Debt

CFPB Report: One In Four Consumers Have Debt In Collections

CFPB

More than a quarter of consumers have one debt in collections, according to data from the Consumer Financial Protection Bureau. A large swath of that is tied to medical debt — but it depends on who is trying to collect, according to a recent agency study.

The Consumer Financial Protection Bureau said in a report that a bit more than one in four —  to be specific, 28 percent — of consumers have had at least one debt in collections.

The report, released Thursday (July 18), examined collections tradelines — information about a consumer account sent to a credit reporting company, generally on a regular basis — from 2004 to 2018.  The data spanned debt buyer tradelines, representing debt bought from creditors that has been charged off by creditors and non-buyer tradelines, which attempt to collect on behalf of the original creditor.

The percentage of consumers sampled with third party collections never went below 27 percent or above 34 percent. Peak levels — and levels of 33 percent and above — occurred after the financial crisis into 2013.

The agency said in its report, titled “Market Snapshot: Third Party Debt Collections Tradeline Reporting,” that as many as two thirds of non-buyer tradelines had indicated medical debt in collection, according to the latest data as of the second quarter of 2018.  Medical debt comprised 58 percent of total third party collections in that period. Buyer tradelines primarily reported banking, retail and financial debt.

The CFPB also reported that as much as 20 percent of the debt was for telecommunications or utilities-related debt.

In reference to the debt collectors themselves, the number of third party collections in the aggregated increased over the past 15 years. But the number of collectors reporting tradelines declined markedly. In terms of that data, there were as many as 9,330 debt collectors, but the CFPB said that the number reporting third party collections tradelines fell by 60 percent over the same period to the most recent 898.

The data that show medical debt as a large percentage of what’s being pursued by collectors dovetails with findings and reports last month, seen in this space, that hospitals and other providers have been resorting to aggressive tactics to collect on unpaid bills. As reported, in one example in Virginia, 36 percent of hospitals sued patients and garnished wages in 2017. That’s according to the American Medical Association Journal JAMA. And separately, as estimated in the PYMNTS Changing Landscape of Healthcare Payment Plans, of the $63.7 billion in annual out of pocket medical expenses, about $7.5 billion goes unpaid.

In May, the CFPB proposed new debt collection rules that would let collectors contact debtors more than they already do. Under the new proposals, collectors would be allowed to send unlimited e-mails and texts to consumers and would be able to call as many as seven times per week. In a response, a group of senators sent a letter to CFPB Director Kathy Kraninger that expressed reservations about the proposal. The senators said that costs may accrue to consumers who do not have unlimited mobile device plans and thus may wind up paying for those communications.

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NEW PYMNTS DATA: HOW WE SHOP – SEPTEMBER 2020 

The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.

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