Borrower hardship management, explained.

What happens when a borrower says "I can't pay this month"

From the first call to the last plan payment: a hardship request in five steps

1. The borrower asks for helpBy phone, web form, chat or letter, often after a missed payment, sometimes before.
2. Proof is gatheredPay stubs, letters about the hardship, statements or connected bank data; what is missing is asked for once.
3. The budget is built and testedMoney in, essentials, other debts, what is left; every relief option tested against what is left.
4. The offer is decided, signed and sentWithin the specialist's authority or co-signed; new terms disclosed in writing; the reason recorded.
5. The plan is serviced until it endsPayments tracked, the account re-aged or charged off by the rules, the credit report kept accurate.

Steps 2 to 4 are the subject of this guide; step 5 is covered where it changes the decision. The people, lenders and figures in the examples are fictional.

Four facts about hardship relief that newcomers rarely expect

Hardship program, workout, re-aging, affordability budget: the four key terms

Fourteen terms are defined in the one-page summary.

Skip a payment, cut the rate, stretch the term or settle: the relief ladder for consumer loans

In shortLenders offer a short list of relief options and usually try them in order, from the least costly to the lender to the most. Short-term programs carry a borrower through a hardship that will end; workout plans close the card and pay the balance down over years; settlements accept less than the balance; a referral to nonprofit credit counseling handles several creditors at once. The right rung depends on what the borrower can pay and whether the hardship has an end date.

The CFPB's December 2025 report surveyed eight large card issuers holding about 65% of card balances. All eight offered long-term programs, lasting 13 months or more, in 2023 and 2024; more than half also offered short-term programs, and the rest put every borrower in a long-term program whether the hardship was short or long. The issuers said their long-term programs generally require repayment within 60 months and that they document the reason, severity and duration of each borrower's hardship.7

Six relief options: what each changes, when it fits, what to watch

Settlement activity is growing. At the end of 2024, balances enrolled in settlement were 1.5% of receivables before charge-off and 2.1% after, and settlements arranged by for-profit debt settlement companies had passed those agreed directly with consumers.7

The 2000 retail credit policy, the 2003 card workout guidance and what moved in 2025–2026

In shortTwo banking policies from 2000 and 2003 still set the frame: when consumer loans must be charged off, when a delinquent account may be re-aged, and how long card hardship and workout programs may run. Regulation Z adds disclosure rules for card workouts, Regulation F governs third-party collectors, the FCRA governs what the credit bureaus are told, and Regulation B covers collection procedures. In 2025 and 2026 the CFPB withdrew dozens of guidance documents and cut its enforcement sharply, Regulation B lost its effects test, and new model risk guidance replaced SR 11-7.

Accounting moved too. A 2022 accounting standard, ASU 2022-02, ended troubled-debt-restructuring accounting for lenders on the current expected credit loss method and added financial statement disclosures for modifications made to borrowers experiencing financial difficulty.19 A hardship plan that cuts the rate or stretches the term is that kind of modification.

When a delinquent account may be re-aged, and the 120- and 180-day clocks every plan runs against

In shortA hardship plan does not stop the charge-off clock by itself. A card is charged off at 180 days past due and an installment loan at 120, counted on the contract. Only re-aging, extending or deferring under the 2000 policy's conditions brings the count back, and those conditions are strict: the borrower must show, with three qualifying payments, that the new arrangement works, and re-ages are rationed per year and per five years.

The open-end re-aging conditions

Renée's card: the charge-off date and the earliest re-age

Renée Okafor has been a customer since March 2017, so her card passes the nine-month test with years to spare. She missed September 15, 2026, so on October 12 she is 27 days past due. If she pays nothing, the card reaches 180 days past due on March 14, 2027 and must be charged off. If she accepts the 60-month plan, the first $198 payment is due November 15, 2026. After the third consecutive payment, on January 15, 2027, the lender may re-age the account to current under its workout re-age, if its own policy allows.

Partial payments: the 90 percent rule

A borrower who pays most of the payment is a common case. The policy lets a lender count "a payment equivalent to 90 percent or more of the contractual payment" as a full payment when computing past-due status, or instead add up partial payments and credit them against the amount due. A lender may use either method across its portfolio, but not both on one loan.2 On a $198 plan payment, $180 counts as a full payment under the first method ($178.20 is the 90% line) and $170 does not.

Installment loans: extensions and deferrals

Car and personal loans are closed-end, so the tools differ. An extension moves monthly payments and the maturity date back by the same number of months; a deferral pushes a due payment back with other terms unchanged; a renewal or rewrite underwrites the loan again, the second with significantly changed terms.2 The policy asks for explicit standards: renewed willingness and ability to repay, limits on how often each may be used, and no new advances to cover unpaid interest or fees.2

Building an income and expenditure budget a borrower and an examiner can both check

In shortAn affordability budget lists money in, essential spending and other debts, and what is left. The figures come from three places: what the borrower says, what her documents and bank data show, and a published or house guideline for a household of her size. A written rule decides which figure is used, and every line keeps its source, so a second reader reaches the same total. What is left is the surplus: the most a relief payment can take.

The idea is old. The IRS uses Collection Financial Standards "to help determine a taxpayer's ability to pay a delinquent tax liability": national amounts for food, housekeeping supplies, clothing, personal care and miscellaneous items, local amounts for housing, utilities and transportation, and a per-person allowance for health care. The national amounts are allowed in full without proof; for housing, utilities and transportation the IRS allows the lesser of actual spending and the local standard, and more only when documents show the standard is inadequate for basic living expenses.20

Lenders use the same shape with their own tables.

The budget rule, worked through on the example

Renée's lender uses a simple rule: take her figure up to the household guideline; above the guideline, use the guideline unless there is a written reason; never set a fixed bill below what the bank data shows. Income counts only when a document or deposit proves it. Here is what that produces for a household of one adult and one child.

* Take-home pay in the bank column is the after-cut rate seen from the August 21 payday. The July to September deposits average $3,248.20 because July and the first August payday were paid before the cut; a budget should use the pay the borrower earns now, and say so.

Working out the payment on every relief option, and which one a $214 surplus can carry

In shortEach relief option has a payment you can calculate from the balance, the rate and the term. Line them up against what the budget leaves, in the order your policy tries them, and the first one that fits is the candidate. On the example's $9,786.40 balance, only the 60-month plan at 7.9% fits a $214 surplus; a pause fits for three months but the hardship has no end date.

The monthly payment on a fixed plan is the standard amortizing formula: payment = B × r ÷ (1 − (1 + r)⁻ⁿ), where B is the balance, r the monthly rate (the annual rate ÷ 12) and n the number of months. At 0% it is simply B ÷ n. For a settlement the "payment" is the lump sum.

The 60-month plan is a workout in the 2003 guidance's terms: the card is closed, the balance goes on a fixed schedule with concessions, and it is paid off in exactly 60 months.3 It also costs the borrower far less. At 7.9% the 60 payments of $197.96 carry $2,091 of interest. Repaying the same balance over the same 60 months at the card's 26.99% would take payments of $298.77 and $8,140 of interest.

For a card plan, Regulation Z requires a clear written disclosure of the plan's terms before it starts, including what happens if it is completed or fails, and the rate on the old balance can never return above the rate before the plan.8

What the banking agencies have said about relief after hurricanes, wildfires and the pandemic, statement by statement

In shortAfter a major disaster the federal banking agencies usually issue a joint statement encouraging lenders to work with affected borrowers and promising that examiners will not criticize prudent changes to loan terms. The standing examiner guidance dates from 2017; the pandemic statements of 2020 added detail on short-term modifications; the most recent joint statement we found covers the January 2025 California wildfires, and the FDIC still issues its own letter for each declared disaster, most recently in July 2026. None of them sets a program design, so the lender's own policy still decides who gets what.

The pattern is consistent. The agencies' January 14, 2025 statement on the California wildfires, issued with the state regulator, says "prudent efforts to adjust or alter terms on existing loans in affected areas are supported by the agencies" and "should not be subject to examiner criticism".27 The October 2024 Milton statement encouraged financial institutions "to work constructively with borrowers" in the affected communities.26 The 2017 examiner guidance asks examiners to allow for the "increased amount of time needed for a financial institution to evaluate the effect of the disaster on the ability of borrowers to repay".22 The FDIC still repeats the core promise for each declared disaster: its July 22, 2026 letter for Mississippi storms says it "will not criticize prudent efforts to adjust or alter terms on their existing loans".29

What a lender owes a disaster borrower beyond that is its own policy: which ZIP codes or declared counties qualify, what proof it asks for (often none at first), how long the relief lasts, and how the account is reported. The August 2020 statement is the most useful template for the end of relief: effective risk management includes "clear, conspicuous, and accurate communications and disclosures", and borrowers should hear about "affordable and sustainable accommodation options" before the accommodation period ends.25

How disaster relief reached credit reports after Hurricane Harvey

Lenders can flag an account "affected by natural or declared disaster" on the credit report. After Harvey in 2017, the flag reached 10.4% of Houston-area tradelines (the individual accounts on credit files) in October and 38.6% of consumers there had it on at least one account in November. Nationally in 2017, the code stayed on a tradeline for two months on average.30 Use varied widely by industry.

How a hardship plan shows on a credit report: the CARES Act years, Metro 2 comment codes and the rule today

In shortFrom March 2020 to August 2023 federal law told lenders to report accommodated accounts as current, or at least not worse, while the accommodation lasted. That rule has ended. Today the industry's Metro 2 reporting guidance and the FCRA's accuracy duties decide what the bureaus see: disaster and forbearance comment codes, an account status of current when no payment is due, and the true delinquency otherwise. Whatever a lender reports, its letter has to tell the borrower the same thing.

The CARES Act rule and when it ended

Section 4021 of the CARES Act added a paragraph to the FCRA. If a lender made an "accommodation" during the covered period, such as "an agreement to defer 1 or more payments, make a partial payment, forbear any delinquent amounts", and the consumer made the payments or was not required to, the lender had to report the account as current if it was current before, or keep it at its earlier delinquency, while the accommodation lasted. The rule never applied to charged-off accounts.5 The covered period ran from January 31, 2020 to the later of 120 days after March 27, 2020 or 120 days after the national emergency ended.5 A joint resolution signed on April 10, 2023 (Pub. L. 118-3) ended that emergency, declared on March 13, 2020, so the period ended 120 days later, on August 8, 2023.6

Metro 2 comment codes for disaster and forbearance

Lenders report to the bureaus in the Metro 2 format, maintained by the Consumer Data Industry Association (CDIA) in its Credit Reporting Resource Guide. In a law firm's 2020 summary of that guidance, special comment code "AW" marks an account affected by a natural or declared disaster, and "CP" marks an account in forbearance.32 The CFPB's own research calls the first one the comment "Affected by natural or declared disaster".30 CDIA's guidance for disasters and for forbearance sits in two of the guide's FAQs, numbers 58 and 45.33 FAQ 45, as quoted in a 2024 letter from consumer groups, says that when no payments are due during forbearance the account status is reported as 11, current, and the monthly payment history gets the code "D".34

When a collection agency is involved: the FDCPA, Regulation F's seven-call presumption and who may offer a plan

In shortThe Fair Debt Collection Practices Act and Regulation F govern third parties that collect debts for others, and creditors that collect under another name. A lender's own staff collecting in its own name are outside them, though the unfair-practice law, card rules and fair lending law still apply. Most large card issuers keep hardship enrollment in house and do not let their agencies offer programs.

The FDCPA defines a debt collector to include a creditor that, collecting its own debts, "uses any name other than his own" suggesting a third party, and excludes "any officer or employee of a creditor while, in the name of the creditor, collecting debts".17 Regulation F, in force since November 30, 2021, implements it.10 Its best-known rule is a call frequency presumption: a collector is presumed to comply if it calls a person about a debt no more than seven times within seven consecutive days, and not within seven days after a telephone conversation with that person.16

Large issuers use agencies early. In the CFPB's 2025 survey, more than half of the eight issuers used third-party agencies before charge-off, collecting in the agency's own name, and several also used "first-party" outside collectors working under the issuer's name and direction. Most issuers said they "do not allow their third-party collection agencies to offer and enroll borrowers in hardship programs, due to the complexity of managing these programs".7

Same budget, same offer: fair lending in collections and the hardship failures regulators have published

In shortCollection procedures are part of a credit transaction under the Equal Credit Opportunity Act, so who gets which relief is a fair lending question. Since July 21, 2026, Regulation B no longer carries the effects test, but intentional discrimination is still prohibited and state laws vary. The CFPB's published findings on relief programs describe the same few failures: requests not processed, borrowers misinformed about what enrollment needed, payments taken after relief, and steering to the option that suited the servicer.

The fair lending frame in 2026

Regulation B defines a credit transaction as "every aspect of an applicant's dealings with a creditor", including "revocation, alteration, or termination of credit; and collection procedures".18 Action or forbearance on an account in default or delinquency is excluded from "adverse action", so declining relief on a delinquent account does not by itself call for an adverse action notice; a request from a borrower who is still current is worth checking with counsel.18 The CFPB's final rule published April 22, 2026 (91 FR 21620), effective July 21, 2026, says ECOA "does not authorize disparate-impact liability", removes the effects test from Regulation B and narrows the discouragement rule; the Act still "prohibits practices that discriminate on a prohibited basis regarding any aspect of a credit transaction".14 State fair lending laws sit outside the rule, and a suit to vacate it, National Fair Housing Alliance v. CFPB, was still pending in October 2026 with no injunction sought.35

For a hardship team the practical test has not changed: borrowers with the same budget, balance and hardship should get the same offer, and every departure should have a written reason that has nothing to do with who the borrower is. A record of the budget, the options tested and the precedent makes that test possible after the fact.

Six published relief failures, and the control that catches each

We found no public federal enforcement order since 2023 aimed squarely at a credit card hardship program. The findings above come from supervision, a student loan case and a servicing case whose lessons carry over.

Card balances 90 days late near a 2010 high: the delinquency data behind more hardship requests

In shortIn mid-2026, Americans owed $1.26 trillion on credit cards and 12.9% of those balances were 90 or more days late, close to the 13.7% of 2010. Auto loan serious delinquency hit a series high in early 2026. Card charge-off rates at banks have eased from their 2024 level, while the large issuers' pre-charge-off cure rates fell two years running. More borrowers in trouble means more requests, and each one needs a decision.

Fewer delinquent card balances cure before charge-off

The CFPB's survey of eight large issuers measures what happens to balances that become delinquent in a quarter. The cure rate, the share that returned to current by the quarter's end, fell from 54.7% in 2022 to 50.0% in 2023 and 47.6% in 2024; the share charged off rose from 5.2% to 7.0% and 8.8%.7

No public figure gives the number of hardship requests lenders receive, the share approved, the days to decide or how many plans break. What you can measure in your own data: requests by channel and reason, days from a complete request to a decision, the program offered by surplus band, plans broken within 6 and 12 months, and accounts re-aged or charged off after a plan.

Which parts of a hardship decision software can take over, and how SR 26-2 and consumer law treat the tools

In shortMost of the work before the decision is reading and arithmetic: what is missing, what each pay stub says, which bank transactions are bills, what each option would cost. Software does that quickly and keeps the source of every figure. The April 2026 model risk guidance leaves simple arithmetic, fixed rules and generative AI outside its scope, so a lender governs these tools through its own policy, third-party risk management and consumer law. A person still decides, signs and owns the policy.

The April 17, 2026 guidance (Federal Reserve SR 26-2, OCC Bulletin 2026-13, FDIC FIL-15-2026) replaced SR 11-7. It says the term model "excludes simple arithmetic calculations, such as those found within spreadsheets, as well as deterministic rule-based processes", and that generative AI models, and AI models that act on their own, "are not within the scope of this guidance", while a bank's risk management "should guide the determination of appropriate governance and controls" for such tools.13 A budget rule and a payment formula are rules and arithmetic. A score that predicts whether a plan will hold is a model.

Call notes, pay stubs and a policy grid: how collections teams decide hardship requests today

In shortA collector takes the first call, a hardship specialist chases documents and builds the budget, a team lead co-signs the larger plans, and a compliance analyst tests the outcomes later. Most of the days go to waiting for documents and re-keying them; most of the risk sits in the choice of program, made from a policy grid and memory. Teams run the work in house, with nonprofit credit counseling for multi-creditor cases, or with collections software, and most combine them.

Who handles a hardship request, from the first call to the books

Six steps from the first call to the offer letter

Where a week-long hardship decision spends its days

The CFPB's 2021 findings show what happens when volume outruns the process: issuers that relied on manual handling built backlogs, and accounts became delinquent between the request and the processing.9 The waiting is the expensive part. While a request sits, the account rolls toward the 180-day or 120-day date, collection calls may continue unless a pause is in place, and the borrower's situation can change again.

In house, through credit counseling, or with collections software

From −$138 on her own form to $214 checked and a $198 plan: Renée Okafor's request on screen

In shortThis is the example from the top of the page, inside the product. Tomás Reyes, a hardship specialist, opens the request queue, sees what was asked for and received, starts from Renée's own budget, lets the agents check it against her pay stubs, her support statement and 90 days of bank data, tests every program against the $214 that is left, and signs the one plan that fits. His team lead co-signs because the balance is above his $7,500 limit.

1

Every open request on its clock

On Monday morning, October 12, Tomás opens Hardship requests: 38 open, nine ready to decide, 11 waiting on the borrower, six with the agents reading. Each row shows the account, the reason, how many required documents are in, what the borrower has left, the program that fits and the decision date. Collection calls pause while a request is open.

Renée Okafor's request, HC-24117, came by phone and portal: card ending 4471, reduced hours, eight of eight documents, $214 left, decision due Tuesday, October 13.

2

What was missing, asked for once

Dwayne Pratt, a collections agent, took her call on October 1 at 2:22 pm and wrote "hours cut, ex helps with the kids". Her web form arrived 18 minutes later. The request reader compared both with the policy's checklist for reduced hours and found three items missing: her October 2 pay stub, proof of the hours cut, and proof of the support payments, which only the call notes mentioned.

One message went out by portal and text on October 2. She uploaded the pay stub, the employer's letter and the county support statement on October 8 and connected her checking account; the request was complete on October 9 at 4:12 pm.

3

Her own budget says she is $138 short

The budget opens on her figures as she gave them: $3,148 in, $2,872 of essentials, $414 of other debts. That leaves −$138 a month, and asked what she could pay she wrote "Honestly nothing right now. Maybe $100 if I skip things."

Nothing is tested yet. The relief options wait until her answers are checked against her documents and her bank data.

4

Checked: $214 left, every figure cited

Tomás builds the budget. The income and document reader reads both pay stubs and the employer's letter: $1,452.80 every two weeks is $3,148 a month, hours cut from 36 to 29 from August 1, no end date. The bank data reader sorts 214 transactions and finds $350 of child support on the 1st of each month and four pay-later plans totaling $98, none on her form.

The affordability builder fills each line with what she said, the 90-day bank average, the guideline for one adult and one child, and the figure used, each with numbered source chips. Food was $640 on her form, above the $540 guideline, so $540 is used. $3,498 in, less $2,772 and $512, leaves $214.

5

Every program tested against $214

Under the budget, the program matcher lines up the bank's relief ladder in the order its hardship policy tries it. Keeping the card terms ($318) is short by $104; the 9.9% rate reduction ($315) by $101; the interest-free plan ($272) by $58. The $50 three-month relief fits only for three months, and her hours have no return date. A settlement needs $5,872 and she has $412 in checking.

The extended plan, 7.9% fixed for 60 months with the card closed, is $198: the first that fits, with $16 to spare. On the right, 13 of 14 similar borrowers in the last 90 days were offered the same plan.

6

Signed, co-signed and ready to send

The letter writer has drafted the decision record (request, budget, test, precedent, decision) and a plain offer letter: $198 a month from November 15, 2026 to October 15, 2031, card closed to new purchases, the $41 late fee waived, interest of $2,091 instead of $8,140 at 26.99%. Tomás signs. The balance is above his $7,500 limit, so Paula Nordgren, the team lead, co-signs from the same record.

The letter goes by portal and first-class mail, and Renée can accept it in the portal.

The solution's design targets are one day from a complete request to a signed offer, and 96.8% of offers matching what borrowers with the same budget received. They are targets, to be measured on your own requests.

Bank data, the what-if with a reason, the fairness view and the relief ladder on screen

In shortThe walk-through is the story. These screens show the rest: what 90 days of bank data showed, the case run with each agent's step, testing a different food figure with a written reason and what it does to every offer, the signing dialog, the offer letter, the fairness view of 1,284 decisions and the overrides with their reasons, the relief ladder with its test bench, and the settings that hold the bank's policy.

Select any screen to open it larger. The bank, borrowers, employers, landlords, lenders, people and figures are fictional.

Seven agents read, count and draft; the hardship specialist decides and signs

In shortEach agent has one job and a fixed limit. None of them contacts the borrower outside the channels she chose, changes account terms or sends a letter. The hardship specialist signs every offer up to a $7,500 balance; above it the team lead co-signs; an offer that differs from the first program that fits, or from the precedent, needs a written reason and goes to the compliance analyst.

What each agent reads, counts or drafts, and what it never does

Who signs a hardship offer, and up to what balance

Settlements below 50% of the balance go to the head of collections. Each signature records the name, the decision and the time; every agent step, document, what-if and signature is on the request's activity trail, and the decision record is kept with the account.

Harrow Creek Bank's hardship team, and Renée

What the hardship budget reads from your systems, and the decision record each request leaves

In shortIt reads what the lender and the borrower already have: the request and call notes, her uploads, the account from servicing, a soft credit check, connected bank data with her consent, and the bank's hardship policy. It leaves a completeness check, a cited budget, every option tested, the precedent, a drafted letter and a signed decision record. The servicing system stays the system of record and changes only when a person approves.

Eight connections a hardship desk plans for

Built for enterprise scale: role-based access, maker-checker sign-off above each limit, versioned rules, and a full audit trail of every document read, figure used, offer and signature.

What a week-long decision, an unaffordable plan and an unexplained offer cost a collections team

In shortStart from your own costs, because nobody publishes how long hardship decisions take or how often plans break. Published figures set the scale: delinquent card balances cure less often than they did, more of them are charged off, and the people building budgets by hand cost a known wage. Every day a request waits, the account moves toward the charge-off date; every plan that breaks costs the balance and a second conversation.

Six hardship costs you can measure in a week

What broken plans and unwritten reasons cost beyond the spreadsheet

Staff hours released and broken plans avoided: a calculator for your hardship team

In shortPut in your own numbers. The calculator starts from a published wage and asks you for the rest: requests a year, hours per request now and after, how many requests end in a plan, how many plans break, what a broken plan loses, and what the tool costs. Every default marked illustrative is an assumption to replace.

Where the return on hardship automation comes from

Hours back and losses avoided on your hardship requests

A team handling 12,000 requests a year, with the calculator's defaults, releases 16,800 staff hours worth $537,600, keeps 144 plans from breaking and avoids $576,000 of losses, and nets $863,600 after a $250,000 yearly cost. At 3,000 requests the value is $278,400, just above the cost, and the case rests on the plans you keep.

Score your hardship desk: are your relief ladder, budget rule and records ready for software?

In shortPick the answer closest to your team today. Eight questions score 0 to 2; the last is for reflection. The meter adds up your score as you go, and each question says why it matters and what a strong answer sounds like.

Explore, pilot or implement: next steps for your hardship desk

Sixteen questions that test how hardship software builds a budget, chooses relief and keeps the record

In shortAsk every vendor the same questions, us included. The answers show where each budget figure comes from, how the options are tested, whose rules apply, how consistency is checked and how you would test it on your own history.

There is no published independent test of any hardship software's budgets or offers, as of October 2026. A replay on your own history is the test that counts.

Start with a replay: twelve weeks from your past hardship requests to a decision on five numbers

In shortWrite the rules down, measure your baseline, replay your own past requests, then run live on one product with your specialists signing everything, and decide with five numbers. None of these steps commits you to a vendor.

1. Write the rules down: the relief ladder in policy order, the budget rule, the guideline table, documents by reason, signing limits.
2. Measure your baseline on 100 recent requests: days to decide, incomplete rounds, programs offered by surplus, and plans broken from a year ago.
3. Replay three months of requests with the documents as they arrived, and compare budgets and offers with what your team decided.
4. Run live on one product for six weeks, with your specialists deciding and signing every offer.
5. Decide with five numbers: days to decide, incomplete rounds, consistency with precedent, early plan breaks, and staff minutes per case.

Five numbers that decide the hardship pilot

Hardship program questions people search: deferrals, workouts, re-aging, credit reports and collectors

In shortThe questions borrowers, collections teams and compliance staff search for most, each answered on its own.