The Consumer Financial Protection Bureau yesterday released a report that looked at the volume of third-party debt collection tradelines being furnished on consumers’ credit reports, and found that the number of collection tradelines dropped by one-third between 2018 and 2022. Contingency-fee-based debt collectors furnished 38% fewer tradelines during that period, according to the report.
A copy of the report — Market Snapshot: An Update on Third-Party Debt Collections Tradelines Reporting — can be accessed by clicking here.
Perhaps not coincidentally, the number of contingency-fee-based debt collectors that furnished information to the credit reporting agencies dropped by nearly 20% — to 672 from 815 — during that four-year period. Rohit Chopra, the director of the CFPB, pointed to a strong labor market and emergency programs put in place during the COVID-19 pandemic to explain why “household financial distress” has “reduced over the last two years.” While the pace of the decline in the number of consumer credit reports with collection items has accelerated since the onset of the pandemic, the figure was already falling in the two years before the pandemic was declared, according to the CFPB’s data.
By an overwhelming margin, the most common collection-related debt being furnished are for unpaid medical debts, accounting for nearly 57% of all furnished tradelines. Banking and financial debts were next, at 13.2%, followed by telecom (10.9%). More than two-thirds of contingency-fee-based collectors were furnishing medical debt, while 62% of debt buyers were furnishing banking and financial debts.
The CFPB expects the number of collection tradelines on consumers’ credit reports to continue declining, particularly in the wake of announcements from the credit reporting agencies related to how they are handling medical debts. The CFPB estimates that two-thirds of medical debt collection tradelines will disappear from consumers’ credit reports, which could help boost credit scores, although the Bureau pointed out that the dollar amount of debt being removed represents “a minority of all medical collection balances.”