You Don’t Need a Crystal Ball to Predict Industry Volume Trends

Posted By: Joel Rosenthal Articles,

Federal Reserve Indicators are Predictors of Collection Industry Accounts Volume

By Joel Rosenthal, ProVest Vice President, Head of Credit Collections Business Development & Client Relations

ProVestIf I had a crystal ball in my office that predicted business volume, I’d use it—you likely would, too! And yet, several reputable indicators can help you anticipate volume. The Federal Reserve releases its report on credit card charge-offs and delinquencies each quarter. These data points help indicate industry account volume, especially considering that 80% or more of the NCBA member firms’ collective volume is credit card related.

In ProVest’s experience, we generally see a 9-12-month lag from when the charge-offs occur before our litigation clients see the volume. Additionally, delinquencies are a 3–6-month early indicator of charge-off volume. What does this mean?

Based on this timeline, our clients will likely see their account volume continuing to increase throughout the fourth quarter and into early 2024. According to the recent report’s data, the trend is favorable.

The charge-off rate increased from 2.75% to 3.03%, continuing to inch closer to the pre-pandemic level of 3.65%. The delinquency rate increased from 2.29% to 2.63%. The delinquency rate is an early indicator of the future charge-off rate and is now at a 10-year high.  This indicates that a continued rebound of charge-off volume should be expected.

The Federal Reserve’s charts for the data referenced follow. The charts are easily downloadable in several formats.

Charge-off Rate on Credit Card Loans

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Delinquency Rate on Credit Card Loans

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As your firm wraps up 2023 and identifies 2024 strategies and activity based on key indicators—the industry’s account volume will continue to grow. Planning to respond to growth opportunities will position your firm for continued success.