Consumer Trends, Litigation, and the Current Pandemic Environment
Only several months ago vaccines became available for much of the United States population and, as a result (seemingly), consumer credit and spending confidence spiked in the U.S. to a record high in June 2021. That is, June saw the highest growth in consumer credit in U.S. history, per the Federal Reserve.
To be specific, in June “[t]otal consumer credit expanded at a pace of $37.69 billion, which was the quickest rate ever [in U.S. history] and followed a $36.69 billion increase in May, the U.S. central bank said.” July consumer credit expansion figures are expected to remain solid but, in light of the recent surge of Covid-19 infections throughout the entire country, several questions remain: (1) how long will consumer credit expansion continue as the U.S. (presumably) enters another wave of Covid-19-related financial and health issues; and (2) will courts come to a near-halt in the event Covid-19 continues to resurge (as they did for some time in 2020)?
Nearly every State in the U.S. is experiencing a resurgence of the novel Covid-19 virus because of the highly-transmissible Delta Variant.For perspective, on June 20, 2021, 9,768 cases were reported to the CDC; in contrast, on August 9, 2021, 92,631 cases were reported to the CDC. This means that during this month alone (which is only days removed from mid-June), the number of Covid-19 cases in the U.S. has increased nearly ten-fold as compared to mid-June. If this trend continues and the Covid-19 case count continues its exponential growth as it is at the time of this writing, we can likely expect consumer credit expansion to drop off steeply similar to 2020.
While consumer credit expansion may be coming to a halt because of an unexpected resurgence of the pandemic in the U.S., courts have had a year to become comfortable with remote litigation. Accordingly, many cancellations and complete docket re-organizations that occurred in 2020 can potentially be avoided, assuming the judiciary is prepared for another pandemic wave which brings with it social restrictions. That is to say, the court system should be much more prepared to remain open and handle cases in the event health-related restrictions are re-imposed.
Importantly, the large increase in credit expansion during the past several “light-at-the-end-of-the-tunnel” months may result in more collection-related litigation in the event a Covid-19 resurgence takes its toll on the economy and consumers begin defaulting at substantially higher rates than recent months.
And courts, because of their experience during the past year, are likely prepared to pivot if restrictions are imposed because of the continued pandemic.
Consumer credit expansion, compared with the number of consumer defaults, will certainly be interesting to examine in the coming months, and should give collection attorneys a glimpse at what may be coming in the event the U.S. cannot effectively battle the resurgence currently taking place.