Consumer Financial Protection Bureau publishes article called,“Recent trends in debt settlement and credit counseling”

CFPB Regulatory Update

On July 9, 2020, the Consumer Financial Protection Bureau published another installment of its “Quarterly Consumer Credit Trends” called “Recent trends in debt settlement and credit counseling.” The CFPB uses “data from the Bureau’s Consumer Credit Panel (CCP) to provide insight into consumers’ use of debt settlement and credit counseling debt management plans from 2007 through 2019.” The article takes a high-level look at how the debt settlement industry rose after the Great Recession in 2008, fell from 2011 until about 2015 when the economy stabilized and the TSR Amendment was enacted, and then again began a steady rise, similar to the one in 2008, in 2016 through present day.

The article is highly analytical and uses charts and data that the CCP has collected over the last 13 years to track how the debt settlement industry has progressed since the Great Recession. The most interesting piece of data that the CFPB found through their research is that, “[s]ince 2017, there has been an uptick in reported settlement activity and balances settled alongside an increase in delinquency, but no corresponding increase in credit counseling.” The CFPB does not have a conclusive answer as to why the debt settlement industry has grown, but the credit counseling industry has not, but they do subjectively believe that the growing, and large market presence of debt settlement companies could be part of the reason. 

With COVID-19 continuing its hold on the economy and this massive economic downturn that we are now experiencing, the CFPB believes “we may see patterns like those from the Great Recession repeat themselves in future downturns as consumers and lenders face increased pressures: increases in debt settlements and less time in severe delinquency or charge-off before settlement occurs.” The CFPB will continue to monitor these debt relief trends to “deepen our understanding of how creditors and consumers manage their debts portfolios in response to this crisis”

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