July 10, 2020, the CFPB released a report examining recent trends in debt settlement and credit counseling. Many Americans struggle with their debts, especially during times of crisis. Today’s report documents changes over time in how consumers have used these debt relief options for unsecured debt.
Using the Bureau’s Consumer Credit Panel (CCP), a nationally representative sample of approximately five million de-identified credit records maintained by one of the three nationwide consumer reporting agencies, this report shows that nearly one in thirteen consumers with a credit record had at least one account reported by the creditor as settled or with payments managed by a credit counseling agency from 2007 through 2019.
The report also shows debt settlements rose dramatically during the Great Recession to a peak of $11.4 billion. More than half of these settlements occurred within a year of the account first becoming delinquent. Debt settlement and credit counseling became less common after that recession, but recently settlements have been on the rise following changes in delinquencies and credit tightness.
These trends may repeat in future economic downturns. This work builds off other recent foundational work undertaken by the Bureau to promote market discussions highlighting developments in options for consumers who are no longer able to manage their unsecured debts.