Many of us think nothing of the small plastic rectangle card we carry and use on a daily basis. Credit cards and lines of credit have reached the point of mundanity for most American consumers; they are simply a fact of life. However, with so many consumers possessing credit across a multitude of financial institutions, it should come as no surprise that monitoring and collecting credit card debt is a huge enterprise. In an effort to greater understand the inner workings of the credit card and debt collecting industry, the Consumer Financial Protection Bureau ("CFPB") publishes a bi-annual report on the conduct and trends of the creditors and third parties involved in collecting debt. This post will serve to highlight some of the ways in which debt collection behavior has changed and the ways in which these changes reflect upon you as a consumer.
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Sub-Prime & Secured Credit Cards
In its 2017 Report on the Consumer Credit Card Market, the CFPB notes that the practices employed in issuing consumer credit are in a constant state of fluctuation. The CFPB notes that while traditionally lines of credit are primarily offered to those with “prime” credit standings, creditors are beginning to market to those with “sub-prime” credit scores on an increasing basis.
One of the fastest-growing trends in this respect is the issuing of secured credit cards. Secured credit cards are those that are backed with a cash guarantee, a guarantee that then becomes the credit limit on the card. These secured accounts can serve as a low-risk way for those with lower credit scores to improve their credit, especially in instances where they could otherwise obtain a line of credit. Improved offering of secured cards means that those with poor credit have more opportunities to improve their credit scores.
Credit Scores & Technology
The report also outlines several others ways in which the creditor card industry is expanding its horizons. Allowing consumers free access to credit scores has increased across almost all institutions. Over 200 million accounts are now eligible to access their credit score, some can even access without a prior relationship with a bank.
Additionally, the credit card industry has become increasingly digitized in its approached to both marketing and customer service. The CFPB finds that an increasing amount of credit accounts are being accessed through an online portal, and that with this increase their comes an uptick in the use of paperless billing and automated payments. The increased use of online portals has also encouraged creditors to make more information available to consumers, such as access to the aforementioned credit scores.
Short Term vs. Long Term Payment Plans
As the marketing of consumer credit continues to grow, so does the business of collecting upon consumer debt. The CFPB report details that almost all consumer credit institutions employ some sort of internal collection effort, a practice which has seen a notable increase in the past few years. While creditor issuers continued to employ the usual collection tactics, the report showed an increase in long-term repayment programs and an almost complete termination of short-term hardship programs.
Important Take-Aways
The report details that, in general, third party debt collection shrunk as an industry in the period between 2015-2017. Fewer creditors moved accounts from internal collections to third parties, such as debt collection agencies or law offices. The report also details that the past few years have seen an overall decrease in the selling of debt to other creditors. Additionally, while the process of pursuing litigation in order to collect debt maintained a substantial practice, some creditors reported that they were no longer issuing lawsuits as a strategy at all.
Credit Cards Lawyers in NY & NJ
At the Law Office of Simon Goldenberg PLLC, we closely watch the changing industry trends so that we can provide our client's with the cutting-edge services they deserve. Our lawyers are dedicated to consumer protection and help people understand their various options for debt relief, which may includes debt settlement, bankruptcy, and defense from lawsuits. If you're seeking help with debt relief or specifically a lawyer for debt negotiations, contact us for a free phone evaluation and learn how we can help.
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Not legal advice, for informational purposes only. Not responsible for typographical errors. Our law firm does not have any involvement or affiliation to the report discussed in this article, nor are we affiliated with any governmental or official agency. We are headquartered in Brooklyn, New York City and we practice law only in New York and New Jersey. Contact us to learn more.
Source: https://www.consumerfinance.gov/data-research/research-reports/the-consumer-credit-card-market/