Overall Debt Levels: Kaulkin Report, 2022 Edition Selections

Kaulkin Ginsberg believes that every accounts receivable management (ARM) executive should be armed with an acute understanding of the industry in which they operate, from its long history to the latest trends and developments. To that end, we have put together an aggregation of our most up-to-date collection agency research in the form of the Kaulkin Report, 2022 Edition. The following blog is an excerpt from the “Operational & Technological Trends” chapter regarding overall debt levels. To request a copy of the full Kaulkin Report 2022 – or any of our Kaulkin Sub-Reports – please contact us here or email hq@kaulkin.com.

The amount of debt available for collection has fluctuated throughout the years. Total household debt has grown precipitously since 2000, with the total volume outstanding nearly tripling from $5.2 trillion in Q1 2000 to $15.2 trillion in Q3 of 2021, per Figure 1 below. The vast majority of outstanding debt is tied up in mortgages, which totaled nearly $10.7 trillion in Q3 2021. Student loans made up the next largest segment at $1.6 trillion, followed closely by outstanding auto loans which amounted to roughly $1.4 trillion. Outstanding credit card and HELOC debt stood at $804 billion and $317 billion, respectively, while all other household debt – including personal loans, retail loans, and other forms of consumer credit – totaled $423 billion in Q3 2021.

Figure 1. Total Household Debt Balance Outstanding, by Type

Source: Kaulkin Ginsberg & Federal Reserve Bank of New York

Severe delinquency rates, which measure the percentage of debt that is at least 90 days past due, are a useful measure of potential collection and purchasing opportunities for ARM companies. An increase in delinquencies indicates that creditors hold more debt in need of collection, thereby driving demand for ARM services.

Per Figure 2, delinquency rates in the non-home loan types (i.e., auto loans, credit cards, student loans, and others) increased over the last half-decade or so after experiencing a post-recession decline as the economy recovered and consumers regained control of their finances, until Q2 2020. Since the onset of the COVID-19 pandemic, though, severe delinquency rates have declined across every asset class as consumers, buoyed by government stimulus, paid off their debts at higher rates than before. It is likely, however, that delinquencies will reverse their trajectory in 2022, as the effects of government stimulus begin to wear off and the economy normalizes as the omicron wave subsides.

Credit card debt continues to have the highest severe delinquency rate, at 8.8% in Q3 2021, surpassing the student loan severe delinquency rate in Q2 2020 due to the majority of federal student loans transitioning into CARES Act forbearance.[1]

Figure 4. Percent of House Debt Balance 90+ Days Delinquent, by Type

Source: Kaulkin Ginsberg & Federal Reserve Bank of New York

Works Cited

[1] “Quarterly Report on Household Debt and Credit: Q2 2020.” Federal Reserve Bank of New York, Aug. 2020, https://www.newyorkfed.org/medialibrary/interactives/householdcredit/data/pdf/hhdc_2020q2.pdf.

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