We can learn a lot from looking back on the collections trends in 2023 to predict where the industry might be at the end of 2024.
Here are three predictions from Collections & Recovery, based on what we saw in 2023:
CFPB Activity will Increase
It barely seems possible that the CFPB could be more active than they were in 2023, but it's a safe bet the Bureau will outdo itself in 2024.
The primary target for the CFPB in 2023 was credit reporting. We saw the CFPB’s plans to dramatically alter decades of FCRA requirements for everyone. Another major shift in 2023 was the decision by the credit bureaus, met with praise from the CFPB, to prohibit reporting on medical debt under $500. The CFPB clearly wants to ban the reporting of any medical debt, based on their July 11 hearing.
The Upside: Regulation breeds innovation. The changes the CFPB are proposing pose an opportunity for a change in the way we look at creditworthiness. As more companies are deemed credit furnishers, watch for short-term challenges in how creditworthiness is calculated, and then a long-term positive of a more holistic view of consumers’ finances.
Student Loan Repayments Will Continue to be a Focus
The Upside: Seeing no immediate impact is definitely a positive. It could be a much more gradual challenge for collections departments than initially predicted, which gives lenders time to focus on updating their hardship policies to handle a higher number of disadvantaged consumers.
We’re expecting a decrease in interest rates in 2024, which is good news for auto loan borrowers. In 2023, 53% of new car loans and 87% of used car loans had an APR over 6%, resulting in record high monthly payments – a majority of which were over $500 per month. We may not see a marked decrease in those payments, but many of the staffing and supply chain issues we saw in early 2023 have been resolved.
The Upside: As auto payments tick up, concern about the economy follows. If those plateau, or even decrease, we’re looking at borrowers who have a little extra flexibility in their spending, which is a positive overall.
Keep reading the Collections & Recovery Newsletter every Thursday for updates on our predictions, and to learn about the collections trends you need to know.
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