CFPB Report: One In Four Consumers Have Debt In Collections

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.