A recent report by TransUnion (NYSE: TRU) sheds light on the evolving landscape of the debt collection industry. Over half (52%) of debt collection companies have experienced a rise in accounts placed or acquired in the last 12 months. Additionally, 62% of these companies anticipate being in a stronger financial position next year. However, this growth comes with challenges, such as declining collectability and increasing concerns over data security and regulatory compliance.
Investments in Technology
To address these challenges, 52% of debt collection agencies are investing significantly in technology. These advancements aim to enhance agent productivity, improve profit margins, and streamline compliance management. These insights and more are detailed in the report, Preparing for Opportunity: Investing in Efficiency to Scale Operations, the sixth annual publication sponsored by TransUnion’s third-party debt collections business.
“Growing collections businesses are better positioned to take advantage of new technologies available in the market,” noted Manny Plasencia, senior director of TransUnion’s third-party collections business. “Utilizing data to drive the right approach in a rapidly changing environment is becoming more impactful to recovery and collections performance than ever. Those that do will be able to unlock efficiencies in both contacting and collecting their accounts.”
The Role of AI and Machine Learning
Artificial intelligence (AI) and machine learning (ML) are reshaping the debt collection industry. Nearly half of companies that had no plans to adopt AI/ML technology in 2023 are now exploring in-house or third-party solutions. The percentage of companies investing in AI/ML increased from 11% in 2023 to 18% in 2024. The primary applications of AI/ML include:
- Predicting and segmenting accounts (57%).
- Predicting payment outcomes (57%).
- Facilitating self-service and virtual negotiations (56%).
Shifts in Communication Channels
Traditional communication methods, such as letters (87%) and telephone calls (86%), remain prevalent due to legal and regulatory requirements. However, digital channels are gaining traction:
- Email usage grew by 6%, with 74% of companies now leveraging it.
- Text/SMS messaging saw a 5% increase between 2023 and 2024.
Despite these trends, the use of data furnishing to credit bureaus dropped significantly, from 51% in 2023 to 39% in 2024. Digital communication channels are also driving a shift in payment processes. SMS and email often direct consumers to online payment portals, reducing the need for human interaction.
Rise of Online Payment Portals
The adoption of self-service online payment portals has risen sharply, with usage increasing from 79% in 2023 to 88% in 2024. A quarter of companies now collect more than 40% of their payments through these portals, streamlining the payment process and improving efficiency.
Survey Methodology
The insights in this report are based on a survey conducted in Q3 2024, involving 225 debt collection professionals across various disciplines, including creditors, debt buyers, collection agencies, law firms, and BPO firms. Secondary research on economic indicators and consumer credit trends further contextualized the findings. This year’s survey also saw increased participation from debt buyers, creditors, and law firms, providing a broader perspective on industry trends.
For a comprehensive look at these findings, read the full report:
Debt Collection Industry Report 2024.
Author: Jennifer Evancic
Jennifer.Evancic@ResourceManagement.com
Jennifer Evancic is a third-party auditor valued by creditors and large organizations for her knowledge in call monitoring within the collections industry. With meticulous attention to detail and a firm grasp of regulatory requirements, she ensures compliance with clients’ criteria and state and federal regulations.
Jennifer audits collections calls, ensuring they meet client-specific criteria and comply with regulations, providing valuable insights and maintaining industry standards.
Beyond her auditing responsibilities, Jennifer takes the lead in organizing and facilitating monthly call calibrations. These sessions serve as a collaborative forum where clients and their vendors come together to discuss call monitoring results and address any findings or areas for improvement. Jennifer’s guidance fosters open communication and ensures alignment between clients and vendors, driving continuous improvement in collections practices.
Jennifer stays up-to-date with compliance and industry best practices by participating regularly in peer meetings, regulatory updates and industry webinars. This keeps her informed about emerging issues and ensures she remains a knowledgeable leader in collections compliance.
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