Debt Collections Fell 33% Over...

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Debt Collections Fell 33% Over Last Four Years, CFPB Says

By Admin   February 7, 2021

According to the Consumer Financial Protection Bureau, medical bills made up 57% of all collections on credit reports from 2018 to 2022. Over the same period, consumer debt collections fell by a third, indicating an improvement in Americans' household finances. Additionally, the percentage of consumers with a collection tradeline on their credit report decreased by 20%.

The report states that new consumer credit card debt fell sharply in December, from $33.1 billion to $11.6 billion, according to the Federal Reserve.

According to the Federal Reserve, credit card debt decreased from $15.2 billion to $7.2 billion in December, while nonrevolving debt decreased from $17.8 billion to $4.4 billion. 

While the CFPB said the report shows improving conditions for the average American household, decreasing collections tradelines doesn't necessarily mean fewer people are experiencing debt troubles. 

According to the report, the decrease in reported collections tradelines doesn't necessarily indicate a decrease in debt collection, or an increase in the ability of families to meet their financial obligations. Instead, it's a choice made by debt collectors and others to report fewer collections tradelines while still conducting other collection activities.

The number of tradelines pursued by contingency fee-based debt collectors decreased by 28% in Q1 2022 compared to 2018, while debt buyers increased their collections by 9%.

The CFPB stated that the push away from providing collections is due in part to industry consolidation and higher dispute rates on collection tradelines. Most collections are for low-balance, non-financial accounts, with the median balance being $382. The majority of these collections are for medical debt, utilities, telecommunications, and rental or lease obligations.