Consumer Financial Stress Index Declines, in Reversal, As Policymaking Actions Temporarily Relieve Pain
- After Largest-Ever Increase in March, Consumer Financial Stress Index in April Falls Most in 16th-Year History of the LegalShield Law Index
- However, LegalShield Data Likewise Indicate Consumers Are Facing Intense Financial Pressure That Could Drive Bankruptcy and Foreclosure Activity If Unaddressed
ADA, Okla. – May 14, 2020 – Released today, the April 2020 LegalShield Law Index, a suite of leading indicators of the economic and financial status of U.S. households and small businesses, saw a sharp month-over-month decline in its Consumer Financial Stress Index, suggesting that federal, state and local policymaking actions have been successful at temporarily relieving consumer financial concerns as the coronavirus pandemic took hold throughout America. Notwithstanding, LegalShield data also make clear that consumers are facing increasing financial pressure, as the demand for “consumer finance” legal services such as vehicle financing and billing disputes remains at an all-time high after spiking in March. LegalShield has been measuring the demand for various legal services for nearly 16 years.
“We have to admit to some initial surprise at the data because it is counterintuitive to what we see and know is happening during this horrible crisis,” said Scott Grissom, Senior Vice President and Chief Product Officer, LegalShield. “However, as we dug in further, it became clear that in the midst of potentially great financial challenges, consumers and small business did find some temporary relief, such as the federal Paycheck Protection Program for small business employees, economic stimulus payments of $1200 to eligible adults, enhanced unemployment benefits, certain states instituting moratoria on evictions due to unpaid rent or mortgages, and even temporary mortgage relief by certain financial institutions. Even so, we believe that this array of initiatives created to ‘bridge us to recovery’ in the near-term may not have staying power in ultimately warding off consumer financial pain long-term. In fact, we believe the opposite.”
In explaining this month’s results, Mr. Grissom said the LegalShield Consumer Financial Stress Index fell (improved) 10.0 points, from 80.6 in March to 70.6 in April. He noted that the March results had marked the highest (worst) reading in nearly four years and the largest-ever increase in the 16-year history of the series, which made the 10.0 point reversal in April almost as significant.
However, Mr. Grissom added that the shift was, in part, a result of how the LegalShield Consumer Financial Stress Index is constructed, as it includes demand for bankruptcy and foreclosure-related legal services, which take time to manifest. In fact, the LegalShield Bankruptcy Index and the LegalShield Foreclosure Index both declined in April respectively, however, are now expected to continue to rise over the course of the year given record job loss and rapid rise of mortgages in forbearance. Mr. Grissom said that legal services being requested currently, therefore, are more pressing and immediate, including billing disputes, debt collection, credit reports/repair, employment, and landlord/tenant issues, which are all running at or near an all-time high.
Over the last 15-plus years, the LegalShield Consumer/Finance Intake Ratio (see chart), which excludes bankruptcy and foreclosure intakes, has provided a real-time snapshot of consumers’ most worrisome financial concerns, indicating that despite the slight drop in April the measurement remains near an all-time high.
The LegalShield Law Index reflects the demand for legal services among the company’s provider law firms in all 50 states. The Law Index is a suite of leading indicators of the economic and financial status of U.S. households and small businesses, including the LegalShield Foreclosure Index in addition to the Consumer Financial Stress Index, Housing Activity Index, Real Estate Index, and the Bankruptcy Index. For full LegalShield Law Index findings visit https://www.legalshield.com/law-index.
About LegalShield and IDShield
A trailblazer in the democratization of affordable access to legal protection, LegalShield is one of North America’s largest providers of online legal subscription plans covering more than 4.4 million people. Its IDShield identity theft solution for individuals and families has more than one million members. LegalShield and IDShield serve more than 141,000 businesses. In addition, over 40,000 companies offer LegalShield and IDShield plans to their employees as a voluntary benefit. Both legal and identity theft plans start for less than $25 per month. For more information about LegalShield, visit: https://www.legalshield.com/ or for more information about IDShield, visit: https://www.idshield.com/.
Elyse Gentile (ICR)