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Data for today’s episode is provided by Mercator Advisory Group’s report – Credit Card Collections: The Foundation for Safe and Sound Card Portfolio Management.
The informal payment hierarchy among households:
- Water, gas, and electric bills are at the top of the order, and housing payments are a must
- Car loans are secondary to housing payments, but these are often collaterallized with lenders
- Unsecured loans, whether credit card or personal loans, are often the first lending types become subject to stress
- Credit card aging follows a regimen of defined 30-day periods tied to billing statements
- At 180 days delinquent, U.S. credit card issuers are required by law to charge off the account
- The greatest volume of delinquent accounts sit in the 30- day aging bucket
- “Managing the roll rate” from each 30 day bucket often reduces delinquency by 40-70%
Mercator Advisory Group released its latest research report, Credit Card Collections: The Foundation for Safe and Sound Card Portfolio Management. The report, the second in a series of three on collections, explains the importance of preparing collections operations for the next economic cycle, a downturn that is long overdue. It also gives an overview of the U.S. revolving debt market and defines strategies for each stage of credit card delinquency.
This report complements an earlier report on back-end collections, Credit Card Charge-Off Collections Takes Brains not Brawn. The pair give credit card managers a comprehensive view of credit card collections from cradle to grave. A forthcoming report in early 2020 will discuss underlying technologies that support this market space and will compare the vendors listed in this report.
“The U.S. market is long overdue for a recession. Unemployment levels are low, gasoline is cheap, inflation is at bay, but the indicators have been good for too long,” comments the author of the research report, Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group. “Experience shows that the best time to hone collections is when times are good. It is much better to test strategies when you don’t need to than have to react as the economy shifts.”
This document contains 17 pages and 10 exhibits.
Companies and other organizations mentioned in this research report include: ACI Worldwide, A.R.M Solutions, CGI, Equifax, Experian, edgeverve, FICO, Infosys, Lending Solutions, SkyCom, TransUnion