TrueAccord reviews current economic trends and shares takeaways on successful collection strategies.
04/25/2024 2:15 P.M.
2.5 minute read
A recent TrueAccord blog post reviewing industry insights from the first quarter of 2024 found that high inflation and mounting debt burdens may have an impact on the most effective consumer communication strategies in the months ahead.
Q1 saw inflation continuing its upward trajectory, with the Consumer Price Index (CPI) rising by 0.4% in March alone. This surge, driven primarily by escalating shelter and energy costs, presents a substantial challenge for consumers striving to maintain their financial stability. Additionally, total household debt surged to $17.5 trillion in Q4 of 2023, with credit card balances hitting a record high of $1.13 trillion.
Author Mark Ravanesi writes that this economic landscape has given rise to what experts call “a tale of two consumers.” While some have weathered the storm with savings and investments, others, particularly middle- and lower-income consumers, find themselves grappling with financial strain. The burden is particularly heavy for those resuming student loan payments amid a high cost of living.
In the face of mounting debt and inflationary pressures, consumers are using various strategies to manage their finances, according to TransUnion’s Q4 2023 Consumer Pulse Survey:
- Thirty-three percent of surveyed consumers with student loans planned to reduce discretionary spending or use their savings;
- Twenty-eight percent said they would get a second job or do part-time or temporary work;
- Twenty-five percent will use money from retirement savings;
- Twenty-one percent will use credit card available limits; and
- Nineteen percent will borrow from family or friends, or delay a key milestone like marriage or home purchase.
Additionally, consumers’ reliance on credit cards to bridge financial gaps has led to a surge in credit card delinquencies, which soared more than 50% by the end of 2023, with about 6.4% of all accounts 90 days past due, up from 4% at the end of 2022.
What Does This Mean for the ARM Industry?
In this shifting economic landscape, TrueAccord emphasizes the importance of adaptability and resilience.
“For debt collectors, it will be critical to provide the right experience for each consumer and understand that everyone has a different financial situation with different considerations,” Ravanesi said in the blog post. “While the first quarter may have brought increased liquidation due to cash influxes from tax season, the following months may bring challenges.”
Additionally, TrueAccord recommends that debt collectors and lenders consider the following as they navigate the next quarter of 2024:
- Tailor your messages to resonate with each individual’s unique journey through the debt resolution process. Understanding where they are and what they need helps foster engagement and positive responses.
- Offer payment plans that fit within tight budgets, allowing consumers to make smaller, manageable payments over time. Additionally, provide options to reschedule payments or choose preferred payment dates to help consumers stay on track.
- Simplify the repayment process by offering an easy-to-use online platform. Provide clear and upfront information, empowering consumers to self-serve and make payments with just a few clicks. Leveraging digital channels enhances accessibility and convenience for consumers, leading to higher engagement rates.
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