At the end of 2023, economists were hoping for a “boring” 2024—just a relatively uneventful year thanks to a soft landing with downward trends for inflation, unemployment, and interest rates.
But instead, the first half of 2024 has been an economic roller coaster for consumer spending, resulting in a whiplash for consumer sentiment. While the soft landing may still be on track, that track doesn’t appear to be as straightforward as hoped. There is an onslaught of mixed messages:
Consumers are proving to be more resilient than expected as they continue to spend, staving off what had been predicted to be an inevitable recession
versus
Consumers are actually financially stretched from depleting their pandemic-era savings and battling ongoing inflation and higher interest rates
And between these highs and lows, a serious fact remains for businesses: delinquency transition rates have increased across all debt types. But for companies looking to recover those delinquent funds, understanding how to communicate with consumers where they are in this roller coaster can mean the difference between repayment and write-off.
Let’s look at the recent trends between consumer spending and consumer sentiment and how businesses can effectively engage with customers in the event of delinquency.
Roller Coaster of Consumer Spending
Up and down the economic roller coaster goes, but the ride may be feeling different for different subsets of consumers: Americans with higher incomes have continued to spend at healthy rates, yet lower- and middle-income consumers are starting to pull back.
This “split-spending” pattern hasn’t been the case in recent years—pandemic-era benefits, a savings surplus, and rapid wage growth resulted in consistent spending rates across all income groups. But as excess pandemic savings decline at the same time as both inflation and interest rates increase, lower-income consumers are feeling the squeeze while higher-income consumers are mostly unaffected.
And even when there is a spending uptick in the lower-income sector, like we saw in April 2024, what these consumers are spending on and how they are paying for it is still quite different from their higher-income counterparts. These spending patterns show that consumers are “trading down,” or changing the type or quantity of purchases for better pricing and value, and are starting to put more everyday bills on credit cards—and in turn, credit card delinquencies and charge-offs for low-income consumers are returning to their pre-pandemic levels faster than other groups.
Regardless of where on the financial spectrum individuals may fall, an overall slowdown is expected. According to a Fitch Ratings report, annual consumer spending growth will lower from 2.2% in 2023 to 1.9% in 2024, with much of the slowdown expected in the second half of the year as income growth decelerates, pandemic savings dissipate, and higher interest rates persist.
And the Whiplash of Consumer Sentiment
So how is this roller coaster affecting how consumers feel about the economy and their own financial outlook? Overall, consumers are reporting they plan to spend less money on discretionary items in the coming months, with approximately 40% citing affordability constraints due to “economic reasons,” but that doesn’t quite capture the true whiplash of consumer sentiment we are seeing month over month:
- January: Consumer surveys find that 43% of respondents describe the economy as very good—but 59% are also worried about inflation.
- February: The Consumer Sentiment Index fell in the February 2024 survey, down from the more positive outlook reported in January.
- March: U.S. consumer sentiment rose unexpectedly in March to reach the highest it’s been in nearly three years.
- April: Consumer confidence deteriorates and falls to its lowest level in more than a year and a half.
- May: The Consumer Sentiment Index reports the largest decline in the index in approximately three years amid worsening concerns around inflation.
Despite these swings, recent consumer surveys have found that 22% of respondents expressed feeling less discomfort about spending a lot of money when using a credit card, and more than half reported they are more likely to make impulse purchases when using cards. Whatever the sentiment, people are feeling some confidence to continue to spend and continue to carry a debt balance, with 41% of consumers reporting a revolving month-to-month balance on their credit cards.
Looking at the dramatic spikes and dips in sentiment makes knowing how to message and engage delinquent consumers critical to eliciting commitments for repayment—especially when we already noted above that delinquencies and charge-offs are returning to pre-pandemic levels for certain income sectors.
How to Handle the Roller Coaster and Whiplash and Effectively Engage With Delinquent Consumers
So we’ve seen how although the roller coaster of spending trends may actually be split into two different tracks between income levels, consumers across the board are experiencing an almost monthly back-and-forth whiplash in their financial outlook and sentiment—how are debt collection and engagement strategies supposed to keep up when consumers are on this wild ride? In today’s world, traditional methods of outbound calling and mass blast emails are the epitome of “spray and pray” chasing the tail of the roller coaster and rarely reaching one of the consumers holding on.
To engage with today’s consumers, customization is key. Your debt recovery communications need to match where individual consumers are with the:
- Right message – engage with empathy and options for repayment
- Right channel – engage through their preferred method of communication
- Right time – engage compliantly when they are ready
This means most businesses need to shift the mindset of debt resolution operations from only being focused on roll rates and placements to a more consumer-centric engagement strategy. Yet many collection agencies still practice call-and-collect (and struggle due to declining right-party-contact rates and tightening regulations), and even those using email will typically only develop basic messaging for all customer communications.
Effective debt recovery needs to take consumers’ roller coaster into account—but how?
TrueAccord’s patented machine learning engine, HeartBeat, reaches out to every account placed with a goal of getting them to repay on their own terms when they are ready, versus the one-size-fits all communication that ignores trends in sentiment and spending habits.
Powered by a combination of data-driven heuristics, the latest compliance regulations, and machine learning—continuously refined by data from our 20 million customer engagements and counting—HeartBeat dynamically optimizes the next best touchpoint for every consumer in real-time, including the content, timing, and channel for each customer. It leverages interaction signals to identify consumers at risk of breaking plans and automatically adapts to keep them successful until resolution.
The TrueAccord approach aims to engage and empower no matter where the roller coaster may be taking individual consumers. As we continue to listen, learn, and innovate, we remain committed to delivering exceptional debt collection experiences that prioritize consumer well-being paired equally with debt recovery.
What Do Consumers Have to Say About TrueAccord’s Engagement Approach?
“I really have enjoyed TrueAccord because they give you so many options that align with your finances, work schedule and once you commit to a schedule they still allow you more time to pay if something comes up. Everything is customizable to you which makes it so much easier to pay down your debts, never harder. They make it very user friendly and straightforward. I really appreciate this company and what they do for you.”
“Absolutely amazing! I really get uncomfortable admitting I need help, and calling and settling a debt. This being done by email initially made the process less stressful and myself less anxious about the whole thing. Much appreciated! Would recommend using TrueAccord to anyone that has the opportunity to settle a debt. Thank you so much.”
“I just want to commend True Accord for their professionalism as well as their empathy and outstanding customer service. NEVER have I encountered a collection company with such superb service, they did not continually harass me nor did they ever make threats in order to obtain payment, they understood my situation, and worked 110% to accommodate a payment plan specific to my financial situation.”
“I really appreciate the patience and kindness I feel I get with this company. Makes it easier to pay my bills.”
“I have dealt with enough “collectors” to be able to honestly say your company, Trueaccord, was the easiest to deal with. Allowing me to set up my own plan, not calling 15 times a day. You made this as easy as possible and without the stress! Thank you for such a stressless collection procedure.”
“I have been very backed up on getting my finances in order. I love how emails would always pop up and remind me. Finally got this one off my bucket list!”
“It was a joy working with you all, making it an easy experience. Thank you for making the ride a smooth one, slowly cleaning up our debts thanks to your company.”
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