The Role Third-Party Debt Collection Plays in the US Economy #8 Finale
Debt collection is an important piece of the stable US economy. By allowing for the recovery of an outstanding debt, debt collection provides a lender with the freedom to extend credit to consumers, help a business that provides goods and services through credit to remain solvent, and prevents the risk and financial losses of defaulted loans from passing on to consumers. Debt collection also helps to contribute to the overall economy by returning the debt to creditors and creating savings for household consumers.
If it wasn’t for the debt collection industry then most money lost through a defaulted debt would never be recovered. The losses would, therefore, be passed on to consumers through an increase in retail prices with businesses compensated for their expected losses.
Lenders would also become more risk-averse if they didn’t have the safeguards the debt collection industry provides, consumers would be faced with an increase in interest rates on credit as well as a reduction in the overall levels of available credit. Changes like this are most likely to harm consumers with lower incomes that present a higher risk because they are the ones bearing the brunt of increased credit costs. It would also encourage these consumers to use other forms of credit that come with higher costs than traditional credit offerings. In conclusion, the debt collection industry provides an essential service that benefits consumers and creditors across the marketplace.