New CFPB Study Examines Recent Debt Settlement, Credit Counseling Trends

A new report from the CFPB found “substantial changes in debt settlement activities over the last 13 years,” likely driven by market share increases among debt settlement companies. According to the report—which references data from the bureau’s Consumer Credit Panel—debt settlements rose dramatically in the aftermath of the last financial crisis but tapered off significantly between 2011 and 2015. Since then, debt settlements have been on the rise, tracking with slowly rising delinquency rates—while the share of accounts in credit counseling have remained flat after coming down from recession-era peaks.

The total amount of debt settled more than doubled from 2007 to 2010, increasing from $5.4 billion to $11.4 billion, before tapering off to $3.7 billion in 2016, the CFPB observed. That decrease was mostly driven by the large decrease in the number of accounts settled during this period, as the supply of charged-off debts accumulated during the financial crisis resolved or became less likely to resolve over time. Meanwhile, the average balance settled decreased from 2010 to 2014 and has remained relatively unchanged since.

The bureau noted that “these trends may repeat in future economic downturns,” such as the current downturn brought on by the coronavirus pandemic.