New data released by LegalShield reveals a significant increase in consumer financial stress, with the Consumer Stress Legal Index hitting its highest level since November 2020.

The CSLI has risen for ten consecutive months, reflecting growing concerns among everyday Americans facing mounting economic pressures.

The CSLI, which serves as a leading indicator of the Consumer Confidence Index, paints a worrying picture despite recent positive economic indicators such as robust GDP growth, easing inflation, strong jobs reports, and record consumer spending during the 2023 holiday season.

The Mastercard Spending Pulse reported a 3.1% year-over-year increase in holiday spending from November 1 to December 26.

LegalShield’s CSLI was launched in 2018 and is based on data from over 35 million consumer requests for legal assistance since 2002.

Legal help

This index analyses approximately 150,000 monthly calls from consumers seeking legal help in more than 90 areas of law, including crucial consumer issues.

Matt Layton, LegalShield’s SVP of Consumer Analytics, emphasized the authenticity of the data, stating, “People don’t call attorneys unless they are genuinely worried about something.”

Layton explained that these calls are unprompted and represent real concerns from individuals seeking affordable legal advice to address their challenges.

The CSLI’s increase in 2023 follows the Federal Reserve’s interest rate hikes initiated in March 2022, with foreclosures and bankruptcies driving the index higher.

Generational problem

Millennials and Gen Xers are particularly affected, as evident from rising calls related to payday loans and a significant surge in auto repossessions, billing disputes, and other financial issues.

LegalShield’s historical data suggests that the CSLI typically precedes financial challenges by 60-90 days, indicating that consumers are facing significant financial strain. Despite increased spending, the rise in consumer stress may portend a sharper increase in household debt in the coming months.

A recent federal report confirms this trend, showing a 1.3% rise in U.S. household debt in the third quarter of 2023, reaching a record $17.29 trillion. Mortgage, credit card, student loans, and auto loans were among the leading contributors to this debt, according to the Federal Reserve Bank of New York.

LegalShield CEO Warren Schlichting expressed concern over the growing financial stress at the retail level. He noted that inquiries about foreclosures and missed bill payments were on the rise, indicating that people may struggle to cover costs despite positive jobs reports and interest rates.

The LegalShield Consumer Stress Legal Index serves as a valuable resource for policymakers and industry leaders to gain insights into the challenges faced by consumers and make informed decisions to address these issues.