CFPB Report Highlights Credit Card Debt Collection

The Consumer Financial Protection Bureau’s fifth biennial report on the consumer credit card market released in September examines a variety of hot topics, including how card issuers are collecting overdue debts and the increase in debt. digital engagement in the debt collection process.

From a peak of $ 926 billion in 2019, credit card debt fell to $ 811 billion in the second quarter of 2020, the largest six-month decline on record, before reaching $ 825 billion at the end of the year, according to the report. Credit card default rates also fell throughout 2020, erasing six years of increases.

Notably, the section of the CFPB’s credit card debt collection report found that issuers had policies in place detailing how often their collectors can call, leave voicemail messages, emails, and text messages. and otherwise contact a consumer regarding an overdue account. The average number of consumer contacts specified in the policies ranged from three to 11 per day, but in practice, issuers reported significantly fewer overall contact attempts on average per account than allowed by the policies: 1.25 at 2.99 per day.

Digital engagement, whether it translates into signing up for online portals, signing up for mobile apps, enrollment rates for electronic statements versus paper equivalents or electronic payment of credit card bills. credit, steadily increases across all age groups and almost all types of platforms.

The report found that since the 2019 report, issuers have lowered the range of their daily limits on debt collection phone calls for overdue credit card accounts while increasing the use of emails when calling. recovery.

The number of card issuers using text messages as part of their credit card collection strategy has also continued to increase since the bureau began tracking them. Less than two-thirds of those surveyed in 2019 said they had sent text messages to communicate with delinquent consumers, while almost all respondents said they had used text messages in the last survey period.

Two-thirds of issuers surveyed also reported interacting with delinquent consumers through “web chat,” often allowing consumers to negotiate settlements and make payment arrangements.

The CFPB also discussed how issuers use proprietary collectors to support internal collection activities.

“Most issuers who have used proprietary collectors noted that they do not place any specific sub-segments of accounts with proprietary agencies. However, a minority of respondents assigned higher risk accounts to owner collectors, ”according to the report.

On average, issuers reported holding 96% of pre-charge debt balances to be processed internally and by proprietary collectors, with the remaining 4% placed with third-party collectors.

Other key points to remember:

• Over 25 million consumer credit card accounts representing approximately $ 68 billion in outstanding credit card debt entered relief programs in 2020, significantly higher than in previous years;
• The share of accounts with a revolving balance declined in 2020, more consumers paid off their card debt in 2020, and existing cardholders paid off the highest share of their credit card debt in recent years;
• Late payments and default rates have fallen to historically low levels, especially for consumers with scores below the premium;
• Citing data from IBISWorld, the report shows that third-party debt collection industry revenues have declined in recent years from around $ 14.1 billion in 2013 to $ 12.7 billion in 2019; and
• The industry continues to consolidate, with the number of debt collection companies decreasing by 30% and the number of debt collection establishments decreasing by 28% between 2011 and 2019.

Read the full report here.