Credit card holders are far less likely to get calls from a debt
collector than in the past -- at least about their card debt, new
figures from the collection industry show.
A survey of 300 collection agencies by the industry group ACA
International found that card debt made up only about 3 percent of
their business in 2013. That compares to a 20 percent share in
2010, the last time ACA did the analysis.
"The world was a different place," Public Affairs Director Mark
ACA's forthcoming report includes only a fraction of the
industry, he added, stressing that the results may not be
universal. There are more than 5,000 third-party collection
agencies in the U.S. that contract their services to creditors,
according to Census figures.
However, a separate survey supported ACA's results. Since just
2013, bank cards have fallen from a top source of collection
business to fourth place, said the report by payment processing
company BillingTree and Inside ARM, a trade publication.
"Compared to 2013 results, revenues related to bank card
collections decreased significantly," said the
based on 150 collection companies.
Changing credit card use
The surveys add to growing signs that Americans are
changing the way they use plastic
. Credit cards are being pulled out more often to make
transactions, and less often as a means to tap into revolving debt.
ACA's figures come on the heels of a report by the American Bankers
Association showing increased
use of cards as a payment device
, as banks shift away from higher-risk consumers who are more
likely to carry a balance.
Americans' total credit card balance has been rising lately, but
May's $872 billion figure remains about $150 billion below the
pre-recession peak reached in 2008, according to the Federal
The collection industry surveys don't measure dollar figures, so
it's impossible to tell how much the stack of credit card bills on
collectors' desks has shrunk. And whatever the amount of the
decline, other obligations -- including medical and student loans
-- have zoomed in to fill the gap.
Health care was the No. 1 source of collection work in both
collection industry surveys, and Schiffman said the amount of
health care debt in collections is up. Also on the rise are debts
owed to goverrnment entities. "State and local governments can't
have a hole in their budget -- they can't run a deficit," Schiffman
said, explaining a rise in collection business from the public
Overall debt burden growing
Looking at the overall debt burden on consumers, the size of bills
in collection is actually rising, according to the Federal Reserve
Bank of New York. For people with at least one overdue bill in
collection, the average amount of delinquent debt was $1,518 in the
first quarter, up by $150 since the first quarter of
"I think we all know there are still a lot of people out there
experiencing financial distress," said Gail Cunningham, vice
president of membership and public relations for the National
Foundation for Credit Counseling.
NFCC members counseled 1.5 million distressed debtors last year,
Cunningham said. The group doesn't track credit card debt problems,
but anecdotal accounts from some counselors indicate that problems
are increasing with payday loans, student loans and online
So why are collectors dunning cardholders less?
Debt collectors say a squeeze on new credit card applications is
at least part of the answer. "When we hit the recession, credit
started getting real tight," said Nick Jarman, chief operating
officer of Delta Outsource Group in O'Fallon, Missouri, and an ACA
board member. As card companies screened out higher-risk
applicants, that meant the people able to get cards were more
likely to pay on time.
"Other business has made up the slack -- we still have a lot of
volume," he added. Some collection accounts are coming from
businesses that only recently began offering credit, such as gyms
and swimming pool dealers.
Late payments on card debt are hovering near record-low levels,
according to the American Bankers Association, a good reason for
the drop in collection business. Only 2.44 percent of accounts were
delinquent in the first quarter, ABA's quarterly
said. The delinquency rate -- for bills more than 30 days overdue
-- has been below the long-term average of 3.82 percent since
One other factor may be at work in the decline of card debt
being placed with collectors. When banks do have problem accounts,
they are more likely to sit on them than before, rather than sell
them on the debt market, according to the debt buyers' industry
association. Debt buyers often contract with collectors to bring in
the debts they purchase from banks.
"I call it a paralysis," said Jan Stieger, executive director of
the industry association, DBA International. Banks are largely
waiting for regulators to finish crafting new rules that will
govern how debt sales are conducted, she said. The Consumer
Financial Protection Bureau is expected to propose debt collection
rules around year-end. Banks "want to know what the rules are for
debt sold," Stieger said. "I think it is a great chill to the
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Fed: Card balances extend growth