This research report focuses on strategies to improve credit card collection at each stage of credit card delinquency.
The report, the second in a series of three on collections, explains the importance of preparing collections operations for the next economic cycle, a downturn that is long overdue. It also gives an overview of the U.S. revolving debt market and defines strategies for each stage of credit card delinquency.
This report complements an earlier report on back-end collections, Credit Card Charge-Off Collections Takes Brains not Brawn. The pair give credit card managers a comprehensive view of credit card collections from cradle to grave. A forthcoming report in early 2020 will discuss underlying technologies that support this market space and will compare the vendors listed in this report.
“The U.S. market is long overdue for a recession. Unemployment levels are low, gasoline is cheap, inflation is at bay, but the indicators have been good for too long,” comments the author of the research report. “Experience shows that the best time to hone collections is when times are good. It is much better to test strategies when you don’t need to than have to react as the economy shifts.”
Highlights of the research report include:
- Revolving debt estimates, U.S. market
- Average credit card debt volumes
- Credit card delinquency trends
- The importance of technology and how it needs to drive the process
- Collection aging strategies
- Using third-party resources to manage overflow and diversion
- Top collection systems
1. Executive Summary
2. Consumer Credit Total Debt Environment
- Revolving Debt Volumes and Trends Increase at Record Levels
- Credit Cardholders Carry Higher Balances and More Debt Today
- Impact of Rising Debt Levels on Delinquency and Charge-off
3. Developing Strong Collection Management Practices
- A Credit Card Collections Work Structure Is Essential
- Collections Practices at Work
- Front-End Collections Sets the Stage for Overall Portfolio Performance
- Supplementing Operational Capacity with Third-Party Resources
- Robust Collection Strategies to Cure Delinquency and Minimize Overall Charge-off
4. Supporting Technologies
- Increase Collections and Customer Experience While Decreasing Costs
- Related Research
Figures and Tables
- Figure 1: Revolving debt declined after the recession and is now more than $1.08 trillion
- Figure 2: Average credit card debt has increased 8% over a three-year period
- Figure 3: Bankruptcy disrupts delinquency aging and accelerates write-off
- Figure 4: Following the recession, delinquency rates dropped sharply, but now they are rising slightly.
- Figure 5: In a healthy economy, $4 out of every $100 of credit card loans is charged off as bad debt.
- Figure 6: Collections work structures are typically organized by stages of delinquency and focus areas.
- Figure 7: Risk segmentation in early-stage delinquency optimizes collections capacity
- Figure 8: Risk segmentation in Middle and Late-Stage Delinquency differs from segmentation in Early Stage
- Figure 9: Risk mitigations activities target lower delinquency and improved charge-off rates
- Table 1: Common industry collections management systems