The consumers behind delinquent accounts are sliding deeper into what one credit counseling leader calls a “cycle of survival debt,” and economists say the pressure is unlikely to ease soon even if the Iran war winds down. For the credit and collection industry, the signals point to a population increasingly unable to cover basic costs, let alone catch up on existing obligations.
Inflation rose 4.2% in May compared with a year earlier, climbing 0.5% from the prior month and surpassing 4% for the first time in three years, according to the Bureau of Labor Statistics. The Federal Reserve held interest rates steady this week, its first rate decision under new chair Kevin Warsh, who pledged to bring inflation back to the central bank’s 2% target and called persistently high prices a burden on Americans.
Mark Zandi, chief economist at Moody’s Analytics, told ABC News that even a quick end to the conflict would not deliver immediate relief. So-called pass-through costs, the higher expenses suppliers and manufacturers eventually charge consumers, typically take months to readjust. Zandi estimated that energy prices tied to the war have already added nearly $600 in costs to the typical household since fighting began in late February, and he expects elevated inflation to persist for another six to 12 months.
The strain is compounding. Diane Swonk, chief economist at KPMG US, noted that current price pressures stack on top of five years of accumulated inflation, leaving many goods out of reach. Grocery costs illustrate the squeeze: tomatoes are up 32%, lettuce 24%, coffee 17%, and ground beef 12.1% year over year, though egg and butter prices have fallen.
For agencies and creditors, the debt data is the headline. Bruce McClary of the National Foundation for Credit Counseling reported a surge in Americans seeking help to manage debt and avoid bankruptcy and collectors, with even households earning up to $100,000 now requesting counseling. The group’s Financial Stress Scale sits near record highs at a projected 6.7 for the second quarter, up from 3.1 in 2022. Total credit card debt reached $1.25 trillion in the first quarter, a nearly 6% jump from late 2025, even as average card rates exceed 20%.
Zandi warned that real disposable income is falling year over year, something that rarely happens outside recessions, and that households will increasingly cut spending to necessities. Counselors are urging consumers to avoid leaning on credit cards to bridge budget gaps, a behavior that often precedes the delinquencies and charge-offs that flow downstream to the ARM industry.
