Encore Capital Group has published its first Economic Freedom Study, which details consumer sentiment around their financial situations, as well as the economy in general, in both the US and UK. The survey included 2,600 people in the US and UK, with 300 low-income respondents in each location. 

General Highlights:

  • 57% of respondents in the US still feel positive about their personal financial future.
  • 33% of respondents in the US ranked credit card debt as their biggest source of stress.
  • 32% of low income respondents in the US ranked medical debt as the most stressful.

Pandemic Shifts:

  • 69% of US respondents indicated that prior to the pandemic, their sentiment toward their financial future was positive. 57% reported feeling positive about their financial future in August, 2021.
  • For low-income respondents, the numbers are similar. 62% reported a positive sentiment pre-pandemic, and 51% still felt positive in August, 2021.
  • 42% of US respondents reported feeling that the future of the economy in general is worse off than it was in August, 2020.
  • In early 2021, consumer credit scores in the US hit record highs as a result of consumers using stimulus money to pay off debt.
  • However, now 50% of American respondents state they are in more debt than before the pandemic began.

Financial Goals and Challenges:

  • 64% of respondents in the US rank having an emergency fund as their top financial goal, with 47% of US respondents reporting eliminating debt as their top financial goal.
  • 53% of US respondents believe that receiving incentives for good financial habits would help them achieve their financial goals.
  • 61% of US respondents believe they can reduce their debt in the coming years, with most (56%) planning to pay their debt off in small increments over time.
  • Most US respondents (58% and 57% respectively) believe that pausing repayment due to hardship and having additional time to pay off their debt would be helpful in reducing/eliminating their debt.

Ethical Collections:

  • 40% of US respondents believe that in order for a collection agency to be considered ethical, it would need to offer debt forgiveness.
  • Far fewer US respondents (15%) believe that social responsibility is important.

insideARM Perspective: While 2020 was a banner year for many collections agencies as a result of consumers paying their past-due debts with stimulus money, 2021 has not been quite as flush. Consumer spending was down in 2020, which meant fewer account placements to agencies. However, as the report indicates, we can likely expect to see an uptick in placements in 2022, since 50% of US respondents are reporting having more past-due debt than they did pre-pandemic. 

Consumers are also clear about what they are looking for in ethical collections companies. While there is concern about data privacy, consumers are clearly looking for collections agencies to provide flexible payment options and consistent hardship policies. As the number of charge-offs increase, it will be important to keep this in mind.

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