Debt Management Insights for Distressed Borrowers: Bridging from Emergency Programs to Longer Term Payment Plans

Report Summary

This study analyzes the potential benefits of combining temporary forbearance programs and longer term debt management plans (DMPs) during the COVID-19 pandemic. The research finds it may be helpful to evaluate whether particularly vulnerable and distressed borrowers need longer term repayment plans soon after they first enroll in natural disaster or other emergency relief programs with credit card lenders.

The study builds on a broader report (updated in August 2023) by FinRegLab and researchers at The Ohio State University and Charles River Associates that analyzes data organized by the National Foundation for Credit Counseling (NFCC) and credit records from Experian.

The working paper was released in August 2023 and updated in October 2023 to reflect the issuance of an online appendix with supplemental findings.

Acknowledgments

This empirical working paper is part of a broader research project organized by FinRegLab and the National Foundation for Credit Counseling to evaluate data, technology, and other innovations’ potential to help consumers recover more quickly from personal and economic crises such as COVID-19.

The independent empirical research in this report has been conducted in collaboration with:

Coordination with the credit counseling agencies that contributed data for the analysis was facilitated by the National Foundation for Credit Counseling.

We would like to thank Charles River Associates for their continuing involvement in our Distressed Borrowers project and David Silberman for his valuable feedback on this report.

We would also like to acknowledge FinRegLab team members who worked on convenings, interviews, and reports related to this project. They include:

With Support From

Bank of America

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Capital One Financial Corporation

(www.capitalone.com) is a financial holding company which had $307.9 billion in deposits and $440.3 billion in total assets as of June 30, 2022. Headquartered in McLean, Virginia, Capital One offers a broad spectrum of financial products and services to consumers, small businesses, and commercial clients through a variety of channels. Capital One, N.A. has branches located primarily in New York, Louisiana, Texas, Maryland, Virginia, New Jersey and the District of Columbia. A Fortune 500 company, Capital One trades on the New York Stock Exchange under the symbol “COF” and is included in the S&P 100 index.

JPMorgan Chase & Co.

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LendingClub Corporation

(NYSE: LC) is the parent company of LendingClub Bank, National Association, Member FDIC. LendingClub Bank is the leading digital marketplace bank in the U.S., where members can access a broad range of financial products and services designed to help them pay less when borrowing and earn more when saving. Based on more than 150 billion cells of data and over $75 billion in loans, our advanced credit decisioning and machine-learning models are used across the customer lifecycle to expand seamless access to credit for our members, while generating compelling risk-adjusted returns for our loan investors. Since 2007, more than 4 million members have joined the Club to help reach their financial goals. For more information about LendingClub, visit https://www.lendingclub.com.

Synchrony

Synchrony is a premier consumer financial services company delivering one of the industry’s most complete digitally-enabled product suites. The company’s experience, expertise, and scale encompass a broad spectrum of industries, including digital, health and wellness, retail, telecommunications, home, auto, outdoor, pet, and more. Synchrony has established a diverse group of national and regional retailers, local merchants, manufacturers, buying groups, industry associations, and healthcare service providers, referred to as their “partners.” They connect their partners and consumers through a dynamic financial ecosystem, providing a diverse set of financing solutions and innovative digital capabilities to address specific needs and deliver seamless, omnichannel experiences. Synchrony offers the right financing products to the right customers in their channel of choice.

TD Bank

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