The Consumer Finance Protection Bureau is in the process of modernizing the Fair Debt Collection Practices Act (FDCPA), which is an appropriate move for the credit card industry. It is the perfect time for credit card issuers to consider their current collections strategies while the economy is performing well.
The author's latest research report, Credit Card Charge-Off Collections Takes Brains not Brawn The report explains the importance of third-party collection agents and why proposed regulatory updates are appropriate for the U.S. credit card business.
Readers will learn how the credit card aging process works, why third-party agencies help manage financial institution account overflow, and how the FDCPA creates guard rails for the industry.
“The timing of the original Fair Debt Collection Practices Act was perfect. Revolving debt in the U.S. hit $50 billion,” comments the author of the research report. “Today, the U.S. credit card market has more than $1 trillion of revolving debt. Loss rates are at normal levels, yet more than 1 million U.S. cardholders end up at collection agencies each year. FDCPA was born in a world before cellphones, email, and texts. FDCPA 2.0 addresses all these functions and curtails litigation in zombie debt. Both are appropriate next steps”.
Highlights of the research report include:
- A thorough explanation of credit card aging
- Bankrupcy trends (2006–2019F)
- Revolving debt trends in the U.S. (1968–2027F)
- Charge-off rates for U.S. credit cards (2006–2023F)
- Percentage of U.S. consumer accounts placed at collection agencies (2006–2018)
- Regulatory controls impacting third-party collections
- Customer complaints about collections by type
- Collection process flow
Sooner or Later, Credit Card Collections Move to a Different Arena
- Days Contractual Delinquency Causes a Strategy Shift
- Cardholders’ Ability and Intent Drive Credit Card Decisioning
- Bankruptcy Terminates Collection and Accelerates Charge-off
Credit Card Charge-offs Affect Many Americans
- Almost Four Dollars of Every Hundred Becomes a Contractual Charge-off
- Collection Agencies Touch Many Households
Governing Third-Party Collection Agencies
- Rules and Laws Affecting the Collection Industry
- Collection Agency Work Is Not Easy
- Third-Party Collections: Big Business
- Dodd-Frank Governs Financial Institutions’ Practices, FDCPA Governs Collection Agencies
- FDCPA: 1978 Perfect Timing for Governance
- FDCPA 1.0
- FDCPA 2.0: Staying Relevant in the Digital Age
- Internal, Pre-Write-off Collections Manages Credit Risk
- External Collection Management: Manage Vendors, Risks, and the Customer
Conclusions: What Credit Card Issuers Should Do
- Related Research