TrueAccord Blog

Q1 2026 Industry Insights: Energy Volatility, Tax Season and Consumer Anxiety

Mark Ravanesi
A green and blue background with the blog title next to a lightbulb illustration.

In the first quarter of 2026, the cost of living remained the primary antagonist for American households. While grocery price growth showed signs of stabilizing, the relief was short-lived as a spike in energy costs driven by geopolitical instability and renewed inflation pressure reintroduced significant strain on monthly budgets.

In debt collection, the first part of the year brings tax season, which provides cash refunds, some of which historically have been used to repay debts. However, despite anticipating the “largest tax refund season in U.S. history,” which on paper showed an average tax refund that was 11% higher than last year, consumers have been underwhelmed with how those bumps materially impacted their finances. Higher earners saw more of a refund boost, and some people who owed owed less, but for many, their refunds ended up being negated by increased energy and other essential costs.

In our latest quarterly report, we have distilled major factors of the current economic landscape to offer recommendations intended to help borrowers, lenders, and collectors navigate these turbulent waters.

Key Economic Indicators

The economic data from Q1 2026 reveals a complex and increasingly fragile financial situation for many households. CPI rose 0.9% in March, pushing the annual rate to 3.3%. While indexes for shelter, airfares, household expenses, and education all rose in March, the biggest driver was energy prices, which surged 10.9% in a single month, primarily due to a 21.2% spike in gasoline.

The labor market in Q1 showed continued expansion with 178,000 nonfarm payroll jobs added in March and a steady 4.3% unemployment rate. While hiring remains active, the market is selective, focusing on efficiency and AI literacy as AI-driven restructuring contributed to approximately 12% of layoffs. Key job gains occurred in healthcare, construction, and transportation, while large enterprises adopted more conservative hiring. 

Based on inflation and the labor market, the FOMC held the benchmark interest rate steady at 3.50%–3.75% through March. Despite previous cuts, the Fed has entered a “wait-and-see” mode as it monitors inflation and global conflict, with minutes from the latest meeting even showing considerations for rate increases.

According to the Federal Reserve Bank of New York’s Quarterly Report on Household Debt and Credit, credit card balances increased to $1.28 trillion at the end of 2025, and credit card accounts delinquent by 90 days or more reached 12.7%, a nearly 15-year high. Aggregate delinquency worsened in Q4 2025, with 4.8% of outstanding debt in some stage of delinquency.  Auto delinquency rates also continue to trend upward, forecast to reach 1.54% for 60+ days past due accounts by year-end.

Foreclosure filings in January 2026 were up 32% compared to the previous year, after 11 straight months of increases. While delinquency rates for mortgages were near normal levels,  deterioration was seen in lower-income areas and in areas with declining home prices. 

What’s Impacting Consumer Finances?

Specific pressures are making it increasingly difficult for middle-to-lower-income Americans to manage their financial obligations. In addition to inflation and skyrocketing gas prices, electricity costs are being driven up by the massive power requirements of AI data centers. According to the U.S. Energy Information Administration, residential electricity prices rose by 11.5% in 2025 and are expected to increase by up to 40% by 2030. 

The “K-shaped” economy continues to define the consumer financial landscape, with higher-income households seeing 5.6% wage growth in March over a year ago and sustaining their spending, while lower-income earners saw meager 1-2% increases, forcing them to navigate a reality of stagnant wages and rising essential costs. 

US consumer spending remains resilient in early 2026, though growth is shifting toward services and experiences over goods. While high costs for housing and essentials squeeze budgets, consumers are selectively spending, shifting toward “cheap thrills” and necessary services like healthcare with a focus on value. 

Many student loan borrowers are also struggling to make payments, with millions more facing monthly payment increases when the SAVE plan ends. According to a recent survey, about 42% of student loan borrowers said they have to decide between making student loan payments and covering their basic needs, and 20% reported they are in delinquency or default on their student loans. In March, 43 million Americans with student loans, about 9 million of whom are in default, were notified that the Treasury Department is taking over debt collection.

What’s Impacting the Debt Collection Industry?

The industry is operating in a state of high regulatory and technological uncertainty, while the future of the Consumer Financial Protection Bureau (CFPB) remains in flux. Following a court order that blocked previous attempts to shutter the agency, Acting Director Russell Vought requested $145 million from the Federal Reserve to keep the CFPB operational only through March 2026, and is expected to continue requesting funds. However, in April, the agency continued to take steps to reduce operations, ending the lease for the headquarters’ office and filing motions to reduce the workforce by half.

While the CFPB pursues a minimal and deregulatory agenda under current leadership, state-level regulators and the Federal Trade Commission (FTC) are increasingly filling the void with their own enforcement priorities. The FTC recently published a detailed five-year roadmap laying out how it plans to police the economy through 2030, and in summary, enforcement will be broad, tech-focused and data-driven. The FTC is reaffirming its commitment to enforcing the nation’s antitrust and consumer protection laws, with a specific focus on online behavior. The agency’s priorities include fighting fraud and deception, targeting healthcare fraud, and holding large technology platforms accountable. 

At a state level, enforcement and regulations focusing on fintech, fair lending, AI, debanking, anti-DEI and cryptocurrency are on the rise. In particular, these 10 states have been leading the charge in increased oversight. With continued rapid advancements in AI technology in financial services and trailing regulatory guidelines, it is more important than ever for businesses leveraging new technologies to assess and mitigate risk through informed and strategic governance policies.

How Are Consumers Feeling?

Consumer sentiment readings show declining confidence and increased anxiety, reflecting the economic indicators. The University of Michigan Consumer Sentiment Index sank about 11% in the beginning of April, continuing a decline that began with the Iran conflict, sinking about 9% from a year ago. Setbacks in sentiment showed up across age, income, and political party demographics and in every component of the index. 

The Conference Board Consumer Confidence Index rose slightly for present situations, but the Expectations Index, which tracks outlooks for income and labor, declined by 1.7 points. Respondents are increasingly pessimistic about their future household financial situations, with consumers’ average and median 12-month inflation expectations surging in March. The percentage of consumers stating that interest rates over the next 12 months will be higher leapt from 34.9% to 42.4%, with a growing cohort believing a recession is likely within the next 12 months.

The Federal Reserve Bank of New York’s March 2026 Survey of Consumer Expectations also shows that households’ inflation expectations increased at the short- and medium-term horizons, with expectations of growth in gas prices ballooning. Respondents’ job finding expectations improved, while job loss and unemployment expectations worsened. Expectations for credit availability have also deteriorated, with more consumers expecting it will be harder to obtain credit in the year ahead. 

What Does This Mean for Debt Collection?

For businesses, navigating 2026 requires a strategy that balances operational efficiency with an acute awareness of the average consumer’s diminished purchasing power and feelings about their financial security.

Sources:

Exit mobile version