Collections for telecommunications debt – for example, money owed for landline or cell phone, cable or Internet – showed up in more than 1 in 5 consumer credit reports from mid-2013 to early 2018, but most of these likely had no impact on creditors’ decisions, according to a report from the Bureau of Consumer Financial Protection (BCFP, formerly known as CFPB).
The report, the bureau’s latest quarterly report on consumer credit trends, is based on a “longitudinal, nationally representative sample” of about 5 million de-identified consumer credit records from a nationwide credit reporting agency. The aim of the report was to show the prevalence and dollar value of telecom collections and illustrate industry practices in the collection and reporting of telecommunications debts.
Nicholas Tremper, one of the three bureau representatives credited for producing the report, pulled out these key findings for a BCFP blog post Wednesday:
- About 22% of consumer reports contained a telecom-related item at some point between mid-2013 and early 2018. Although consumers often pay for their telecom services on a monthly basis, most telecommunications providers do not report to credit reporting agencies unless an account is in collections. Nearly 95% of the telecom-related items were telecom collections items.
- The median telecom collection balance is $408, and 17% of telecom collection balances exceed $1,000.
- Telecommunications providers often hire collection agencies or sell telecom debt to debt buyers. Collection agencies are typically contracted to collect a telecom debt for several months. After the collection contract ends, the debt is returned to the telecommunications provider and the collection item is removed from the credit record. The debt may be sold or sent again to a collector and reported as a new item in the credit file.
- The presence of a telecom collections item on a consumer’s credit record is associated with having a lower credit score, but the change in score before and after the item appears on the credit record is often small and therefore unlikely to affect creditors’ decisions for many consumers.
According to the report, there are 202 distinct furnishers of telecommunications tradelines in the data over the period analyzed. The top three furnishers of such data account for 48% of all telecom tradelines in the sample; the top five furnishers account for 60%.