The Role Third-Party Debt Collection Plays in the US Economy
The economy in the US is reliant upon the use of credit, and consumers rely heavily on being able to use credit to get access to everything from healthcare and education to home and car loans. The debt collection industry is an important part of the credit economy. They recover the debts owed to creditors and providers. By the end of the third quarter of 2015, there was over $12 billion in outstanding debt, $672 billion of which was in a stage of delinquency. Creditors from every industry use third-party debt collectors to recover this outstanding debt. When the debt goes uncollected, the excess costs will be passed to the consumer through increased prices and interest rates for a declining credit supply.
There are benefits to recovering this debt for lenders and consumers alike. Debt recovery allows a lender to reduce their costs, maintain their competitive pricing in markets, and retain their financial solvency. Consumers are given the ability to negotiate their total balance, pay discounted prices on an initial balance, and establish a payment with collection agencies as mediators. Third-party collectors collected $44.9 billion in 2013. This equates to savings for every household in America of $389, as the businesses didn’t need to recover the lost capital by increasing prices.