The Critical Role of Third-Party Collections in the Economy

ACA International member TransUnion’s “State of Third-Party Collections 2019 Study” findings reflect consumer communication preferences, collections trends and the need for regulatory reform.

11/11/2019 9:00 AM

NEWS

The Critical Role of Third-Party Collections in the Economy

Consumers’ credit behavior and the regulatory environment for accounts receivable management companies reflect the ups and downs for the industry, according to a new study from Aite Group and ACA International member TransUnion, “The State of Third-Party Collections 2019 .”

In one key finding in the study, TransUnion reports that at the end of 2018, 79 million consumers held at least one collection account with total outstanding balances at $211 billion, according to a news release . Yet, despite the solid level of debt in collections, the number of companies have declined in recent years.

“Third-party collections plays a critical role in the health of the American economy,” said ACA member Peter Ghiselli, vice president of third-party collections at TransUnion. “Not only does the collections industry provide gainful employment for thousands of professionals, it keeps the cost of credit low for consumers that seek it. For the industry to thrive once again, modernization must take place. Yet this can only happen if both the industry and government officials work side-by-side to create an environment that fosters healthy discourse between collectors and consumers.”

TransUnion’s report also shows key trends in consumer communications and technology.

For example, the report, based on a survey of third-party debt collection professionals conducted in May and June 2019, reflects difficulty reaching consumers through their preferred communication methods.

According to TransUnion:

Nearly 60% of collectors reported that contacting consumers is more difficult compared to five years ago.

53% of collections organizations said they are considering text messages to contact consumers in the next two years—in addition to social media (23%) and email (22%)

Companies are diversifying their collections operations. For example, 49% of the companies in the survey said they collect at least four types of debt.

Overall findings indicate the need for regulatory reform, also reflected in components of the Consumer Financial Protection Bureau’s proposed debt collection rulemaking.

“The report reinforces our belief that the collections industry has an opportunity to rejuvenate itself for the first time in 42 years. The use of modern technology could address fundamental challenges and allow the industry to implement a consumer-first approach to collections — facilitating an amicable, productive experience for all parties,” Ghiselli said.

After working with ACA members and association leadership to garner feedback on the CFPB’s first-ever proposed rule for the Fair Debt Collection Practices Act, ACA submitted comprehensive comments on behalf of its members, outlining views on the rule and suggested improvements.

ACA’s comments note that research shows the U.S. economy depends on collected debt. The ARM industry returned $67.6 billion to U.S. businesses in 2016—that’s an average savings of $579 for every American household. The CFPB’s final rules should not incentivize consumers to shirk legal and valid debts at the expense of honest businesses and other consumers seeking affordable credit, ACA previously reported.

ACA’s findings in the comments to the CFPB are similar to those in TransUnion’s report.

Consumers increasingly prefer modern electronic communications—such as email and text messages—over antiquated snail mail. ACA has been urging the CFPB to set realistic regulations of these communications that balance consumer preference and the ability for businesses to comply.

ACA addresses many other issues in its comments and provides a table of contents to help readers navigate our response. We encourage members to read the complete comments to the CFPB, which are available through ACA’s Advocacy Resource Center.

ACA is also conducting ongoing research and analysis of the industry’s key metrics to include total debt collected, commissions, fees earned, number of employees, charitable contributions, and more through an economic impact survey in partnership with Kaulkin Ginsberg.

Your information is critical to the study’s success—and to ACA International’s stellar reputation as the industry’s go-to resource for relevant information. ACA International hopes you will use the survey link  provided by Kaulkin Ginsberg to answer the survey questions.