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Susan Tompor: Car loan borrowers face challenges getting economic relief

Susan Tompor, Detroit Free Press on

Published in Home and Consumer News

Up to $600 extra a week in unemployment benefits during the COVID-19 economic meltdown plugged a lot of holes in everyday budgets.

Yet as the extra money is scheduled to phase out by the end of July, it's likely that more people could struggle making their car payments in the months ahead. Some may even find it more difficult to get extra help than they imagine.

Consumers who face financial hardships during the fight against COVID-19 aren't always happy after trying to get a break on their auto loans, based on skyrocketing complaints to a federal consumer watchdog agency.

Many times, consumers said they were having trouble managing the auto loan or lease during the economic downturn but could not get relief. Increasingly, consumers complained that they were denied requests to lower their payments.

Americans filed about 2.5 times more complaints about those auto loan issues in March through May than during the same time last year -- averaging more than 70 complaints a month, according to an analysis by U.S. PIRG of consumer complaints made to the Consumer Financial Protection Bureau.

"If that $600 in unemployment ends, you're going to have another crush of people with no money," said Ed Mierzwinski. senior director, federal consumer program for the U.S. PIRG Education Fund.

 

"They're going to fall off another cliff -- a no money cliff."

Auto lenders, much like credit card issuers and others, have some leeway to allow borrowers to skip car payments without damaging their credit scores during the coronavirus crisis. But borrowers must contact their lenders, just like they would have to do if seeking a mortgage forbearance, if they want a break.

Already, roughly 7.5% of auto loans saw terms changed in some way to assist troubled borrowers as of June 23, according to data from Equifax. Loan accommodations could include partial payment plans and deals where a borrower might stop making payments for a few months and resume making payments later. Less than 1% of car loans had such accommodations early in 2020 before the economic fallout that was triggered by the pandemic.

About 8.7% of mortgages saw some type of accommodations through late June, 6% of home equity loans, and 2.7% of credit cards, according to Equifax.

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