Even so, many middle-class individuals who do work
in industries impacted by the pandemic have gotten
financial relief through extended unemployment
benefits or government and private programs that
have allowed borrowers to enter into forbearance
or deferred payment programs.
“But those measures are now sunsetting, and
(once they are gone, these borrowers) are most
likely to be the first to feel pressure and pain,” said
Sakhrani of Keefe, Bruyette & Woods.
Congress appears to be making progress toward
an agreement on a new COVID-19 relief bill in
the $1 trillion range. Additional unemployment
benefits are likely, though it’s unclear if Americans
will see another round of stimulus checks.
Credit card executives have for months been
bracing for the impact on their customers if there
is no new aid.
“(Like our competitors), our customers are also
helped by external factors such as the impact
of record levels of government stimulus and the
broad availability of forbearance programs,” said
Jeff Campbell, American Express’ chief financial
officer, in October with a call with investors. “As a
result, we do remain cautious about the potential
for future shocks to the economy.”
One point of uncertainty is how banks are reporting
their credit card loans. The coronavirus aid bill and
government regulators have required the industry
to provide borrowers accommodations and relief
without having to report these loans as troubled on
their balance sheets, which accounting rules would
otherwise require the banks to report as losses.
In the absence of these programs and regulations,
it’s unclear whether delinquencies would be
higher, at least on paper.