Over the last three months, we’ve seen the impact of COVID-19 on areas throughout the economy. Millions of Americans have lost their jobs or are facing unexpected expenses. While government aid and unemployment benefits have helped many weather the crisis, many others are still experiencing shortfalls.
Like many businesses, the online lending industry has experienced disruptions due to COVID-19’s impact on credit markets. The industry has seen small-dollar loan demand decline by 67% since February 23 as consumers purposefully avoid taking on new debt. Lenders have also tightened their credit underwriting requirements as a response to the pandemic, with approval rates dropping from 26 percent to 15 percent. Still, many other Americans are turning to small-dollar loans to help make ends meet.
Despite the disruptions, online lenders have also joined many other businesses in helping existing loan customers get through these troubling times. One way that online lenders have done this is through direct assistance or flexible options, including loan forgiveness, loan forbearance, frozen interest payments, the ability to skip or defer payments, extended payment plans, waived fees, and halted collections. Lenders have also designed the COVID-19 crisis as a natural disaster, which helps borrowers by not impacting credit scores due to late payments.
This is a difficult time for many businesses and consumers. Just as OLA members have committed to being good actors in the industry by following OLA’s best practices and other regulations during good economic times, OLA members are committed now to helping consumers access the credit and financial resources they need in a responsible way. In so doing, they can be a force for good until the skies clear and the crisis is over.