New Data: Consumer Debt Crisis Drives Legal Stress to 5-Year High
LegalShield data offers early warning of household financial stress ahead of Federal Reserve's upcoming debt report.
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LegalShield's Consumer Stress Legal Index (CSLI) climbed 4.4% from March to June, driven by surging foreclosure and consumer finance legal inquiries, all rooted in increased debt.
'Debt is the common thread behind rising consumer stress,' said Matt Layton, senior vice president of consumer analytics at LegalShield. 'Whether it's missed mortgage payments, maxed-out credit cards, or mounting buy-now-pay-later balances, debt-fueled household spending is forcing people to ask a lawyer for help.'
Data analysis shows the Foreclosure Index jumped 13.3% during the quarter and is now nearly 28.9% higher than a year ago, marking the steepest annual increase in three years. The Consumer Finance Index also climbed 8.7% since March, as more consumers sought legal assistance for debt-related issues such as defaults and loan modifications.
Americans in Debt
LegalShield's CSLI report comes ahead of the Federal Reserve Bank of New York's scheduled release of second quarter household debt numbers in early August. Household debt has steadily increased since 2013 following a period of decline after the 2008 recession. Household debt balances stood at a record $18.20 trillion in Q1 2025, a 0.9% rise from the end of 2024. In particular, mortgage balances grew by $199 billion and home equity lines of credit (HELOC) increased by $6 billion. More concerning is that overall debt delinquencies increased to 4.3% at the end of Q1, the highest level since 2020, including rising delinquencies for mortgages and HELOCs, as well as student loans that began reporting to credit agencies in Q1 following a nearly five-year pause due to the pandemic.
'LegalShield data tends to move ahead of official reports, and right now, it's signaling deeper trouble,' said Layton. 'In the coming weeks, we expect the next debt and foreclosure reports to reflect what calls to our provider lawyers are seeing — more households slipping into unsustainable financial territory.'
Consumers Take Action
LegalShield data tracks actions taken by consumers with more than 150,000 calls to provider lawyers each month. The LegalShield dataset is built on hard data based on American households' real-time legal needs that reflect financial pressures and opportunities. This stands in contrast with polling based on opinion and sentiment. The latest rise in consumer stress reveals sharp increases in foreclosure and consumer finance inquiries, and those findings suggest that more Americans are struggling with debt, housing costs, and financial obligations, even as overall spending remains strong; the latest Personal Consumption Expenditures (PCE) data shows consumer spending is up 6.9% year over year in May.
Key Research Findings:
Consumer Stress Legal Index (CSLI) Highest in More Than 5 Years
CSLI: 68.2 (up from 65.3 in March; up from 61.8 YoY)
+4.4% quarter-over-quarter | +10.4% year-over-year
The CSLI has increased four straight months, signaling intensifying economic stress for consumers despite a resilient stock market and stable employment figures.
Foreclosure Spike Signals Growing Housing Strain
Foreclosure Index: 46.8 (up from 41.3 in March; up from 36.3 YoY)
+13.3% quarter-over-quarter | +28.9% year-over-year
Rising insurance premiums, property tax reassessments, and adjustable-rate mortgage resets are pressuring homeowners. LegalShield's Foreclosure Index closely tracks foreclosure filings nationally.
Rising Debt Fuels Surge in Consumer Finance Legal Issues
Consumer Finance Index: 106.4 (up from 97.9 in March; up from 101.7 YoY)
+8.7% quarter-over-quarter | +4.6% year-over-year
Consumers are increasingly seeking legal assistance for a wide range of financial issues with a steep rise in the index in the second quarter. Analysis of the data indicates households are feeling the effects of delinquent debt, sustained interest rates and persistent inflation on everyday essentials.
Bankruptcy Dips in Q2 But Remains Elevated YoY
Index: 32.1 (down from 36.4 in March; up from 29.5 YoY)
–11.8% quarter-over-quarter | +8.8% year-over-year
Bankruptcy inquiries eased in the short term but remain significantly elevated compared to last year. The dip may reflect temporary stabilization due to seasonal factors, but high debt levels and consumer delinquencies still loom.
Study Methodology
LegalShield tracks an average of 150,000 monthly calls to provider lawyers based on more than 90 areas of law. That data comprises more than 35 million consumer requests for legal services dating to 2002. The CSLI is the flagship index reporting consumer stress, based on three subindices: Bankruptcy, Consumer Finance, and Foreclosure.
About the Research: LegalShield Consumer Stress Legal Index
As part of LegalShield's mission to ensure every person has equal access to justice, the company mines its data for insights policymakers can use to make a real, positive impact in their decision making. The LegalShield Consumer Stress Legal Index comprises three subindices that reflect the demand for various legal services. LegalShield's dataset includes more than 35 million consumer requests for legal assistance since 2002, averaging approximately 150,000 calls received monthly. The CSLI uncovers the daily challenges people are facing and provides actionable intelligence to help policymakers and industry leaders bridge those gaps. Released quarterly, view past reports on the CSLI page on LegalShield.com.
About LegalShield:
For more than 50 years, LegalShield has provided everyday Americans with easy and affordable access to legal advice, counsel, protection, and representation. Serving millions, LegalShield is one of the world's largest platforms for legal, identity, and reputation management services protecting individuals and businesses across North America. Founded in 1972, LegalShield, and its privacy management product, IDShield, has provided individuals, families, businesses, and employers with tools and services needed to affordably live a just and secure life. Through technology and innovation, LegalShield is disrupting the traditional legal system and transforming how and where people receive legal guidance and services, with access to hundreds of qualified, trusted attorneys and law firms. LegalShield and IDShield are products of Pre-Paid Legal Services, Inc. To learn more about LegalShield and IDShield, visit LegalShield.com and IDShield.com.
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