You might have heard of Rocket Money before. It’s a subscription finance app for consumers that helps with budgeting and tracking spending. One of its core features is negotiating with companies on a user’s behalf to lower the monthly bills of streaming platforms, cell service and more. In many cases, this process uses agentic AI for the negotiation process – a tactic that consumers could adopt for themselves.
Consumers are already using AI to help make financial decisions. LLM tools like ChatGPT will create a budget, and AI can be used to call stores to check stock and even make purchases. And with GenAI tools being widely available and incorporated into day-to-day tasks, consumers are even using AI to draft emails, scripts and texts to use in debt collection negotiation.
The industry will see more consumers using the technology more heavily on their end as well. In this blog we’re going to explore the emerging frontier of consumers using AI for debt settlement.
Consumers Could Use Agentic AI to Call Debt Collectors in the Near Future
As AI becomes more widely accepted and used, consumers will likely start using AI agents to interact with debt collectors to try and resolve a debt. If consumers start using agentic AI to negotiate debts, there’s logistical and legal challenges that will arise.
For example, if the AI agent does not identify itself as an AI (which is NOT considered to be current best practice for businesses), questions will arise around who the collector is speaking to and what authority they have.
Even if these AI agents have identifying information for the consumer, such as SSN, phone number and DOB, debt collectors will need to find ways to ensure that the AI is actually acting for the consumer and that it is not a bad actor.
If a debt collector gets a call like this, it may be a scam. Industry experts say that if AI agents for consumers are regularly used, there has to be a dedicated verification step. This could mean the consumer getting on the phone to confirm their identity, or implementing some type of two-step verification system. Currently, the idea of an AI agent claiming to represent a consumer raises too many core issues for collectors.
How Should Debt Collectors Treat Consumer AI Agents?
There’s a debate currently going on within the industry on how consumer AI agents should be treated if the trend develops. One view is that the AI should be seen as an extension of the consumer, just like a business’s use of AI is considered an extension of the business. Another is that the AI agent could be considered a third party, meaning the debt collector might not be allowed to share details of the debt.
As the use of consumer AI agents grows, debt collectors will need to work out internal processes for how to manage these calls. Eric Nevels, Sr. Director of Operations Support at TrueAccord, says that until a legal precedent is set, businesses will need to create policies on whether to treat undeclared AI agents as the consumer or as a third party.
The Most Popular Consumer AI Debt Collection Negotiation Tactics Used Today
AI agents are still a ways out from mass adoption by consumers. Most consumers using AI to help with debt collection negotiations do so by asking LLMs like ChatGPT, Claude and Gemini for guidance on financial matters or to generate scripts to use when calling collectors to negotiate a debt. Many people don’t feel comfortable negotiating, and LLMs give consumers confidence by arming them with information and making them feel like they have an expert on their side.
The same approach is being used with collection emails and texts as well. Consumers can easily plug in digital debt collection messages into AI platforms to help decide the best way to respond. This makes the messaging of a debt collector’s emails and texts more important. For example, an email that uses aggressive language is more likely to cause an LLM to advise a consumer to dispute a debt. On the other hand, an empathetic message offering options could prompt AI platforms to encourage the consumer to work with that collector.
Businesses need to be aware that consumers now have the ability to analyze large amounts of their own financial data to help inform what payments should be made to collectors. LLMs have already reached mass adoption by consumers and are much easier to use than a more complex agentic AI. Consumers can now plug in all their debts into AI platforms to get a recommendation on what to pay down first. It’s one of the reasons why businesses need to gain a deeper understanding of AI use in debt collection.
Ready to Boost Your Collection Efforts with Industry Leading AI?
With more consumers using AI for debt settlement and negotiation, your business needs to provide a digital-friendly experience. TrueAccord uses Heartbeat, a patented machine learning engine that uses dynamic feedback combined with millions of customer interactions to figure out the best way to engage each consumer for better payment results.
It’s a personalized, self-service experience that honors consumer preferences while driving more engagement. Contact us today to learn more about how TrueAccord uses AI to collect more from happier consumers.
As we close the third quarter of 2025, the economic picture is becoming one of sharp contrasts. While some top-line indicators may appear stable, a closer look reveals a widening gap between high- and low-income Americans. The post-pandemic boom that briefly lifted lower-income workers has faded, leaving many families facing stagnant wages and rising costs for essentials. This growing financial strain is reflected in rising delinquencies and increasing consumer anxiety about the future.
For the debt collection industry, this moment demands a nuanced approach. The landscape is being reshaped by a complex interplay of economic pressures, a shifting regulatory environment and evolving consumer expectations around technology and security. As we look toward the final months of this year, understanding these dynamics is crucial for protecting your bottom line while treating consumers with the empathy they need.
Key Economic Indicators
The economic data from Q3 shows the financial hurdles for many households. While the economy as a whole continues to move forward, the benefits are not being shared equally, creating significant headwinds for a large portion of the population. A prolonged government shutdown at the beginning of October has impacted the release of key economic data, shifting the focus to alternative sources and making it difficult to get an accurate reading of the situation.
The labor market is showing signs of stagnation and growing inequality. Amid the federal data blackout, experts have been watching nongovernment numbers from sources including Bank of America, Goldman Sachs and ADP, which are all telling the same story about fewer companies hiring in a job market that has cooled since the spring. August data revealed that low-income earners experienced their worst month for wage growth since 2016, while high-income earners saw their best since 2021. Meanwhile, jobless claims are ticking up, with estimates showing a rise to 235,000 in the last week of September.
Inflation remains the primary concern for American families, with September showing a 0.3% increase in the CPI, up to 3%. Core CPI, which excludes volatile food and energy, gained 0.2%. The index for gasoline rose 4.1% in September while energy rose 1.5%. Other indexes that increased over the month include food, shelter, airline fares, recreation, household furnishings and operations, and apparel.
Forty-five percent of U.S. adults cite the rising cost of living as the most important economic issue they face, more than 30 points ahead of any other issue. This is compounded by costs of essentials like electricity, with prices climbing faster than the overall inflation rate. In response to these persistent pressures and concern with the state of the labor market, the Federal Open Market Committee lowered interest rates by .25% at its September meeting, landing at 4-4.25%. Two more rate cuts are widely expected before the end of 2025.
Household balance sheets are also showing significant signs of stress. Credit scores are dropping rapidly for many consumers as they fall behind on payments, with delinquency rates across multiple types of loans reaching heights not seen since the 2009 financial crisis.
Auto loans are a particular area of concern, as surging car prices have pushed more buyers to take out longer loans, some extending to seven years. This has led to a spike in auto loan delinquencies, especially among lower-income consumers. Beyond auto debt, the number of homeowners facing foreclosure is also rising fast, with August foreclosure filings having risen six straight months year-over-year, up 18% from the same period in 2024.
What’s Impacting Consumer Finances?
Several specific factors are squeezing household budgets and making it harder for consumers to manage their financial obligations. First, the U.S. economy is increasingly divided. Higher earners are benefiting from strong investment portfolios and valuable homes, driving a larger share of consumer spending. At the same time, poorer Americans are dealing with flatlining wages, rising unemployment and punishing housing costs. For those in the middle, Q3 was a turning point in the economic outlook. Wages haven’t kept up with the cost of living and the softening job market has many on edge. Running out of savings to cover lingering high-rate credit card balances and auto loans, combined with renewed student loan payments, this cohort is more at risk than ever of falling behind and becoming more vulnerable to financial shocks.
Second, the resumption of student loan payments continues to ripple through the economy. With interest-free periods over, millions of borrowers are now facing renewed financial pressure, adding another significant monthly payment to budgets already strained by inflation. In what is good news for some, the Trump administration has agreed to resume student loan forgiveness for an estimated 2.5 million borrowers who are enrolled in certain federal repayment plans.
Third, as financial lives move increasingly online, consumers are growing more concerned about the safety of their data. A recent survey from Mastercard found that many people now believe it is harder to secure their digital assets than their physical ones. The report found that 78% of Americans are more concerned about cybersecurity than they were two years ago. This anxiety can create friction and mistrust, impacting how consumers engage with digital financial services, including online payment portals.
What’s Impacting the Debt Collection Industry?
The debt collection industry is adapting to a regulatory environment that is becoming more localized and a technological landscape that demands greater attention to security.
Despite the CFPB recently releasing a semi-annual rulemaking agenda, Russel Vought, the Director of Office Management & Budget and the acting director of the CFPB announced that the bureau is going to close in two to three months. However, such a closure would require an act of Congress, as the CFPB was established by statute under the Dodd-Frank Wall Street Reform and Consumer Protection Act. Without congressional action, the agency cannot simply be dissolved by executive order or administrative decision. Vought’s statement therefore appears to reflect a political stance or intention to restructure or defund the agency, rather than an imminent legal reality. Nonetheless, the comment has sparked concern within financial sectors—including debt collection—about potential regulatory upheaval and uncertainty in the months ahead.
Despite the slowdown of CFPB oversight, the Federal Trade Commission (FTC) remains focused on consumer harm and continues its crackdown on illegal collection practices, serving as a reminder that deceptive or harassing methods carry severe consequences. Adherence to both the letter and spirit of the law is paramount.
The push toward AI and digital communication continues to accelerate, especially in financial services. However, with rising consumer anxiety around cybersecurity, the implementation of these tools must be paired with a clear commitment to data protection. Building and maintaining digital trust is no longer just a best practice, it’s a business imperative. Navigating the emerging state-level laws and regulations around AI will become more important than ever.
How Are Consumers Feeling About Their Financial Outlook?
Consumer sentiment reflects the deep anxieties revealed in the economic data. Confidence is low, and worries about jobs and inflation are persistent. The Federal Reserve Bank of New York’s Center for Microeconomic Data’s September Survey of Consumer Expectations, showed that households’ inflation expectations increased at the short- and longer-term horizons. Labor market expectations continued to deteriorate, with consumers reporting lower expected earnings growth, greater likelihoods of losing jobs and a higher likelihood of a rise in overall unemployment.
The Conference Board’s Consumer Confidence Index declined by 3.6 points in September to 94.2. The Expectations Index, which is based on consumers’ short-term outlook for income, business and labor market conditions, decreased by 1.3 points to 73.4. The present situation component, based on consumers’ assessment of current business and labor market conditions, registered its largest drop in a year, falling by 7 points to 125.4. Consumers’ assessment of business conditions was much less positive than in recent months, while their appraisal of current job availability fell for the ninth straight month to reach a new multiyear low.
The University of Michigan’s consumer sentiment index showed little change in October, down only 1.5 points from September. Decreases in sentiment among older consumers were offset by increases among younger ones. Overall, consumers don’t see much change in economic circumstances and inflation and high prices remain at the forefront of consumers’ concerns.
Other polls confirm this widespread unease, with pessimism about income prospects, combined with high inflation, that has left consumers feeling financially insecure. An Associated Press poll found that high prices for groceries, housing and health care persist as a fear for many households, while rising electricity bills and the cost of gas at the pump are also sources of anxiety. Additionally, 47% of Americans believe they would not be able to find a good job in the current market.
What Does This Mean for Debt Collection?
Navigating this challenging environment requires a strategy centered on empathy, awareness and trust. The economic pressures on consumers are real and significant, and successful engagement in debt collection depends on acknowledging their reality. Here are some tactics to consider:
Lead with Flexible Solutions: With so many households struggling, a one-size-fits-all approach is doomed to fail. Consumers need options, understanding and convenience. Offering self-service portals and flexible payment arrangements is critical. This empowers consumers to manage their debt on their own terms and demonstrates that you understand their financial situation.
Navigate the New Regulatory Patchwork: Compliance is no longer just about following federal rules. With states becoming more active, it’s essential to stay informed about local laws and regulations. Investing in compliance resources that track state-by-state changes will protect your business and ensure you are treating all consumers according to the specific laws that protect them.
Build Digital Trust: As you adopt AI and digital tools to improve efficiency, make security a cornerstone of your strategy. Clearly communicate your commitment to protecting consumer data and using safeguards. A secure and user-friendly digital experience not only meets consumer expectations for convenience but also addresses their growing fears about cybersecurity, building the trust necessary for productive engagement. Another way to build trust with consumers in debt collection? Social proof.
There’s no shortage of federal regulations in the financial industry. However, there’s a noticeable absence of federal oversight when it comes to governance over artificial intelligence (AI). A regulatory vacuum around AI policies has emerged at the federal level, which has ceded the initiative to individual states. This has prompted a specific set of state regulatory models on AI that are pioneering risk frameworks and how they interact with various use cases like AI debt collection strategies.
The process of navigating the state-led AI legislation and regulations in US financial services is complex, and requires specific industry knowledge. In this blog post, we’re going to dive into why states are leading the charge, and the type of landmark laws and regulations some states are enacting that are going to set the tone moving forward.
Why AI Regulations Are Being Led By States
Back in July, the current administration released “America’s AI Action Plan”, which is focused on building AI infrastructure with over 90 policies with the goal of being a global leader. AI technology is rapidly being integrated into the US economy and financial services industry. While there have been multiple AI-focused bills introduced in Congress over the past few years (including two new bills in July of 2025), none of them have gained enough traction to get passed. This led to increased tension between federal and state governments, which came to a head once the “One Big Beautiful Bill” was passed on July 4th, 2025.
Originally, there was a provision in the bill proposing a ten year moratorium on states enacting or enforcing their own laws on AI. This was a top priority for technology companies who were trying to avoid a more complex regulatory landscape, but the provision was stripped in the bill’s final version. Experts agree this move was a clear signal that states are going to be the primary architects of public policy governing AI for the foreseeable future.
The Federal Stalemate in AI Regulations
One of the root causes for why there’s been federal inaction towards AI regulations is a debate about how the process should look. There is one perspective pushing for a technology-neutral approach, claiming that existing laws are enough to govern AI technology. For example, the existing US laws on discrimination, fraud or defamation already apply to AI technology and businesses, so no new laws would be required. In short, this outlook focuses on punishing bad outcomes from AI rather than trying to regulate the technology itself.
At the other side of this debate are regulators who want rules surrounding AI technology itself. There has been a wave of state laws and regulations that support this approach with Colorado and California pushing new requirements to address AI. They’re not just retooling old laws, states are creating novel legal categories like deployers and developers of AI and assigning them proactive duties of care. It’s a stance that believes states laws on AI need to have specific and rigorous rules in place to better protect consumers.
The Pioneering State Laws on AI You Should Know
The Colorado AI Act (CAIA)
The Colorado AI Act (CAIA), was the first comprehensive, risk-based AI law in the United States that was enacted in May of 2024. The CAIA created a framework for creators and users of high-risk AI (which many financial applications fall into) to follow. The Act states that developers and deployers of AI technology have a duty of “reasonable care” to protect consumers from the risks posed by the technology. One of those top risks called out by the CAIA is called algorithmic discrimination, which is the unlawful differential treatment by AI technology of an individual or group of individuals that are part of a protected class.
The duties for developers and deployers under CAIA are met if those parties adhere to these obligations:
Developer Obligations: These makers of AI technologies have to provide extensive documentation on their products. This includes data on how the AI is trained, what steps are made by the developer to prevent bias, what the foreseeable use cases of technology are and more. Developers also have to notify the Colorado Attorney General within 90 days if their AI technology has caused or is likely to cause an algorithmic discrimination.
Deployer Obligations: Deployers (like a company using AI for debt collection), are required to implement and maintain a risk management program. They also have to perform annual assessments of AI technologies and notify consumers of changes being made. Consumers also have the right to correct any inaccurate data being used by AI systems with the right to appeal any decision they don’t agree with by human review.
The Financial Compliance Exception for Colorado’s AI Act
In Colorado’s AI Act, there’s an important provision for the financial industry and companies using AI for debt collection. The CAIA says that financial institutions such as banks, credit unions and insurers are considered to be already in full compliance with its requirements. However, this provision doesn’t provide universal protection.
This exemption pressures federal agencies and other state banking institutions to develop their own AI governance rules. If they don’t, financial institutions that do business in Colorado could face punitive actions through CAIA. This law is set to indirectly influence the development of national AI regulation standards by creating the bar that other regulators have to meet.
California’s Draft Regulations for Automated Decision Making Technology
Another standout in state AI regulations is California’s draft regulations for Automated Decisionmaking Technology (ADMT). At this time, the draft regulations were approved and will go into effect on January 1, 2026, and they do represent the most consumer rights-focused AI regulations in the US. The regulations are designed for businesses that use ADMT to make important decisions about consumers. The state law definition of “important or significant decisions” includes financial services, lending, debt collection, insurance and much more.
Since consumer well-being is at the core of these draft AI regulations, California is trying to establish three core rights:
Right to a Pre-Use Notice: Before a business uses ADMT for an important decision, they have to notify consumers explaining how the AI technology works in a way that’s easy for them to understand.
Right to Opt Out: Consumers have the right to tell businesses that they don’t want ADMT to be used for making important decisions about them.
Right to Access Information: Consumers will have the right to request information about the logic being used in ADMT processes. For financial institutions, this means businesses won’t be able to just deploy AI technology into their operations without having a deep understanding of how it works.
Many experts say that these rights will cause a shift in how financial institutions interact with vendors who provide AI technology. The ability to easily explain the technology will go from being a nice-to-have, to a requirement. It’s likely there will also be an overhaul of risk management for AI technology vendors. Due diligence being done for these partnerships will have to go deeper to ensure that these new consumer rights are being honored.
What Does This Mean for AI Debt Collection?
AI in debt collection continues to increase in adoption because of how it lets businesses better honor consumer preferences while being able to scale. As bellwether states like Colorado and California are setting the standards for other states to follow, the laws and regulations surrounding AI are shaping up to be a patchwork system similar to that of debt collection compliance.
For businesses that are looking to benefit from using AI in debt collection, you need a partner who’s an expert in compliance and keeping up state law and regulation developments. The state laws and regulations around AI are going to evolve just as fast, if not faster than debt collection rules. Debt collection strategies that are set up to quickly adapt are the most likely to achieve long-term success.
TrueAccord Is Built to Keep Up with Compliance and AI Changes
TrueAccord is an industry-leading recovery and collections platform that’s powered by patented machine learning. Our legal team follows developments in industry regulation updates across the country and maintains machine learning governance models to ensure complete compliance control.
When the world is changing fast, you want a debt collection partner that has proven flexibility to quickly adjust to new rules and regulations. Contact us today and learn more about how you can collect more from happier people.
It’s common when you put a debt collection company’s name in a search engine, one of the most popular queries is asking if the business is legit. For many consumers, there’s an inherent doubt that comes with receiving a debt collection communication, which often leads to the message being ignored.
If a consumer gets reassurance from an unbiased source (like another consumer), any doubts about interacting with the company often fade away. This concept is called social proof, and it’s extremely important in the debt collection industry. Let’s take a closer look at the relationship between social proof and debt collection.
Social Proof Starts with Ethical Debt Collection Practices
The process of having and paying back a debt can be a stressful experience for many consumers, especially when facing financial hardship. It’s an expereince that is more intense and nerve wracking when companies use aggressive collection tactics like excessive calling or threatening. These more forceful approaches are part of the reason why many consumers doubt the legitimacy of debt collection messages.
The first step in reducing consumer uncertainty is practicing ethical and consumer-friendly debt collection. It’s why more companies are taking an omnichannel approach to sending repayment notifications. Digital communication channels like email and SMS/text give consumers more opportunity to engage with messages on their own terms. When the ask for a repayment is more humane, a consumer is not only more likely to act on it, but share their positive experience with others or online.
When a consumer sees that someone else had a positive experience with a certain debt collector, it can reduce their anxiety about getting a repayment notification. Oftentimes a few positive affirmations from people in a similar financial situation is the difference between making a payment and ignoring a message.
Social Proof Can Encourage More Engagement from Consumers
When a consumer receives a debt collection notification, they might feel alone, isolated and unsure of the best way to handle the situation. In fact, this is a common reaction for many stressful events we experience in life. In these situations, many people’s first instinct is to seek advice from others who can relate to their circumstances. For example, if they hear from another consumer that the process of making a payment was easy, engaging with the notification doesn’t feel as intimidating.
Debt collection companies themselves can also offer consumers social proof. A great way to do this is by providing insight into how other customers handled their financial obligations. If your business sends an email notification to a customer, you could offer examples of how other customers with a similar balance chose a payment plan to resolve their debt. A subtle tip on how others in their situation took action can increase the likelihood of that customer making a repayment.
The connecting thread between both these instances of social proof aren’t phrasing things as a demand, they’re suggestions backed by the experience of peers. That’s the core of social proof that can increase repayment rates and build trust with consumers.
Social Proof Helps to Humanize Debt Collection
Social proof has the power to turn the perception of a debt collector from an intimidating unknown to a partner that helps people with financial wellness. By putting this notion into practice, debt collectors can improve their reputation with consumers. What does this look like in action? Here’s a few ways debt collection companies can bring this to life:
Leverage AI in Debt Collection: AI can be used in debt collection to create a better experience for consumers. Machine learning platforms can figure out the best way to honor each individual customer’s communication preferences. These AI processes help make the customer feel more valued, improving the likelihood they will share their experience.
It’s important that all social proof strategies being used by debt collectors follow legal guidelines and don’t overstep on customer privacy. The power of social proof is its honesty, transparency and ethical use. When it is used responsibly and paired with other strategies like leveraging AI in debt collection, social proof can improve recovery rates.
Boost Recovery Rates with AI Debt Collection Strategies
Social proof and AI debt collection strategies are a great way for businesses to collect more from happier people. If you want to empower your debt collection solutions with machine learning and a consumer-first mindset, TrueAccord is here to help.
Contact our team today to learn more about how we can handle all your delinquency needs.
The path to getting a higher education is a courageous decision that millions of Americans start each year when attending college. It sets the foundation for countless careers and drives personal growth that lasts a lifetime. However, education is expensive and paying back the loans can be challenging—an estimated 5.8 million student loan borrowers have delinquent accounts.
This number could get even higher with student loan forgiveness ending, interest on the debt resuming and shifts repayment options. Student loans and debt collection servicing have always shared a close relationship. And the current changes to the federal student loan system is primed to send shockwaves through debt collection services across the nation.
Learn how student loans have changed in 2025 and trends your business needs to look out for as the situation continues to evolve.
How Student Loans Have Changes in 2025
Before we dive into the implications for the debt collection industry, it’s important to understand some of the key changes recently made to federal student loans. The current administration signed into law the “One Big Beautiful Bill Act” on July 4th, 2025. This legislation overhauled the student loan system:
Student Loan Forgiveness Paused: Borrowers on SAVE plans are seeing the end of payment forgiveness. Right now, payments are required and accruing interest on loans restarted on August 1st, 2025.
Creation of Repayment Assistance Plan (RAP): RAP isan income-based plan for new borrowers that requires a minimum payment regardless of a person’s income level. This plan will only be approved for cancellation after 30 years of qualifying payments.
One of the biggest and most immediate effects that student loans will have on debt collection solutions is a surge of collection activity. With loan forgiveness paused, the millions of delinquent accounts are going to be subject to collection efforts. To start, the federal government is putting increased focus on accounts that are 60 days or more delinquent.
This means that standard debt collection communications channels like phone calls and physical mail are going to be much more crowded for the foreseeable future. It’s also likely that some customers your business talks to have this type of financial obligation. That means no matter what debt type you’re collecting, there is more competition to get their attention through non-digital channels and less funds available to repay debts.
We Could See An Increase in Involuntary Collection Tools
When a consumer defaults on their student loan debt, the federal government has strong tools to help them collect payments. After 270 days pass without a payment being made, the government can garish up to 15% of the borrower’s paycheck. Any federal tax refunds can also be withheld and applied to the loan.
Any student loan accounts that are in delinquency or have defaulted can also be reported to national credit bureaus, causing damage to the borrower’s credit score. Consumers who are going through this process may be less likely to make payments on other debts while they try to keep up with student loans. The common thread is that more student loan borrowers could have reduced disposable income once all the changes take effect.
New Student Loan Rules Could Lower Credit Scores
Experts agree that the new student loan rules have a strong possibility of lowering credit scores for existing borrowers. Since the payment forgiveness that started shortly before COVID is ending, borrowers will likely need time to make payments as other costly necessities (like the rise of grocery costs) take their attention.
It’s possible that this will have widespread effects on consumer credit scores, making it more difficult for these borrowers to participate in the financial system. Specifically for student loans, a lower credit score makes it harder for borrowers to consolidate the debt at an affordable interest rate.
A lower credit score also makes it more difficult to access new lines of credit, a common tactic consumers use to pay off debt. Borrowers with a lower credit score will get higher interest rates on new loans, making it more expensive to get loans and more likely that payments made on debts will be in smaller amounts. To help navigate this challenge, debt collection services that offer consumers more payment options could have greater success.
Increase Your Collections Performance with an Industry Leading Platform
Student loan debt is primed to have a lasting impact on debt collection solutions. If you want to leverage AI that adapts to these situational challenges to collect more from happier people, TrueAccord is here to help.
If you want to empower your debt collection solutions with machine learning and a consumer-friendly digital experience, contact our sales team today.
Despite economic uncertainty, Americans continue to spend, albeit what they’re spending on has shifted. After two consecutive months of reduced spending, consumers came back in June with purchasing focused heavily on necessities like clothing and personal care, rather than electronics or appliances. Discretionary spending also stayed strong on restaurants and bars, indicating that while consumers are feeling some amount of pressure from the economy, it hasn’t really hit their wallets just yet. But economists and key indicators are foretelling more financial challenges ahead, so consumer sentiment may not be keeping up with reality.
The debt collection industry is navigating a period of transformation via a combination of regulatory shifts, technological advancements and evolving economic pressures. Key developments continue to reshape collection strategies, compliance requirements and the tools used to recover outstanding debts. As you protect your bottom line in a rapidly evolving consumer financial landscape, let’s look at what you should consider as it relates to debt collection with an eye toward the second half of 2025.
Key Economic Indicators
After several months of speculation and fluctuation, inflation is starting to heat back up, potentially showing the first impacts of tariffs and signaling what’s ahead. Consumer prices rose 0.3% in June after rising 0.1% in May, pushing the annual CPI inflation rate higher to 2.7%, the highest since February. The increase was driven by higher gas prices and a broad assortment of goods showing the effects of businesses sharing higher import costs with consumers.
On the jobs front, the economy added 110,000 jobs in June. Looking at the number of jobs added through the first part of the year shows an average of 124,000 jobs per month, which is significantly lower than last year’s monthly average of 168,000. With layoff activity relatively low and wage growth remaining decent, economic uncertainty has slowed the pace of hiring and created a somewhat stagnant employment market.
The Federal Open Market Committee held rates steady at 4.25-4.50% at their meeting in mid-June, and Wall Street economists are predicting the central bank to continue their wait-and-see approach at their next meeting in July given June’s reported CPI and expected PCE inflation increases. Bets are now on a September rate cut if the inflation threat cools and the jobs market weakens more noticeably.
The Federal Reserve Bank of New York’s latest Quarterly Report on Household Debt and Credit for Q1 2025 showed that total household debt in the US reached $18.20 trillion, a $167 billion or 0.97% increase from the prior quarter. This growth was primarily driven by increases in student loan and mortgage balances, while credit card and auto loan balances decreased. The report showed delinquency rates rising, with 4.3% of outstanding debt in some stage of delinquency, the highest level since the beginning of 2020.
Mortgage loans experienced a significant rise in early and mid-stage delinquencies across all credit categories in May. Mortgage delinquencies increased to 1.03% from 0.92% the previous month, suggesting that the housing market might be showing initial indicators of financial strain among homeowners.
What’s Impacting Consumer Finances?
Just as more student loan delinquencies are reported and sent to collections, borrowers who had previously been granted an interest-free forbearance period under the Saving on a Valuable Education (SAVE) Plan will lose those benefits. On August 1, the administration will resume interest charges on the accounts of around 8 million borrowers as the SAVE program and several other income-driven payment options end. Overall, the change will see borrowers being charged more than $27 billion in interest over the next 12 months, which will have wide repercussions on students and families.
And in a reversal of a move by the Consumer Financial Protection Bureau (CFPB) earlier this year, a federal judge recently blocked a rule that would have removed unpaid medical debt from the credit reports of about 15 million consumers who carry a total of roughly $49 billion in medical debt. This financial burden could influence creditworthiness and access to loans for many.
What’s Impacting the Debt Collection Industry?
On the federal level, the CFPB has announced a new set of supervision and enforcement priorities for 2025. The bureau intends to reduce the number of its supervisory exams, focusing instead on cases of tangible consumer harm and actual fraud. While this may mean fewer routine audits for collection agencies, it signals more intense scrutiny on practices that directly and negatively impact consumers, with a continued focus on areas including mortgages, credit reporting, and FCRA and FDCPA violations.
In June, the CFPB also published a policy statement in the Federal Register outlining its approach to addressing criminally liable regulatory offenses under statutes including the Consumer Financial Protection Act and Truth in Lending Act, among others.
In efforts to enhance efficiency, the debt collection industry is rapidly embracing new technologies, and artificial intelligence (AI) and digital communication platforms are at the forefront of this technological wave. AI is being leveraged more widely to personalize consumer engagement, predict payment likelihood, and optimize collection strategies. Meanwhile, digital channels like Rich Communication Services (RCS) are gaining traction as innovative methods for consumer contact, offering more interactive and self-service options.
However, the use of technology and collection tactics remains under the watchful eye of regulators. In a significant enforcement action in June 2025, the Federal Trade Commission (FTC) secured a permanent ban against a debt collection operation found to be using deceptive and harassing methods to collect on “phantom debts.” This action underscores the agency’s ongoing commitment to cracking down on illegal collection practices and serves as a reminder to the industry of the severe consequences of non-compliance.
How are consumers feeling about their financial outlook?
In analyzing consumer sentiment, it’s important to note that the following surveys relay responses may have been taken before the latest inflation figures were released, so there may be an incongruity in reporting.
The Fed’s June Survey of Consumer Expectations showed that households’ inflation expectations decreased at the short-term and remained unchanged at the medium- and longer-term periods. Unemployment job loss and household income growth expectations improved while spending growth expectations slightly declined. In general, households were more optimistic about their year-ahead financial outlook.
The latest University of Michigan consumer sentiment survey, reporting from mid-way through July, showed that Consumer sentiment ticked up about one index point to 61.8 from June, reaching its highest value in five months, but still 16% below December 2024 and its historical average. Expected personal finances fell back about 4%, with the report noting that consumers are unlikely to regain their economic confidence until they feel assured that inflation is unlikely to rise.
The Conference Board’s Consumer Confidence Index deteriorated by 5.4 points in June, falling to 93.0 from 98.4 in May. The report showed less positivity about current business conditions and job availability, as well as more pessimism about business conditions, job availability and income prospects over the next six months.
What Does This Mean for Debt Collection?
The debt collection industry in mid-2025 is at a pivotal juncture, tasked with balancing the adoption of powerful new technologies and navigating a challenging economic environment while adhering to an evolving regulatory framework. The ability to adapt to these concurrent trends will mean success for businesses in this sector. For lenders and collectors, here are a few things to keep in mind:
Consumers expect more in debt collection. Gone are the days of debt collection letters or calls from unknown numbers eliciting a productive response.Now, consumers want empathy, understanding and convenience in their financial matters. Keeping up with consumer expectations can mean the difference between collecting debt and not.
Self-service is one of those key expectations. Convenience by way of self-serving is a win-win for your business and consumers. Offering a comprehensive self-serve portal means consumers can engage whenever they want (even outside traditional FDCPA-regulated hours) and reduces resources needed to manage accounts and process payments.
Ready or not, AI is here. Technology is already transforming debt collection by changing the way lenders and collectors engage with consumers, and if you’re not getting on board, you’ll find your business soon left behind. The time to thoughtfully adopt AI is now. Not sure where to start? Here are the must-know tech terms to get you going.
As recently as 15 years ago, consumer expectations about the debt collection experience looked starkly different than they do today. Back then, people expected debt collection communications to come as a piece of physical mail, and consumers were more likely to answer the phone for an unknown number before spam calls and call labeling and blocking became the norm. Companies who were looking to collect on a debt often used aggressive tactics, and customer satisfaction wasn’t a priority as long as some of the money owed was recovered.
Now, consumers want empathy, understanding and convenience from the companies they interact with, especially in financial services. These shifts in consumer expectations continue to spark changes in debt collection trends and have led to more businesses investing in digital strategies to better engage with consumers. Join us as we take a more in-depth look at how consumer expectations in debt collection have changed and what it means for your business.
Customer Satisfaction is a Key Debt Collection Trend
Consumers today want their problems in financial matters resolved sooner rather than later. A recent survey done by TCN on consumer expectations found that financial companies are seeing a decline in customer satisfaction. One of the main drivers of this trend is people reporting that customer service efforts aren’t solving their problems effectively. A key benchmark used in this survey looked at how often financial service businesses were able to solve customer problems on first contact.
Only 13% of survey respondents said that their problem is always solved the first time they reach out. The more someone is forced to call back or wait for a follow up, the less likely they’ll be to engage with the company moving forward. For debt collection, that means fewer payments the longer a consumer has to wait. These survey findings stem from the debt collection trend of consumers wanting to fix problems on the spot. This notion is part of the reason why self-service portals and mobile apps have become the preferred method of resolving financial matters.
One key digital debt collection strategy is offering your customers more options that are easily accessible to them. In fact, 59% of consumers in debt want more flexible payment options. If your business is trying to improve its debt collection performance, giving your customers more options will often lead to higher levels of satisfaction. The proof of this digital debt collection trend can be seen with TrueAccord. Roughly 98% of TrueAccord customers resolve their debts with self-serve options and don’t ever interact with a human in the process.
Preferred Communication Channels for Bill and Debt Notifications Have Changed
Today, there’s no shortage of ways to send customers bills and debt notifications. For many companies out there, these notifications are sent through channels that are convenient and/or familiar to them, which doesn’t always align with consumer preferences. The more in-tune businesses are with consumer preferences, the more likely their communications will be engaged with. For businesses looking to recover debt, that means better collections performance and happier customers.
Let’s walk through an example. According to the same TCN survey, 47% of consumers prefer to be contacted by email for bill and debt notifications. Around 25% of Gen Z and 22% of Millennial customers prefer to be notified by push notifications through mobile apps. Your digital debt collection strategies need to take these expectations into account to maximize engagement. Even though email was the most desired communication method, every consumer is an individual with their own preferences.
Some of the best digital debt collection strategies leverage AI and machine learning to test and uncover the best channel for every individual. TrueAccord uses its patented machine learning engine Heartbeat that learns from every customer interaction to determine the best step to take with each consumer. It’s a personalized approach to debt collection where consumer expectations and preferences are at the core of every communication. The result is collecting more from happier people.
Convenience is King in Digital Debt Collection Strategies
In financial industries like banking and debt collection, convenience has emerged as one of the most important consumer preferences. With how critical messages in these industries often are, consumers want ways to be able to easily address them so the problem doesn’t linger and cause prolonged stress. For further proof of this trend, a recent survey by the American Bankers Association showed that 55% of consumers prefer mobile banking. Only 8% of people surveyed go to a physical branch for their banking needs.
The consumer trend of wanting more convenience through self-serve options is carried through into the debt collection industry. TrueAccord, for example, has been able to honor this consumer trend with its self-service portal. It’s a low friction way consumers use to pay off debt and should be a key strategy leveraged for digital debt collection.
Based on research done by McKinsey, consumers who digitally self-serve resolve their debts at higher rates and are much more likely to pay off the debt in full. Plus, the customer satisfaction is much higher with self-service portals compared to making a payment over the phone. These trends emphasize the importance of convenience. But just don’t take it from us, here’s what a real TrueAccord customer had to say:
“Thank you for being patient and for having a portal that makes it easy to make the payment without filling out a bunch of stuff and having to make an account or something.”
Stay On Top of Consumer Expectations in Debt Collection with TrueAccord
It can be challenging to stay on top of consumer expectations in debt collection. But with the right partner, your business can improve debt collection performance while increasing customer satisfaction.
TrueAccord is a leading digital debt collection agency that’s powered by machine learning to provide a consumer-friendly experience that honors their preferences. Schedule a consultation today to learn more about how our platform can handle your delinquency needs.
Credit unions are vital pieces of the communities they serve. They’re pillars of financial literacy that support the local economy by offering personalized service to members. Credit unions often need continued growth to not only stay competitive in the market, but to also better pursue their mission as an organization.
However, certain market factors like facing competition from large financial institutions can make it challenging for credit unions to thrive. The good news is that with the right approach, membership expansion is achievable. Learn five credit union growth strategies to help your business below.
1. Make Membership Engagement A Priority
One of the clearest paths to growth is for credit unions to get more members. And a good strategy to achieve that is to prioritize membership engagement. Some of the most successful credit unions leverage technology to have more points of contact with their members. Online touchpoints like accepting membership applications online, a strong social media presence and mobile apps (for mobile banking) all add value to customers.
Digital touch points make it easier for your credit union to introduce more convenience to your customers. The happier your members are, the more likely they are to share their experience, which often leads to membership growth.
2. Leverage the Potential of Your Unique Markets
At their core, credit unions operate with a relationship-based business model. This approach is one of the main motivations behind specialized services that serve niche markets. The question is, can your business do more in those unique markets? We’ll expand on this strategy by walking through an example.
Let’s say you’re a credit union that offers specialized loans for musical instruments. While the service is promoted, there’s more that can be done to gain more traction in the market. For starters, your team could reach out to local schools, music stores and teachers. A limited time promotion, sponsorship or contest could drive more customers to this core service.
3. Focus on Community Outreach
Community outreach and a credit union’s financial health often go hand-in-hand. Businesses that put extra focus on serving the community can see increased membership growth and loyalty. Some community outreach initiatives that credit unions could leverage include:
Free Community Events: Host financial literacy workshops that are free for members and the local community. You can also ask attendees about future workshops they’d like to see to help build an event calendar.
Sponsorships: Look for sponsorship opportunities in the local community. Whether it’s backing a little league team or partnering with a local non-profit, make sure the sponsorship aligns with your credit union’s mission.
Partner with Local Businesses: Look for other local businesses that focus on serving the community such as a local insurance agent. There’s a lot of opportunity to grow your credit union’s businesses by cross promoting services with them.
4. Update the In-Branch Experience
An approachable tech solution for credit union growth is to update the in-branch experience with digital signage. These signs are programmed to enhance the customer experience by displaying relevant information such as the current wait time, what documents are needed for specific services, finance tips, and more.
Digital signage also provides the benefit of being a brand ambassador for customers that keeps them engaged when they’re not working with an employee. Industry experts agree that digital signs are a key part of optimizing the branch experience for customers. Digital signs add value without removing the personal rapport expected at credit unions.
5. Embrace an Omni-Channel Approach to Debt Collection
Every credit union has delinquent accounts, and every dollar recouped is another dollar that can be re-invested in the community. An omni-channel approach to debt collection seamlessly combines each communication channel into a consumer-centric approach. The heart of this strategy is all about communicating through a customer’s preferred channel. Research shows that initiating contact with customers on their preferred channels can lead to a 10% increase in payments.
One bad interaction with a customer can damage your brand reputation. That’s why it’s important to provide a debt collection experience that caters to customer needs and preferences. With surveys showing that 46% of consumers expect to be contacted through their preferred channels, how can your credit union fully leverage digital debt collection?
TrueAccord Specializes in Digital Debt Collection for Credit Unions
At TrueAccord, our omni-channel approach is fueled by a patented machine learning engine called Heartbeat. It determines the right channel, to send the right message, at the right time, all while maintaining compliance.
If your credit union is looking to collect more from happier people, TrueAccord can help. Our platform can handle your credit union’s charged-off accounts with an approach loved by consumers. Contact our sales team today to learn how we can support your business goals.
New York City’s Department of Consumer and Worker Protection (DCWP) has been actively revising an amendment to their debt collection rules since November 2022. Multiple rounds of proposed amendments and public hearings have occurred, resulting in several revisions based on stakeholder feedback. In August 2024, DCWP published a notice of adoption of the final version of the amendment, initially effective December 1, 2024. Due to stakeholder confusion, requests for additional time, and a lawsuit filed by ACA International and Independent Recovery Resources, the DCWP extended the effective date to October 1, 2025. On April 10, 2025, the DCWP released additional changes to the amendments aimed to clarify “the applicability of rules to original creditors collecting their own debts, address trade practices and consumer protection concerns.” Any comments are due by June 10, 2025 and the amendment takes effect on October 1, 2025.
Though we have entered an era where digital communication is becoming the standard, New York City’s newly revised proposal still restricts debt collectors from using email and SMS without prior consumer consent. Additionally, the changes require original creditors, who already obtained consent to communicate electronically, to take additional steps after starting debt collection. While the changes are well-intentioned in their aim to “clarify the intent and applicability of recently adopted amendments” to the debt collection rules and ultimately address the industry concerns that resulted in a lawsuit over the first proposed amendment, the amendments still have the unintended consequence of making it more difficult for those who are struggling with debt to learn about and resolve their issues efficiently, effectively, and without added layers of frustration. Consumers, creditors, and collectors should all be concerned and seeking additional revisions.
Statistics and Court Rulings Reinforce the Benefits of Digital Consumer Engagement
In today’s world, 80% of consumers prefer a full digital banking experience, including when it comes to debt collection. Why? It’s simple: these communication methods are quick, convenient, and less intrusive. They allow consumers to engage with creditors or debt collectors on their own time, whether they’re at home, at work, or on the go—and it’s no surprise that 25% of consumers engage with emails after 9:00 pm and before 8:00 am.
Emails and SMS messages are particularly effective in reaching consumers who might not be available for a phone call or may be reluctant to open a letter. Email allows for easy documentation, while text messages offer a faster, less formal way to remind consumers of their debt obligations. This is why many consumers prefer these methods over phone calls, which can be disruptive and intrusive. The federal courts agree. A recent TrueAccord court victory in the Northern District of Illinois stated unequivocally that receiving an email about a debt is less intrusive to consumers than receiving a phone call. And a separate TrueAccord victory as email is silent unlike “noisy telephone rings.”
The Pitfalls of New York City’s Proposed Laws on Consumers
Despite statistics and court rulings, the New York bill in question would require debt collectors to get explicit consent before contacting consumers via text or email, limiting these convenient communication channels. While the law’s proponents argue that these measures are necessary to protect consumers from excessive communication, it overlooks the fact that the existing state and federal law already prohibits debt collectors from harassing consumers. It is illegal under existing New York City, New York state and federal debt collection laws to harass or communicate excessively thereby annoying consumers. The proposal ignores the significant benefits digital outreach provides consumers.
Digital communications are a step forward in consumer protection providing consumers with a written and documented record of communications. Digital channels offer protection from unwanted communication with easy ways to opt out. Email service providers launched one-click unsubscribe last summer, requiring senders to display a one-click unsubscribe button at the top of all emails. To opt-out consumers need only click on the one-click unsubscribe. Consumers can also mark emails as SPAM. When enough consumers take that action, the sender gets banned by the email providers. Consumers can just as easily reply STOP to opt out of SMS communications. The CTIA short code rules require senders to honor several different key word opt-outs and failure to do so results in suspension of the short code.
This proposed amendment ultimately makes it much harder to reach a consumer in the first place. Imagine being behind on payments and missing multiple calls from your creditor, only to later discover that you can no longer be contacted by email or SMS until you opt in. Requiring consent first introduces a significant hurdle. Getting a consumer to respond to a phone call at all (let alone to opt into email or SMS communication) is notoriously difficult, with 80% reporting they will block calls from unknown numbers, according to research from TransUnion. With that in mind, the New York law has the potential for many consumers to simply ignore the phone call to give their consent to be contacted digitally, and as a result, miss out on opportunities to resolve their debt.
This is problematic because the majority of consumers actually prefer digital communication with debt collectors. According to research, many debtors are more likely to engage with collection agencies when contacted by email or text message than by phone or traditional mail. The rise of these technologies has made it easier for people to manage their debts without feeling overwhelmed by the process. For consumers in New York, the proposed legislation could effectively take away a tool that could help them avoid debt-related anxiety, delays, and confusion.
The Pitfalls of New York City’s Proposed Laws for Business Operational Costs
Beyond consumer experience, the New York City proposed further amendment would negatively impact businesses’ bottom line. Studies have found that customers contacted digitally make 12% more payments than those contacted via traditional channels; this will be eliminated under the proposed amendment. Whether collecting in-house or using a third-party agency, the additional operational costs that go into traditional methods like outbound dialing and snail mail have always made initiating communication via digital channels a more cost-effective way to collect—an option that will no longer be afforded to New York City residents.
Even before the release of the additional amendments, businesses and agencies executing outbound call strategies and leveraging dialer technologies faced the reality that 49.5% of consumers take no action after a collection call—and, again, that’s if you can actually get a customer to answer the phone.
And for collectors relying on physical letters to make contact or gain consent, the process is even slower and easily ignored or lost by the consumer—and more costly for the business. Sending letters has become significantly more expensive with the cost of a single paper letter often exceeding 75 cents, depending on the number of pages per letter and volume. If you then take into consideration that contacting first through a customer’s preferred channel can lead to a more than 10% increase in payments and 59.5% of consumers prefer email as their first choice for communication—snail mail isn’t just expensive thanks to the price of paper and stamps, but it can also negatively impact repayment rates from late-payers who prefer digital contact.
NYC Residents Should Receive the Same Digital Communications Benefits All Non-NYCers Receive
The primary goal of these regulations should not be to ban digital communication methods, but rather to regulate them in a way that safeguards consumers from harassment while maintaining their access to modern, efficient forms of communication. Digital communication offers consumers more control over how and when they are contacted, with email and text message platforms incorporating built-in features like unsubscribe options and opt-out mechanisms to prevent unwanted communication. New York City’s stricter rules would leave consumers at a disadvantage, especially those who are less likely to answer phone calls.
In contrast, the rest of the country allows consumers to receive important information about their debts through digital means without additional barriers. For consumers outside New York City, debt collectors can proactively send communications through email and text, as long as these messages include clear opt-out options, such as “reply STOP” for text messages or unsubscribe links for emails. Strict penalties exist for failure to honor opt-out requests, ensuring that consumers retain the ability to control their communication preferences. Furthermore, digital communications in these areas are subject to the same frequency limitations as traditional methods under the Fair Debt Collection Practices Act (FDCPA) and Regulation F, which means consumers still have protections against excessive or harassing contact.
The overwhelming preference for a full digital banking experience, as mentioned above, means many consumers already opt-in and communicate through primarily digital channels with their creditors. Requiring consumers who have already opted-in to have to again opt-in to digital communications in order to discuss the same account with a collection agency adds burden to consumers. When a consumer provides their electronic contact information (email address or cell phone number) to the creditor, there should be little doubt that the consumer desires to communicate electronically. If the consumer does not, they can unsubscribe or opt out from continuing to receive messages through these channels.
Of the millions of email communications TrueAccord sends, only 0.10% of consumers unsubscribe, most using the unsubscribe link provided in the email. And out of the millions of text messages we send, all of which contain the phrase “Reply STOP to opt-out,” on average only 2.07% of consumers reply stop.
Additionally, email addresses offer a distinct advantage over physical addresses or phone numbers in that they remain consistent over time, while other contact details may change more frequently. For consumers who move often, such as military families, email ensures that they don’t miss important communications because of an outdated address or phone number. By allowing digital communication, New York can help ensure that important debt-related messages are delivered without the risk of missed communication due to address changes.
A balanced approach could allow debt collectors to reach consumers via email and SMS in a regulated manner, ensuring that consumers are protected from excessive or intrusive contact, while still enabling them to resolve their debts on their own terms.
You’ve seen the headlines—the federal government last week resumed collecting defaulted student loan payments from millions of people for the first time since the start of the pandemic. And how—debt collection will be through a Treasury Department program that withholds payments through tax refunds, wages and government benefits. This will undoubtedly have negative effects on credit scores and the resulting loss of access to funding going forward for many Americans.
How did we get to this point where so many people with student loans are unable to make payments on them? Taking a look back at the financial activity of those who deferred student loan payments in the first place gives us a good jumping off point, and combined with the challenging economic landscape over the past several years we can begin to understand the precarious financial situation unfolding.
Student Loan Holders Took on More Debt During the Pandemic
Based on data analysis we reported on in “Consumer Finances, Student Loans and Debt Repayment in 2023”, the trend for student loan holders who deferred their payments from 2020-2022 was to take on more debt. Data showed that the total average debt of a consumer with student loans increased 14.6% from 2020 to 2022, while that of consumers without student loans decreased 4.8%.
In 2022, student loan holders increased their average number of open trade lines by 10.3% from 2020, while open trade lines decreased by 7.7% for non-student loan holders. Breaking it down, those with student loans added credit cards (up 8%), personal loans (up 4%) and personal installment loans (up 5%) to their debt balances, with the average total balance of other loans more than doubling from 2020-2022, from $2,078 to $4,747, a 128% increase.
Economic Stressors Have Persisted, Are Likely to Continue
While inflation has cooled significantly compared to the highs of 2021 and 2022, prices remain elevated and interest rates haven’t returned to pre-pandemic levels. Uncoincidentally, household debt and credit card balances have been on a steady upward climb for the past few years, suggesting that rather than catching up with their finances, many Americans have continued to find new sources of funds to support their lives.
Americans’ total credit card balance was $1.2 trillion as of Q4 2024, marking the 10th time in 11 quarters where credit card debt increased or stayed the same. In a bigger picture view, credit card balances have risen by $441 billion since Q1 2021—adding up to a 57% increase in less than four years. Given the still-high interest rates, stubborn inflation (that may or may not go back up due to tariffs) and other turbulent economic factors, these balances are likely to keep climbing.
A Perfect Storm of Financial Challenges for Student Loan Holders
While deferred payments on student loans granted a temporary reprieve for borrowers, the new debt accrued effectively negated the gains of deferral, leaving many student loan holders with monthly debt obligations that were only manageable without having to pay back student loans. The CFPB reported that as of September 2022, 46% of student loan borrowers had scheduled monthly payments for all credit products (excluding student loans and mortgages) that increased 10% or more relative to the start of the pandemic.
Monthly financial obligations directly impact a consumer’s overall financial flexibility, and maxing out budgets to keep up with the economy puts people in a precarious situation when demands on finances change. That’s what we’re seeing now—consumers put student loans on the backburner and weren’t able to financially prepare for when they would come due again.
What Happens Next?
The outlook isn’t great: financially at-risk consumers with student loans will either go into collections for their student loans or will start missing payments on other loans in an attempt to pay back student loan debt. When there is only so much in the bank to work with and the cost of accessing new money is high, consumers will have to prioritize financial obligations and inevitably won’t be able to cover them all.
As we’ve learned from working with more than 40 million consumers in debt, empathy goes a long way, and understanding your customers’ financial situation is the first step to effectively engaging them in debt collection. For creditors and debt collectors looking to engage consumers in debt collection right now, it’s important to have a comprehensive, omnichannel communication strategy and be ready to meet the customer when and where they are ready to prioritize your account. This means don’t limit communication channels and do offer flexible options for repayment that consumers can explore, evaluate and select on their own time.
To engage your customers earlier in delinquency before charge off, consider leveraging consumer-preferred digital channels and AI-enabled decisioning for optimal results. Implementing a SaaS tool to automate digital communications will help you keep up with rising delinquencies while keeping your costs low.
TrueAccord is a machine-learning and Al-driven 3rd-party debt collection company that is reinventing debt collection. We make debt collection empathetic and customer-focused and deliver a great user experience.
Our digital-first approach to debt collection creates a cycle of collections growth:
1. Improve the perception of the industry
2. Provide a personalized experience
3. Build brand equity and collect
