CFPB Analyzes the Financial Health of Rural Borrowers in the South

On June 21, 2023, the CFPB released two Data Spotlight reports focused on the Southern states, entitled “Banking and Credit Access in the Southern Region of the U.S.” and “Consumer Finances in Rural Areas of the Southern Region.” This blog focuses on the Consumer Finances Data Spotlight and is a follow-up to a previous blog post on the first CFPB publication.

The CFPB’s detailed analysis focuses on the financial health of rural borrowers in the Southern region compared to borrowers from other regions of the country. The report is intended to create a starting point for understanding and addressing the “financial situations, needs and challenges of consumers in rural areas in the southern region.” The Southern region is home to 48 million people and includes Alabama, Arkansas, Georgia, Louisiana, Mississippi, North Carolina, South Carolina, and Tennessee. The report notes that the Southern region is diverse “with a mix of race, age, and incomes, across both rural and non-rural communities.” However, nearly half of the United States’ Persistent Poverty Counties (PPCs), meaning “any county or county equivalent that has had 20 percent or more of its population living in poverty over the last 30 years,” are located in the Southern region. In addition to outlining the demographics and economic profile of the rural Southern region, the report provides extensive analysis of the financial health of rural Southerners, both PPC and non-PPC, compared to the nation and other rural communities in other regions of the country. Specifically, the report focuses on 1) consumer finance profiles of rural Southerners and 2) consumer distress and delinquencies in the rural Southern region.

Consumer Finance Profiles

To assess the consumer finance profile of rural Southerners, the Bureau examined the “prevalence of and typical balances on credit cards, auto loans, mortgages, and student loans” of rural Southerners. Additionally, the Bureau compared the breakdown of credit scores in the Southern region with other borrowers across the country. Overall, the Bureau’s examination clarified that the rural South is behind the rest of the county in most areas of consumer financial health, with the discrepancies more pronounced in PPCs. Major takeaways include:

• Consumers in the rural Southern region “are 10.6 percent less likely to have a credit card and 17.9 percent less likely to have an outstanding mortgage” compared to the national average. The report indicates that the deficiencies in the rural Southern region might be the result of increased difficulty in accessing credit.

• The burden of consumer debt is higher for rural Southerners compared to the national average. For example, while the number of rural Southerners with an auto loan is similar to the national average, the median auto loan balance as a percentage of median income is 40% for rural southerners compared to 26% nationwide. In PPCs, “the median ratio rises to 46 percent.”

• The average deep subprime or subprime credit score nationwide is 26% but is 37% for the rural Southern region. Moreover, the average prime or super-prime credit score nationwide is 63% but only 49% in the rural Southern region.

• On average, rural Southerners pay higher interest rates on consumer credit products. For example, the average credit card interest rate in the rural Southern region is 18.99%, whereas the average in other rural areas is 17.74% and 17.90% nationally.

While the Bureau does not make any definitive conclusions explaining its findings, the report clearly indicates that the overall consumer financial health of the rural Southern region compared to the rest of the country is cause for concern. And if these trends continue, consumers in the region may experience increased difficulty in navigating their financial situation.

Consumer Distress and Delinquencies

The Bureau reviewed data addressing debt collections and delinquencies in the rural Southern region. The report indicates that:

• Rural Southerners are more likely to have medical debt in collections compared to other non-rural areas and the nation. In the rural Southern region, 28% of borrowers in non-PPCs and 29% of borrowers in PPCs have had medical debt in collections over the past two years compared to 19% in other non-rural areas and 17% nationwide.

• Rural Southern borrowers with medical debt in collections are much more likely to have other types of delinquencies. For example, 18% of rural Southerners have at least one delinquent credit card, but 38% of rural Southerners with a medical debt in collections have at least one delinquent credit card.  

• Rural Southerners are more likely to benefit from changes in nationwide consumer reporting agencies reporting practices related to medical collections compared to consumers from other regions.

Again, the Bureau did not identify the cause of the consumer distress and delinquencies in the rural Southern region, but it did identify these issues as a point of concern that merits further review. Seeing as this is the second report in a series of reports profiling the finances of consumers in rural communities, it appears likely that the CFPB will continue to monitor and release reports on the financial health of rural communities in the rural Southern region and across the country.