CFPB Report Finds Household Financial Health is Declining after Several Years of Increased Savings

Annual survey of consumer financial health shows downtrends in ability to repay debts

The Consumer Financial Protection Bureau (CFPB) released a new Making Ends Meet report covering the financial health of American households. Since 2019, the annual Making Ends Meet consumer surveys showed improvement in financial health during the first few years of the COVID-19 pandemic, due in part to a tight labor market, reductions in consumer spending, and access to pandemic-related relief programs. However, data from early 2022 revealed a decline in several key measures, as well as a rapid deterioration in financial health for Hispanic consumers, consumers under the age of 40, and low-income renters. In addition, while unemployment remains low, more than 37% of households were unable to cover expenses for longer than one month if they lost their main source of income.

The 2022 survey was mailed to a sample of consumers in January, with responses collected between January and March. Utilizing data collected from the survey, as well as from the CFPB’s Consumer Credit Panel, today’s report focused on several measures of consumer financial health, including:

  • The CFPB’s financial well-being score, which serves as a comprehensive measure of overall subjective financial well-being
  • Whether households had difficulty paying bills and expenses in the previous year
  • How long households could cover expenses if the main source of income was lost

Many consumers are not financially prepared for a disruption to their main source of income, even as unemployment remains low, according to report findings. Nearly 37% of households report that they could not cover expenses for longer than one month, even with accessing savings, borrowing money, selling assets, or seeking help from family and friends. The report also finds that, in 2022, 1 in 8 households also experienced lost income from unemployment or reduction in work hours, and roughly one-third of households experienced a major unexpected expense, including vehicle repair, unexpected medical expense, or a household repair.

The report discusses how consumers also faced frequent income uncertainties, as income variability increased sharply from 2021 to 2022. The increase was particularly large for Hispanic consumers and consumers under age 40. Also, while racial and ethnic groups applied for credit at similar rates, Black and Hispanic consumers were more likely to be turned down or not receive as much credit as they requested. Black and Hispanic consumers were also much less likely to apply for credit in the first place because they believed they would be turned down.

Among renters, 31% missed at least one rental payment in the previous year and approximately 8% were not current on their rent as of February 2022. Yet only 6% of renters had received rent payment or flexibility since the pandemic began.

Nearly 18% of student loan borrowers have annual incomes under $125,000 and loan balances under $10,000. Under the Department of Education’s proposal for student debt relief, currently on hold due to pending litigation, borrowers with federal student loans who meet these criteria would have their entire student debt balance forgiven.

Read the report, Making Ends Meet in 2022.