The Delinquency Surge: A Boon and a Bane for Collection Agencies

The State of Utah Launches CSS IMPACT! Financial Cloud for its Office of State Debt Collection
July 24, 2023
Show all

The Delinquency Surge: A Boon and a Bane for Collection Agencies

The financial landscape is undergoing significant changes, with consumer debt on the rise and the resumption of student loan payments approaching.

Total household debt climbed to a new record of $16.15 trillion in the second quarter of 2023, according to the Federal Reserve Bank of New York. This was an increase of $312 billion from the first quarter. Credit card balances saw their largest year-over-year percentage increase in over 20 years, rising by 13% to $891 billion. This suggests consumers need to rely more on credit cards to cover expenses.

At the same time, the student loan payment pause that began in 2020 during the COVID-19 pandemic is set to end on October 1, 2023. This will impact over 40 million borrowers who will need to resume payments. The average monthly payment is estimated to be $300 to $400.

For borrowers who are already struggling with rising costs and credit card debt, these student loan payments could push them over the edge financially. According to credit rating agency Moody’s, delinquencies on student loans could rise to over 9% later this year as payments resume. That’s far higher than the 2% rate prior to the pandemic.

These challenges bring to the forefront the need for innovative solutions to address the expected surge in delinquencies and the increased workload for collection agencies. While this surge in delinquencies might seem like a golden opportunity for collection agencies, it also carries the potential to reshape the industry in ways that demand careful consideration. In this article, we explore how an increase in delinquencies will indeed create more work for collection agencies but, paradoxically, also put pressure on their commission structures due to heightened competition.

The Delinquency Surge: More Work for Collection Agencies

As consumer debt escalates, the role of collection agencies becomes increasingly pivotal. These agencies act as intermediaries between creditors and debtors, striving to recover outstanding balances while ensuring compliance with evolving regulatory requirements. With more individuals falling behind on their payments, the volume of accounts that require collection efforts is set to soar.

The Paradox: Pressure on Commission Structures

While the growing demand for collection agency services may appear to be a windfall, it brings forth an unintended consequence: intensified competition among agencies. As more agencies vie for a slice of the delinquency pie, they may be compelled to rethink their commission structures.

Why Increased Competition Matters:

Lower Commission Rates: In an increasingly competitive landscape, agencies may be driven to lower their commission rates to attract creditors and secure contracts. This competitive pricing could lead to thinner profit margins.

Innovation and Value-Add: Collection agencies will need to find ways to differentiate themselves from the competition. This could spur innovation in debt recovery strategies and technology adoption, benefiting both creditors and debtors.

Pressure on Performance Metrics: As agencies compete for contracts, they may face heightened scrutiny regarding their performance. Agencies that consistently deliver results are likely to secure long-term partnerships, while others may struggle to survive.

Navigating the Challenges:

To navigate this paradoxical situation successfully, collection agencies must adapt and evolve:

Leverage Technology: Embrace advanced technologies, such as AI and automation, to enhance efficiency and recovery rates. Agencies that can demonstrate superior technology-driven outcomes will be better positioned to negotiate favorable commission structures.

Control Expenses: Expense visibility helps agencies allocate resources strategically, focusing on high-value activities that drive results and profitability. Understanding expenses enables collection agencies to identify cost-saving opportunities, streamlining operations and optimizing resource allocation.

Focus on Compliance: Given the evolving regulatory landscape, agencies that prioritize compliance and demonstrate robust risk management practices will earn the trust of creditors, potentially allowing for more flexible commission negotiations.

Introducing IMPACT HD 3.0, a cutting-edge financial ecosystem designed to empower collection agencies with the latest technology, automation, and customization capabilities.

Automation and Customization for Collection Agencies

IMPACT HD 3.0 offers a comprehensive suite of tools and features designed to streamline collection agency operations, improve efficiency, and enhance debt recovery rates. Here’s how this innovative financial ecosystem can be a game-changer for collection agencies:

  1. Automated Outreach Campaigns: IMPACT HD 3.0 leverages automation to execute precise and effective outreach campaigns. Whether it’s AI Voice Bot Outreach, Chatbots, Text and Email Broadcasters, or Inbound AI Voice Bots, our platform ensures timely communication with debtors without exhausting valuable human resources.
  2. Inbound and Outbound Automation: Inbound AI Voice Bots are invaluable in addressing debtor inquiries promptly, retrieving account information, and providing payment-related assistance. On the outbound front, Live Agent Voice Outreach through a Dialer offers the human touch needed for complex inquiries or negotiations.
  3. Digital Engagement Portals: Our ecosystem provides consumer digital engagement portals that facilitate secure online payments and allow debtors to update their demographic information easily. This convenience fosters positive interactions and encourages prompt payments.
  4. SMS Text Messaging Broadcasts: IMPACT HD 3.0 enables collection agencies to reach debtors effectively through SMS text messaging broadcasts. These broadcasts serve as reminders and payment demands, increasing debtor engagement and recovery rates.

Efficiency, Cost Savings, and Compliance

By automating routine tasks, IMPACT HD 3.0 enables collection agencies to operate more efficiently and cost-effectively. The scalable nature of the platform allows agencies to handle higher volumes of outreach activities simultaneously. This increased efficiency means that human resources can be reallocated to more strategic and complex roles, optimizing the workforce.

Moreover, our financial ecosystem ensures compliance with regulatory requirements, helping collection agencies avoid costly penalties and litigation risks. The automation of compliance checks and procedures minimizes human error and strengthens compliance management.


The surge in delinquencies in consumer debt undoubtedly presents a significant opportunity for collection agencies to expand their portfolios. However, this boom in demand will simultaneously place pressure on commission structures due to heightened competition. To thrive in this evolving landscape, agencies must invest in technology, diversify their service offerings, and maintain a keen focus on compliance. By doing so, they can navigate the paradox and emerge as leaders in an industry undergoing transformation.

In a financial landscape marked by escalating consumer debt and the impending resumption of student loan payments, collection agencies need a robust solution to navigate these challenges effectively. IMPACT HD 3.0 stands as that solution, providing automation, customization, and cutting-edge technology to streamline operations and enhance debt recovery rates.

As the demands on collection agencies continue to grow, our financial ecosystem offers a pathway to success. By adopting IMPACT HD 3.0, collection agencies can meet the expected surge in workload, improve efficiency, reduce costs, and ensure compliance while delivering a superior customer experience. In this era of financial transformation, IMPACT HD 3.0 is the catalyst for collection agencies to thrive and make a lasting impact.

For more information, please schedule a no-obligation appointment with one of our consultants so we can understand the nature of your current challenges and provide you with a set of solutions or call us at 877.277.4621.

Leave a Reply

Your email address will not be published. Required fields are marked *