This article was originally published on CU Insight.
During the pandemic, delinquencies were low due to mandated deferrals and accommodation programs. These programs paused debt recovery efforts, but as forbearance and forgiveness expire, credit unions are seeking to mitigate portfolio risk with optimized collection efforts. Now, the CFPB’s Spring 2022 Supervisory Highlight (PDF download) is top of mind as lenders navigate resuming collection efforts while adjusting to new regulatory guidance and seeking to avoid violations of the FDCPA (Fair Debt Collection Practices Act).
Delinquencies are low, but not nonexistent.
The current average amount of credit card debt per borrower is $5,127 which is below the pre-pandemic average of $5,818. The CFPB reports that while mortgage delinquencies are low, 0.5% of mortgages are in late stage (more than 90 day) delinquency. Borrowers relied on credit for financial stability less during the pandemic, and as consumer sentiment steadies, credit is rebounding. The industry didn’t see the dramatic uptick in delinquencies as expected in 2021, but while delinquencies are low, they still need to be addressed. Existing consumer debt and the rising costs of food and fuel, plus portfolio concerns and CFPB guidance are contributing to increased attention placed on collection efforts.
3 strategies to optimize your collections program
It is no surprise that technology has become a non-negotiable aspect of business, and this also includes delinquency management. As credit unions continue to make digital shifts in business, technology solutions built specifically for collections should also be considered to optimize debt recovery efforts. Here are 3 ways to optimize your collections program:
Read the full article here.
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