CFPB: Strong Labor Market and Pandemic Relief Drove Down Collections

A strong labor market and pandemic relief programs helped consumers keep current on their bills.

As a result, from 2018 to 2022, the total number of collections tradelines on consumers’ credit reports dropped by 33% and the share of consumers with a collection tradeline on their credit report fell by 20%, the Consumer Financial Protection Bureau (CFPB) said in a Tuesday (Feb. 14) press release.

This and other information is included in a CFPB report released Tuesday, “Market Snapshots: Trends in Third-Party Debt Collections Tradeline Reporting,” which examined trends in credit reporting from 2018 to 2022.

The report found that another factor contributing to the drop in the number of collections tradelines may be that some contingency-fee-based debt collectors, who primarily collect on medical bills, are not providing data to credit reporting agencies because they are concerned about data integrity and the costs that would accompany furnishing disputed information, according to the release.

“CFPB market monitoring indicates that contingency-fee-based debt collectors are moving away from furnishing collections information to credit reporting companies in part due to their concerns about data integrity and their ability to comply with the Fair Credit Reporting Act, including dispute processing,” the agency said in the release.

Despite this decline, medical collections tradelines still account for 57% of all collections tradelines on credit reports, according to the release.

While the nationwide consumer reporting companies are to begin removing medical collections tradelines that are less than $500 or have been paid, the CFPB said in the release that half of the consumers who currently have medical collections tradelines on their credit reports will still have them after that change.

As PYMNTS reported in March, the three major credit bureaus — Experian, Equifax and TransUnion — will remove medical debt that was paid off after that debt had been sent to collections, rather than have that debt show up on credit reports for as long as seven years.

CFPB Director Rohit Chopra said in the Feb. 14 press release that “…false and inaccurate medical debt on credit reports continues to be a drag on household financial health.”

The agency reported in April that attempts to collect debt people didn’t actually owe were the most common consumer complaint. Other common disputes were that the debt has already been paid or that the amounts quoted were inaccurate, the CFPB said at the time.