There has been a lot of coverage detailing the various ways that many industries are responding to the COVID-19 pandemic sweeping its way across the globe. The millions working in the financial services industry are not free from disruptions, and now more than ever we understand that our customers are facing greater economic insecurity. Consumers already deemed high-credit risks deserve access to credit in the good times as well as the bad.
Today, Americans with non-prime credit scores are most at risk of losing access to credit. Companies that primarily offer loan products are reducing originations, in part, because of tighter credit standards and stricter income verification requirements put in place by lenders.
Lenders are also experiencing higher delinquencies as borrowers are experiencing loss of income. While five federal financial regulatory agencies recently issued a statement encouraging banks, savings associations and credit unions to offer this type of small-dollar credit, it will take time for those programs to be created and implemented, if they happen at all. Recently, the largest banks like JPMorgan, who primarily serve prime customers, have announced significant changes in loan loss provisions due to this crisis. It would be highly unlikely for major banks to focus on the non-prime market.
Consumers may still need access to credit during this time. Despite mainstream financial institutions pulling back from consumer lending, many Americans still consistently need access to credit. Over 40 percent of Americans have non-prime credit scores and 39 percent of Americans are unable to cover a $400 unexpected expense, and they are now finding themselves dealing with the impact of sudden income reductions. Whether unexpected expenses due to medical needs or sheltering their family at home, they will likely have credit needs.
For current customers, online lenders are providing a wide range of tools and programs to help those impacted by COVID-19 based on the consumer’s needs. We encourage all consumers to contact their lender because many are offering the ability to defer or skip payments, options to extend payment plans, waived fees for late or returned payments, interest freezes and pauses on collection activities. In some cases, loan forgiveness is offered. There are also credit reporting disaster codes and procedures used with credit bureaus to reduce the impact to damaged credit during this period. Lender call centers are ready to assist on COVID-related issues.
Those of us in financial services, too, are experiencing disruptions with employees and systems. While we are listed alongside other “essential” businesses, we are trying to be there for consumers more than ever.
We are truly in times unprecedented in the modern era, and we understand the needs that exist — both the need that many borrowers now have for credit as well as the need to provide assistance for current and future borrowers who may be experiencing additional difficulties. During these troubled times in communities across the country, our members are contributing to national and local organizations helping those most affected by this pandemic.
Our industry is based on the mission of providing responsible, innovative solutions for non-prime customers’ unique financial needs. And as we have done in the past, we will rise to the occasion.
Mary Jackson is CEO of the Online Lenders Alliance.
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