Communications using email and text message to recover unpaid credit card debts, both before and after the debts are charged off and possibly placed with a third-party collector continue to rise, according to a report on the credit card market released yesterday by the Consumer Financial Protection Bureau.
Interestingly, the opt-out rate for consumers who decide they no longer want to receive text messages ws 1.3% in 2022, according to the report. The average open rate for emails that were sent to consumers was 36%, according to the report, a copy of which can be accessed by clicking here.
While the total amount of credit card debt surpassed the $1 trillion mark in 2022, only 13% of charged-off debt actually was placed with a third-party agency for collection — roughly the same amount that was attempted to be recovered via collection lawsuits. More than half of the companies that issued credit cards in 2022 placed unpaid accounts with third-party agencies. About 3.5% of the debt was sold. Most of the debt — about 28% — was warehoused, according to the report.
Credit card issuers charged off $37 billion in unpaid debts in 2022, which was up from $32 billion a year earlier, but well below the high-water mark of $42 billion set in 2019.
Recovery rates of unpaid credit card debts by third-party collection agencies continued to improve in 2022, perhaps due to the economic stimulus and forbearance plans that were still in place as a result of the COVID-19 pandemic, the CFPB said in the report.
More cardholders are also carrying balances from month to month and falling behind on their payments. One-tenth of consumers are underwater each month — they are charged more in fees and interest than the principal they can pay off.
