The Consumer Financial Protection Bureau released a report on the third-party debt collection industry yesterday that contained a number of interesting nuggets and factoids, while not necessarily drawing any conclusions about the state of the industry itself.
The data reveals the contraction that has occurred in the third-party collection space during the past 15 years and the marketshare that the largest debt buyers maintain across the country.
To look at the third-party collection industry, the CFPB segmented it into two parts — entities that purchase debts and then collect on them, called buyers, and entities that collect debts on behalf of others, called non-buyers.
Fewer than 900 collection agencies nationwide reported unpaid debts to one of the three major credit bureaus as of the second quarter of 2018, according to the CFPB’s research. That figure is down from 2,253 that did so back in 2004. While the drop over that timeframe is significant, what is more telling is that there has been a 50% reduction in the number of agencies that credit report in the past five years alone.
The four largest debt buyers, meanwhile, account for 90% of all debt buyer tradelines reported to a credit bureau, according to the CFPB. The four largest non-buyers, by comparison, accounted for just 13% of reported tradelines.
More than three-quarters of all reported tradelines from third-party agencies were for medical, telecom, or utilities debt in the second quarter of 2018. Debt buyers, in contrast, were more likely to report unpaid financial, retail, or banking debts. From the report:
“It is interesting to contrast these data with estimates as to the sources of collection industry revenue. In particular, a leading industry analyst estimates that healthcare, which represents 58% of reported third-party collections tradelines, only generates 11% of collection industry revenue. This may reflect differences in the reporting of different types of collections accounts, differences in the revenue generated per account across different types of accounts, or a combination of the two.”
Three times as many consumers are disputing debts now than did so seven years ago, according to the CFPB, but the total number of disputes still occurred on less than 1% of all new tradelines.
