Debt Collections Drop 33% from 2018 to 2022: CFPB Report Reveals Medical Debt Dominance
Discover how debt collections have decreased significantly over the last four years, with medical expenses making up the majority of outstanding collections, according to the latest CFPB report.
Medical debts represented 57% of all credit report collections from 2018 through 2022.
According to the Consumer Financial Protection Bureau's (CFPB) latest report, consumer debt collections have declined by an impressive 33% between 2018 and 2022. This trend indicates strengthening financial health among American households.
Highlights from the CFPB Report
- Debt collections dropped by one-third over the four-year period.
- Medical debt accounted for the largest share at 57% of all collections.
- The median collection balance remains low at $382, primarily from non-financial accounts.
The percentage of consumers with collection tradelines on their credit reports fell by 20% during this timeframe. Collection tradelines refer to records of unpaid bills reported on credit files. Notably, medical collections dominate these tradelines.
Supporting this positive trend, the Federal Reserve reported a sharp decrease in new consumer credit card debt in December, plunging from $33.1 billion to $11.6 billion. Revolving debt, such as credit cards, also declined to $7.2 billion from $15.2 billion, while nonrevolving debt dropped to $4.4 billion from $17.8 billion.
However, the CFPB cautions that fewer collection tradelines do not necessarily mean fewer individuals face debt challenges. The decline may reflect debt collectors’ strategic decisions to report fewer tradelines while continuing collection efforts.
Specifically, contingency fee-based debt collectors reduced tradelines by 28% in early 2022 compared to 2018, whereas debt buyers increased their collection tradelines by 9%. Industry consolidation and higher dispute rates on collections also contribute to this shift.
Most collections involve relatively low balances, with three-quarters related to medical bills, utilities, telecommunications, and rental or lease payments.
Medical Debt Leads All Collections
Medical expenses remain the predominant source of collections, comprising 57% of tradelines from 2018 to 2022. Recent changes by major credit bureaus—Equifax, Experian, and TransUnion—to exclude medical collections under $500 and paid medical collections from credit reports aim to lessen the impact on consumers.
Despite these adjustments, the CFPB estimates that about half of consumers with medical collections will continue to see them on their credit reports, with larger outstanding balances making up the majority of remaining medical debts.
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