The economy is in a precarious situation due to the pandemic. As COVID-19 continues to spread, some industries—including live events and tourism—remain mostly on pause, forcing millions of people out of work and depriving communities of essential revenue streams.

Even the companies that have been able to reopen must frequently do so with reduced staff, limited customer capacity, and a range of other measures that protect public health but restrict economic growth.

When the pandemic first began, the government was able to avert immediate economic disaster through a series of aggressive stimulus packages with trillion-dollar price tags. This money was used to make grants and loans to struggling businesses and industries, send direct payments to qualifying Americans, and beef up unemployment benefits.

However, the government interventions had limits. The beefed-up unemployment benefits expired, the loans and grants did not fully meet the needs of struggling businesses, and many individuals have already spent their direct payment money. Congress remains divided over how to best address these issues, making a new stimulus package uncertain.   

As of September, unemployment levels remained at 7.9%, more than double the unemployment rate from the same time last year. All of these economic challenges mean that many Americans are out of work without a steady stream of income—and will be for the foreseeable future. That means that in the coming months, many Americans will struggle to pay their bills, including their credit card bills.

To understand how these bleak economic conditions impact delinquencies and how credit unions should respond, PaymentsJournal sat down with Bryan Moffitt, Vice President of Business Development at PSCU’s CU Recovery, Inc. & The Loan Service Center, Inc., and Brian Riley, Director of Credit Advisory Service at Mercator Advisory Group.

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Delinquencies & the profitability of any financial institution

Delinquencies occur when a customer is unable or unwilling to pay their credit card bill. If months pass and the bill remains unpaid, the creditor will eventually have to write-off the amount, meaning it’s not just the consumer that is adversely impacted.

“Delinquencies play a very important role in the profitability of a financial institution because as delinquencies happen,