How Consumer ‘Distress’ Will Affect Your Customers’ Payments

April 11, 2025

Given the volatile state of the US economy, top-performing AR credit professionals need to stay on top of their customers’ payments more than ever. Here’s what IOFM has learned that should influence your credit decisions:

1. Consumer credit card performance metrics are showing signs of “distress”, according to an new report by the Federal Reserve Bank of Philadelphia. Specifically, the share of credit card accounts 90-days past due and the percent of credit card accounts making just the minimum payment are at their highest marks since the Fed began tracking this data 12 years ago.

2. In March, it was widely reported that automotive repossessions jumped in 2024 to the highest level in 15 years. Around 1.73 million cars were seized by lenders in 2024, a figure that was 16% higher than 2023 and 43% higher than 2022.

When consumers tighten their budget, history shows that a number of industries will feel pinched.

Industries Likely to Be Most Impacted By Consumer ‘Distress’

Industry	Market segments	What You Should Track
Retail	Apparel, electronics and luxury goods	Late payments and reduced credit card spending can hurt sales and increase return fraud and chargebacks
Hospitality & Travel	Airlines, hotels and tourism-related businesses	Bookings made on credit cards may be canceled or disputed if financial stress worsens
Automotive	Sales and financing	Because most car purchases are financed, consumer distress could lead to payment delinquencies and fewer sales
Healthcare	Elective and cosmetic procedures	Providers should expect to see delayed payments from both patients and insurers
Entertainment & Subscription Services	Streaming platforms, gyms, and subscription boxes	Service providers should anticipate a sharp increase in payment failures and customer churn
Credit & Lending	Banks, credit card issuers and fintech lenders	A rise in delinquencies will hurt profitability and increase risk exposure
Telecommunications	Cell phone and service providers	Providers should anticipate more late payments, service downgrades or terminations

State-Specific Credit Risks

In addition, specific states are already affected by tariffs – or the treat of them. Keep an eye out for clients, or clients with supply chains, in the following areas:

State	What You Should Track
Michigan	Nearly 1:5 dollars in this state can be linked to the auto industry and will be significantly affected by tariffs on imported steel, aluminum, and auto parts. Stellantis has already laid off 900 workers in response to concerns regarding tariffs.
Texas	The state’s importers are projected to incur an additional $82 billion in costs due to the new tariffs. Companies’ dependent on electronics and machinery will experience increased operational costs, potentially leading to strained business operations.
Ohio	The state’s manufacturing sector, especially auto parts production, is experiencing increased costs due to tariffs on raw materials like steel and aluminum. This could lead to higher production costs and potential job cuts.