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    Consumer Credit Is on the Rise—What It Means for Your Borrowers

    As we kick off 2022, pandemic blues are still very much part of our daily lives and many Americans are contributing to the economic recovery by spending their feelings. They’re buying more cars (or trying to, with current semiconductor shortages), finally taking COVID-rescheduled vacations, and returning to retail shops and movie theaters.

    With inflation skyrocketing to 7.0% in 2021—the highest rate since 1982—people are also just spending more because the cost of virtually everything is rising. According to Forbes, inflation has driven some of the highest price hikes this year on the following items:

    • Meats, poultry, fish, and eggs:5% increase
    • Fruits and vegetables:5% increase
    • Electricity:3% increase
    • Furniture and bedding:8% increase
    • Women’s dresses: 8% increase
    • Jewelry and watches:2% increase
    • Rent of primary residences:3% increase

    Consumer Credit Rose Dramatically in Q4 2021

    Increased spending and the ways in which consumers are paying for purchases resulted in a dramatic rise in consumer credit in Q4 2021.

    According to CU Today, “Led by credit cards, total consumer credit rose 10.9%, at a seasonally adjusted, annualized rate, in November and is up 5.8% compared to a year ago. Revolving credit, primarily credit cards, rose 23.3% during the month and is up 5.7% compared to November 2020.

    Total consumer credit for credit unions rose 1.1% on a seasonally adjusted basis in November, compared to a 2.1% rise for banks and a 0.4% rise for financial companies. From the year prior, total consumer credit at credit unions rose 5.1% while banks experienced a 7.9% gain and other financial companies rose 5.3%.”

    Experts anticipate that consumer credit will experience more moderate growth over the next several months as pandemic conditions begin to normalize, the Federal Reserve tries to get ahead of worsening inflation, and households catch up on their credit balances.

    Products that Help Protect Your Borrowers’ Credit

    The latest data suggests people are charging more to their credit cards. This isn’t inherently bad when you’re able to keep your balance down and pay your bills on time. Unfortunately, even the most financially stable borrower can be hit with bills they can’t pay when illness, injury, or death eliminates a family paycheck—causing damage to their credit score and even repossessions.

    If your financial institution wants to offer your borrowers value by helping protect their credit in such circumstances, consider recommending payment protection products like credit life and disability and/or involuntary unemployment insurance, or a debt cancellation program.

    If your borrowers are armed with the protection these products can provide, when unexpected circumstances like job loss, disability, or even death occur, their loan payments will be covered for a specified amount of time and/or be paid off in full depending on their coverage.

    Your institution benefits from providing valued service offerings to your borrowers (including coverage they may not even be able to get on their own), generating additional non-interest income, and strengthening your borrower relationships. It’s a win, win, win!

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    Joan Cleveland, CLU, ChFC, REBC

    Joan Cleveland, CLU, ChFC, REBC leads SWBC Life Insurance Company as President and CEO. With more than 30 years of experience in the life insurance industry. She holds her Agent licenses for Life, Accident, Health Insurance, and has multiple FINRA securities Licenses. Joan is a frequent industry speaker and media spokesperson. She is a member of the Board of Directors of the Consumer Credit Insurance Association, the Texas Association of Life and Health Insurers, as well as the Life Insurers Council. In addition, she is chair of LIMRA’s Strategic Marketing Issues Committee.

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