A look at the current collections landscape

April 17, 2009 by Jeff Bernstein

Our current collections management landscape is seeing unprecedented consumer debt burdens:

  • Total consumer debt o/s is at $14 trillion as of Jan ’09
  • Revolving debt o/s has reached $1 trillion
  • The unemployment rate is at 7.6% and is expected to continue to rise
  • Credit card and Home Equity Line Of Credit issuers reduced available credit by approximately $2 Trillion last year and more reductions are expected in 2009

There is a continuing rise in delinquencies and chargeoffs. Here are some examples from our recent research:

  • 8.5% of Prime Adjustable Rate Mortgages are now delinquent which shows an increase of 491% over this time last year
  • 25% of all sub prime mortgages are now 60+ days delinquent
  • Delinquencies for prime bankcard customers have increased 286% over the last 2 years
  • 34% of all scoreable consumers (those who have sufficient trade information to calculate a score) now have a collection account.

Compound these by a decline in the relative collectability of these accounts and you see:

  • 9 million households now have negative equity
  • 20% of 401(k) accounts have been tapped for loans (usually at a cost of 45% in penalties and fees to the account holder)
  • According to the Federal Reserve, in late 2006 – at the height of the sub prime mortgage boom – the U.S. experienced a negative savings rate for the first time since the Great Depression.