Tales from the Trenches of Debt Management
March Madness – a time that often delivers gut-wrenching, unpredictable finishes in college basketball’s season-ending hoops tournament for the national championship. The debt management landscape is proving to deliver similar, jaw-dropping information, whether in secured or unsecured lending. The statistics are startling! Credit card debt totals $1.13 trillion (that is a trillion with a T)! (Fed Reserve Feb 2024) The average credit card balance of $6,360.00 is at historic highs as many consumers rely on credit cards to offset rising costs for everyday necessities (food, gas, housing). As you might expect, as consumers continue to struggle financially, delinquencies continue to rise.
In 2023, credit card delinquency surged 50%. 90+ delinquency is at its highest since 2009. Annualized, approximately 8.5% of credit card balances and 7.7% of auto loans transitioned into delinquency. According to the New York Fed, young adults – who are also managing high levels of student loan debt – are falling behind on their payments at rates exceeding their generational counterparts.
In looking at all secured and unsecured products, the collections metrics of the largest 100 banks are quite similar. Delinquency rates are at the highest levels in a decade, well exceeding the low of 1.03% in May 2021, which most agree was the result of stimulus money distributed to consumers during the pandemic. With an average interest rate of 20% on credit cards, it is hard to see how consumers will dig out.
So, if you are a collections leader, how are you feeling about this madness? We used to joke that higher delinquency meant job security. But I also remember the sleepless nights trying to figure out how to deliver the results my employer needed to stay profitable. If I am a credit card issuer, it immediately means I am competing on average with 3 other credit card issuers (the average American has 4 credit cards) for the finite dollars of my consumer…not counting their other debts.
Do you have what you need to compete while offering competitive options to your consumers? How well do your processes and workflows enable your customers to do business with you? How will you differentiate YOUR service to demonstrate to your customers that they should pay you first? The ‘magic’ of March Madness will not last forever – so why should you expect differently from a collections perspective?
If you are worried, you should be. As in any other time of consumer financial stress, there will be winners and losers. Whether you fall into the winner or loser bracket will depend chiefly on what you do NOW to position yourself for success. One of the things you can do now is look at the solution you deploy to manage your delinquent receivables.
If your solution is inflexible, has unmitigated compliance risks, causes productivity drains, costs too much time and money to upgrade, or does not meet your customers’ expectations, you can take your company in another direction. Give Telrock Systems a call, as we’d welcome the opportunity to better understand your specific challenges and share how our cloud-native, SaaS (Software as a Service), end-to-end collections and recovery solution, Optimus, can help. Learn how our unique approach provides the flexibility for you to configure, rather than customize, your solution for the utmost flexibility to evolve going forward.
For those of you attending CBA Live in Washington, D.C. on March 25 – March 27, please stop by the Telrock Systems booth #408 and we can talk in person!