CFPB Issues Report on Debt Settlement Trends

The bureau examined overall debt settlement and credit counseling use from 2007 to 2019.

7/10/2020 8:00 AM

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CFPB Issues Report on Debt Settlement Trends

CFPB Issues Report on Debt Settlement Trends

The bureau examined overall debt settlement and credit counseling use from 2007 to 2019.

The Consumer Financial Protection Bureau released a report on Friday, July 10, 2020, “Recent Trends in Debt Settlement and Credit Counseling.”

In the report, the CFPB examines data from the bureau’s Consumer Credit Panel (CCP) to provide insight into consumers’ use of debt settlement and credit counseling debt management plans from 2007 through 2019. The bureau notes that this period includes debt relief activity observed both during the 2008 financial crisis and the succeeding period of credit loosening, a period that also includes amendments to the Telemarketing Sales Rule (TSR) in 2010 addressing the telemarketing of debt relief services.

The CFPB examines potential relationships between economic conditions, regulatory changes, creditor policies and debt relief services, and, more generally, into the experiences of borrowers in financial distress. Specifically, it examines the evolution of overall debt settlement use, including changes in the number of consumers using this option and in the amount of debt settled, and the time accounts spend between non-payment and charge-off before eventually reaching settlement. 

The report concludes that during the Great Recession, the volume of debt settlements rose dramatically. Between 2007 and 2009, most settlements occurred within a year of the start of delinquency, perhaps as creditors sought to ensure recovery of some funds during the recession. However, as the economy rebounded and the supply of charged-off debts from the financial crisis decreased, settlements dropped and the time before a delinquent account settled grew. The report also states that since 2017, there has been an uptick in reported settlement activity and balances settled alongside an increase in delinquency, but no corresponding increase in credit counseling.

Notably, the report looks at when settlement is most likely to occur during the delinquency.

“Most accounts are charged-off by the debt holder prior to settlement,” according to the report. “Specifically, more than 70 percent of accounts settled since 2013 were first charged-off. Accounts that are not reported as charged-off prior to settlement are typically in collections or another severe delinquency status such as 150 days or more past due.”.

The report also found that in recent years, settlements consistently occur after consumers spent more time in delinquency than they did during the Great Recession.

ACA International will continue to review the report. To access it, click here


Follow ACA International on Twitter @ACAIntl and @acacollector, Facebook and request to join our LinkedIn group for news and event updates. ACA International members are welcome to submit news items for possible publication to comm@acainternational.org. Visit our publications page for news submission guidelines and subscriptions to ACA Daily, Collector magazine and Pulse.

Advertising is available for companies wishing to promote their products or services. Be sure to visit the ACA Events Calendar on the Education and Training page to view our listing of upcoming CORE Curriculum and Hot Topic seminars featuring critical educational opportunities for your company.


Subscribe to ACA Daily NEWSROOM

CFPB Issues Report on Debt Settlement Trends

CFPB Issues Report on Debt Settlement Trends

The bureau examined overall debt settlement and credit counseling use from 2007 to 2019.

The Consumer Financial Protection Bureau released a report on Friday, July 10, 2020, “Recent Trends in Debt Settlement and Credit Counseling.”

In the report, the CFPB examines data from the bureau’s Consumer Credit Panel (CCP) to provide insight into consumers’ use of debt settlement and credit counseling debt management plans from 2007 through 2019. The bureau notes that this period includes debt relief activity observed both during the 2008 financial crisis and the succeeding period of credit loosening, a period that also includes amendments to the Telemarketing Sales Rule (TSR) in 2010 addressing the telemarketing of debt relief services.

The CFPB examines potential relationships between economic conditions, regulatory changes, creditor policies and debt relief services, and, more generally, into the experiences of borrowers in financial distress. Specifically, it examines the evolution of overall debt settlement use, including changes in the number of consumers using this option and in the amount of debt settled, and the time accounts spend between non-payment and charge-off before eventually reaching settlement. 

The report concludes that during the Great Recession, the volume of debt settlements rose dramatically. Between 2007 and 2009, most settlements occurred within a year of the start of delinquency, perhaps as creditors sought to ensure recovery of some funds during the recession. However, as the economy rebounded and the supply of charged-off debts from the financial crisis decreased, settlements dropped and the time before a delinquent account settled grew. The report also states that since 2017, there has been an uptick in reported settlement activity and balances settled alongside an increase in delinquency, but no corresponding increase in credit counseling.

Notably, the report looks at when settlement is most likely to occur during the delinquency.

“Most accounts are charged-off by the debt holder prior to settlement,” according to the report. “Specifically, more than 70 percent of accounts settled since 2013 were first charged-off. Accounts that are not reported as charged-off prior to settlement are typically in collections or another severe delinquency status such as 150 days or more past due.”.

The report also found that in recent years, settlements consistently occur after consumers spent more time in delinquency than they did during the Great Recession.

ACA International will continue to review the report. To access it, click here


Follow ACA International on Twitter @ACAIntl and @acacollector, Facebook and request to join our LinkedIn group for news and event updates. ACA International members are welcome to submit news items for possible publication to comm@acainternational.org. Visit our publications page for news submission guidelines and subscriptions to ACA Daily, Collector magazine and Pulse.

Advertising is available for companies wishing to promote their products or services. Be sure to visit the ACA Events Calendar on the Education and Training page to view our listing of upcoming CORE Curriculum and Hot Topic seminars featuring critical educational opportunities for your company.


Subscribe to ACA Daily NEWSROOM

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