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Americans are having a tough time repaying pandemic-era loans received with inflated credit scores

Borrowers are realizing the responsibility of new debts too late.

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With the economy of the United States at a standstill during the Covid-19 pandemic, the efforts to stimulate the economy brought many opportunities to people who may have not had them otherwise. 

However, the extension of these opportunities to those who took advantage of the times has had its consequences.

Related: American Express reveals record profits, 'robust' spending in Q3 earnings report

Credit Crunch

GLASTONBURY, UNITED KINGDOM - JANUARY 12: In this photo illustration the Visa, Mastercard and American Express logos are seen on credit and debit cards on March 14, 2022 in Somerset, England. Visa, American Express and Mastercard have all announced they are suspending operations in Russia and credit and debit cards issued by Russian banks will no longer work outside of the country. (Photo by Matt Cardy/Getty Images)

Matt Cardy/Getty Images

A report by the Financial Times states that borrowers in the United States that took advantage of lending opportunities during the Covid-19 pandemic are falling behind on actually paying back their debt.

At a time when stimulus checks were handed out and loan repayments were frozen to help those affected by the economic shock of Covid-19, many consumers in the States saw that lenders became more willing to provide consumer credit.

According to a report by credit reporting agency TransUnion, the median consumer credit score jumped 20% to a peak of 676 in the first quarter of 2021, allowing many to finally have “good” credit scores. However, their data also showed that those who took out loans and credit from 2021 to early 2023 are having an hard time managing these debts.

“Consumer finance companies used this opportunity to juice up their growth at a time when funding was ample and consumers’ finances had gotten an artificial boost,” Chief economist of Moody’s Analytics Mark Zandi told FT. “Certainly a lot of lower-income households that got caught up in all of this will feel financial pain.”

Moody’s data shows that new credit cards accounts that were opened in the first quarter of 2023 have a 4% delinquency rate, while the same rate in September 2022 was 4.5%. According to the analysts, these levels were the highest for the same point of the year since 2008.

Additionally, a study by credit scoring company VantageScore found that credit cards issued in March 2022 had higher delinquency rates than cards issued at the same time during the prior four years.

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Credit cards were not the only debts that American consumers took on. As per S&P Global Ratings data, riskier car loans taken on during the height of the pandemic have more repayment problems than in previous years. In 2022, subprime borrowers were becoming delinquent on new cars loans at twice the rate of pre-pandemic levels.

S&P auto loan tracker Amy Martin told FT that lenders during the pandemic were “rather aggressive” in terms of signing new loans.

Bill Moreland of research group BankRegData has warned about these rising delinquencies in the past and had recently estimated that by late 2022, there were hundreds of billions of dollars in what he calls “excess lending based upon artificially inflated credit scores”.

The Government's Role

WASHINGTON, DC - APRIL 29: U.S. President Donald Trump's name appears on the coronavirus economic assistance checks that were sent to citizens across the country April 29, 2020 in Washington, DC. The initial 88 million payments totaling nearly $158 billion were sent by the Treasury Department last week as most of the country remains under stay-at-home orders due to the COVID-19 pandemic. (Photo by Chip Somodevilla/Getty Images)

Chip Somodevilla/Getty Images

Because so many are failing to pay their bills, many are wary that the government assistance may have been a financial double-edged sword; as they were meant to alleviate financial stress during lockdown, while it led some of them to financial difficulty.

The $2.2 trillion Cares Act federal aid package passed in the early stages of the pandemic not only put cash in the American consumer’s pocket, but also protected borrowers from foreclosure, default and in some instances, lenders were barred from reporting late payments to credit bureaus.

Yeshiva University law professor Pam Foohey specializes in consumer bankruptcy and believes that the Cares Act was good policy, however she shifts the blame away from the consumers and borrowers.

“I fault lenders and the market structure for not having a longer-term perspective. That’s not something that the Cares Act should have solved and it still exists and still needs to be addressed.”

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International

Storm Babet caused dangerous floods as the ‘dry side’ of Scotland isn’t used to such torrential rain

The storm came from an unusual direction and dumped exceptional amounts of rain along the east coast.

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12 mins ago

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October 20, 2023

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Storm Babet has caused havoc across the UK, with strong winds and rough seas along the east coast, record breaking rainfall and river levels in Scotland, overtopped flood defences, closed roads and railways and sadly at least two deaths. The impacts are not over as further rain is expected.

The risk was clear well before the event. Storm Babet was officially named by the UK Met Office on Monday October 16 and a rare red weather warning was issued on the Wednesday, 32 hours before the heaviest rain started.

Red weather warnings are used by the Met Office to communicate extreme weather events that pose a risk to life. This was only the fourth time a red warning had been issued for rainfall.

The Scottish Government’s Resilience Operation was activated, flood defences were closed, roads and bridges shut, households evacuated and emergency rest centres opened. These advance warnings undoubtedly kept many people safe.

How did forecasters know it was coming?

Meteorologists were tracking the storm using satellites and weather observations. Every day they became more confident about when and where the heaviest rainfall would land.

Storm Babet is an unusual weather system. Storms that hit the UK in the autumn and winter normally come from the west across the Atlantic, but Babet instead travelled from Portugal, picking up moisture from the Bay of Biscay before being trapped over the UK by a hard-to-budge high pressure system across Scandinavia. This resulted in a prolonged period of wet and windy weather and widespread flooding.

The heaviest rainfall has been over the Angus hills in eastern Scotland, visible in white and black in the map below. As UK weather systems tend to come from the west, dumping their rain over the first hills they encounter, the eastern side of Scotland is usually protected from the worst of the weather. That is why forecasters were particularly concerned.

Babet causes rain across almost the entire British Isles at once. Map shows rainfall from 6pm October 19 to 6am October 20 2023: the white and black colours show the areas of heaviest rainfall. Starling Roost Weather integrated radar (Data: Met Office), CC BY-SA

The previous highest 24-hour rainfall in the area was 100mm recorded in November 2022, with 60mm-70mm recorded during Storm Frank in 2015. The rainfall from Storm Babet is already over 160mm. Unlike those in western Scotland, rivers in the region are simply not big enough to carry that much rainfall without bursting their banks.

Map of Scotland
Scotland has a rainy side and a dry side. Met Office, CC BY-SA

What hydrologists knew

Hydrologists such as myself study how water moves across and through the landscape, which is key to forecasting floods. Alongside the exceptionally high rainfall, other factors made Angus and south-east Aberdeenshire particularly vulnerable. The hills funnel water into steep rivers that rise quickly and rush towards the sea, so towns and villages along them are no strangers to floods.

In this instance, heavy rain ten days ago meant that the ground was already saturated. Instead of soaking into the ground, any rain that fell during Storm Babet would quickly have flowed into the streams and rivers causing them to overflow.

A storm like this is far beyond anything experienced in living memory of those in the region. Without any first hand knowledge to rely on, computer models help forecasters identify where the biggest floods will be. With Babet, hydrological models were able to pinpoint the area of concern (the red weather warning) to the rivers draining off the Angus hills.

Annotated map of Scotland
Flood forecasting model from the day before the storm peaked. The purple and red colours show the rivers expected to see the highest flows. Scottish Environment Protection Agency (SEPA) / UKCEH, CC BY-SA

Similar models predicted that the South Esk river would rise above its flood defences in the town of Brechin, meaning flood warnings could be issued and the difficult decision to evacuate 400 residents to safety could be made on Thursday afternoon rather than in the middle of the night. It turned out to be good decision, as by Friday morning the river in Brechin was at its highest level on record, and had indeed breached its defences.

Preparing for more extreme events in the future

This is yet another reminder that the climate is changing and we will see more extreme rainfall, putting more people at risk. The “Clausius-Clapeyron” relationship states that for every 1°C increase in air temperature there is 7% more moisture – meaning that there is more rainfall in a given downpour.

The relationship between this and flooding is more complex since it also involves interactions with the landscape (How have urban areas expanded? Are there many trees? What sort of farms are there? Are rivers forced into embankments or allowed to meander through floodplains?).

But understanding these interactions is urgent. The Brechin flood defences were completed in 2016 and designed to protect the town from floods up to a 1-in-200-year event. No one expected them to be topped less than ten years later.

Despite the devastation evident today, the value of advance warnings for Storm Babet for saving lives, property and infrastructure is clear. To help the UK be better prepared for floods, many hydrologists – including me – are working together through the new UK Flood Hydrology Roadmap to further improve the science and data underlying those warnings.

Linda Speight does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

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LIST to coordinate Horizon Europe project on next generation of 6G mobile networks

The Luxembourg Institute of Science and Technology (LIST) will coordinate a project on 6G mobile networks funded by the Smart Networks and Services Joint…

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41 mins ago

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October 20, 2023

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The Luxembourg Institute of Science and Technology (LIST) will coordinate a project on 6G mobile networks funded by the Smart Networks and Services Joint Undertaking (SNS JU) under the Horizon Europe programme. Entitled 6G-TWIN, the project is one of the 27 new research and experimentation initiatives selected from the second SNS JU call for proposals, which will all start operating from January 1, 2024. Established by the European Commission in 2021, SNS JU serves as a foundation for fostering the growth of intelligent communication components, systems, and networks, which play a crucial role in constructing a top-tier European supply chain for cutting-edge 5G and upcoming 6G technologies.

Credit: LIST

The Luxembourg Institute of Science and Technology (LIST) will coordinate a project on 6G mobile networks funded by the Smart Networks and Services Joint Undertaking (SNS JU) under the Horizon Europe programme. Entitled 6G-TWIN, the project is one of the 27 new research and experimentation initiatives selected from the second SNS JU call for proposals, which will all start operating from January 1, 2024. Established by the European Commission in 2021, SNS JU serves as a foundation for fostering the growth of intelligent communication components, systems, and networks, which play a crucial role in constructing a top-tier European supply chain for cutting-edge 5G and upcoming 6G technologies.

Beyond 5G

The rapid integration of digital technology across industries like transportation and manufacturing has boosted the need for efficient communication and computing services. To meet this, innovative approaches for 6G architecture are crucial, aiming to go beyond current 5G capabilities.

“Each generation of mobile technology takes roughly a decade to evolve from conception to commercial deployment,” explains Sébastien Faye, 6G-TWIN Project Coordinator.  “Starting from the first generations, which brought basic cellular connectivity, through 5G, which facilitates revolutionary applications like connected and automated mobility, each iteration introduces new capabilities to meet a demand that is continually growing. Networks are becoming increasingly complex and distributed, requiring a large variety of technologies to operate. With 6G, which is now on the horizon for around 2030, it is essential to design, experiment and standardize new network architectures with more intelligence and automation – which is what we will be proposing in this project.”

European 6G roadmaps prioritize an AI-native management system for complex networks. These networks need to be sustainable, energy-efficient, and adaptable to various services and business models. Establishing a consistent unified communication and computing architecture requires unconventional methods, along with collaboration among standardization groups and industry leaders for practical market integration.

Leveraging AI for next-generation 6G architecture

To achieve this, the 6G-TWIN consortium “will explore the concept of Network Digital Twinning (NDT) and its integration into future 6G systems”, says Faye. Creating a real-time digital replica of the physical network infrastructure (i.e., NDTs) means creating a sandbox in which it is possible to train models and test different scenarios before deploying them on physical network controllers. “6G will enable real-time interaction between physical networks and these digital copies, with the aim of optimizing various parameters, anticipating failures, improving energy efficiency and so on,” he adds, “thus paving the way for highly efficient and intelligent networks.”

The project also includes plans to create demonstrators that validate the concepts developed, adds Faye. These demonstrators encompass teleoperated driving and energy-efficient network distribution. “By exploring these real-world applications, the project will not only contribute to the theoretical advancement of 6G but also demonstrate its practical feasibility – thanks to a wide range of expertise from the 11 project partners.”

The 6G-TWIN consortium is made up of multiple partners, ranging from universities and research centres (IMEC, Politecnico di Bari, Technische Universität Dresden, Université de Bourgogne) to SMEs (Accelleran, Research to Market Solution France, Ubiwhere) and large industrial entities (Ericsson Araştırma Geliştirme ve Bilişim Hizmetleri A.Ş., Proximus Luxembourg, VIAVI Solutions). From Luxembourg, the collaboration includes Proximus Luxembourg/Telindus, with whom LIST already has a collaboration agreement on the development of business use-cases based on advanced connectivity. With a total grand budget of €4 million over three years, this initiative exemplifies the European Commission’s commitment to fostering innovation and research that will shape the future of wireless communication, and, within LIST, another step towards the creation of a strong centre of excellence around Digital Twin Technologies.

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Moving muscle fibers with magnets “programs” how they align within tissue

Stimulating muscle fibers with magnets causes them to grow in the same direction, aligning muscle cells within tissue, Massachusetts Institute of Technology…

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41 mins ago

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October 20, 2023

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Stimulating muscle fibers with magnets causes them to grow in the same direction, aligning muscle cells within tissue, Massachusetts Institute of Technology (MIT) and Boston University investigators report October 20 in the journal Device. The findings offer a simpler, less time-consuming way for medical researchers to program muscle cell alignment, which is strongly tied to healthy muscle function.

Credit: Ella Marushchenko

Stimulating muscle fibers with magnets causes them to grow in the same direction, aligning muscle cells within tissue, Massachusetts Institute of Technology (MIT) and Boston University investigators report October 20 in the journal Device. The findings offer a simpler, less time-consuming way for medical researchers to program muscle cell alignment, which is strongly tied to healthy muscle function.

“The ability to make aligned muscle in a lab setting means that we can develop model tissues for understanding muscle in healthy and diseased states and for developing and testing new therapies that combat muscle injury or disease,” says senior author Ritu Raman (@DrRituRaman), an MIT engineer. A better understanding of the rules that govern muscle growth could also have applications in robotics, she adds.

In a previous investigation, Raman and colleagues found that “exercising” muscle fibers by making them contract in response to electrical stimulation for 30 minutes a day over the course of 10 days made the fibers stronger. This time, the researchers wanted to explore whether mechanically stimulating the muscle fibers over the same time frame (rather than letting them respond on their own) would have the same result. To investigate, they developed a method to mechanically stimulate muscle tissue that differs from typical lab techniques.

“Generally, when people want to mechanically stimulate tissues in a lab environment, they grasp the tissue at both ends and move it back and forth, stretching and compressing the whole tissue,” said Raman. “But this doesn’t really mimic how cells talk to each other in our bodies. We wanted to spatially control the forces between cells within a tissue, matching native systems.”

To stimulate the muscle cells in a more true-to-life way, Raman and her team grew cells in a Petri dish on a soft gel that contained magnetic particles. When they would move a magnet back and forth under the gel, the particles moved back and forth, too, which “flexed” the cells. The researchers could precisely control the way the gel moved, and, in turn, the magnitude and direction of the forces the cells within experienced, by changing the strength and orientation of the magnet. To measure the alignment of the muscle fibers within the tissues and whether they contracted in synchrony, the team’s collaborators at Boston University developed a custom software that automatically tracked videos of the muscle and generated graphs of its movement.

“We were very surprised by the findings of our study,” said Raman. While mechanically stimulating the muscle fibers over the 10-day period did not seem to make them any stronger, it did cause them all to grow in the same direction.

“Furthermore, we were excited to find that, when we triggered muscle contraction, aligned muscle was beating synchronously, whereas non-aligned muscle was not beating rhythmically,” said Raman. “This confirmed our understanding that the form and function of muscle are intrinsically connected, and that controlling form can help us control function.”

Raman and colleagues plan to take the study further by investigating how different mechanical stimulation regimens impact both healthy and diseased muscle fibers. Additionally, they plan to study how mechanical stimulation affects other types of cells.

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The researchers were supported by the US DoD Army Research Office Early Career Program, the NSF CAREER program, the NEC Corporation Fund, and the NSF Graduate Research Fellowship Program.

Device, Rios and Bu et al. “Mechanically programming anisotropy in engineered muscle with actuating extracellular matrices.” https://www.cell.com/device/fulltext/S2666-9986(23)00149-7 

Device (@Device_CP), is a physical science journal from Cell Press along with Chem, Joule, and Matter. Device aims to be the breakthrough journal to support device- and application-oriented research from all disciplines, including applied physics, applied materials, nanotechnology, robotics, energy research, chemistry, and biotechnology under a single title that focuses on the integration of these diverse disciplines in the creation of the cutting-edge technology of tomorrow. Visit http://www.cell.com/device/home. To receive Cell Press media alerts, contact press@cell.com.

Journal

Device

DOI

10.1016/j.device.2023.100097

Method of Research

Experimental study

Subject of Research

Cells

Article Title

Mechanically programming anisotropy in engineered muscle with actuating extracellular matrices

Article Publication Date

20-Oct-2023

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