Collector - March 2021 - 34

CREDITORS

Understanding How COVID-19 Will Affect Loan Defaults
Financial companies are gearing up for an acceleration of defaults in the second quarter of 2021.
By Betsy Clarke

P

rofessionals across the financial
services industry have struggled
to forecast economic trends as
the disruption caused by the COVID-19
pandemic spreads into 2021. In December
2020, law firm Barnes & Thornburg
in Minneapolis hosted a webinar on
" Understanding How COVID-19 Will
Affect Loan Defaults, " a topic central
to the work of creditors, collectors and
asset buyers.

34

The panel featured moderator Connie
Lahn, partner at Barnes & Thornburg who
practices in the areas of bankruptcy and
insolvency; Mike Cavallaro, partner at
Barnes & Thornburg who practices in the
area of default; and Violeta Zdravkovic,
CPA and managing director at O'Keefe, a
consultant in litigation for fraud, forensic
accounting and bankruptcy.
Economic conditions in 2020 involved
numerous unexpected directions. Because

many lenders proactively offered
borrowers short-term loss mitigation
and payment deferral assistance, there
were positive trends in consumer credit card
and auto lending compared to the initial
downward trend early in the pandemic.
Surprisingly, when these programs
ended, many borrowers who relied on
these options continued to stay current.
The industry hopes charge-off rates
will stay well below the historic rates

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