Card Issuers Can Achieve Big Savings by Turning to Collection Firms

By Wallace, Douglas W.; de Mayo, Richard T. | American Banker, June 24, 1993 | Go to article overview
Save to active project

Card Issuers Can Achieve Big Savings by Turning to Collection Firms


Wallace, Douglas W., de Mayo, Richard T., American Banker


In its search for cost reductions, the banking industry has turned to collections of delinquent accounts.

The focus is logical, but it wasn't always so.

When credit card providers were creating lots of wealth, as many of today's giants did in the 1980's, they could ladle out generous pay and benefits to collectors. But since the credit card market has become saturated, banks have been pressured into reducing interest rates, paying cash equivalents as incentives to customers, and, in general, running a tighter ship.

Looking outward into the marketplace for solutions, big credit card companies have whittled away collection department staffs, replacing them with outside firms specializing in specific tasks.

As banking moves away from vertical integration, the industry is developing learner, more flexible shops that outsource many functions and add temporary employees as needed. It all adds up to a profound change in the way the credit card industry collects from delinquent borrowers.

In essence, collections has evolved into a product of the marketplace rather than a core service that banks need to own. Outside collection firms typically charge less for servicing delinquent portfolios than the average per-account cost of a bank's internal collection department.

Credit card issuers estimate that their monthly per-account cost of collecting delinquent accounts aged five months or more ranges from $11 to $16, depending on the bank's size and efficiency. Compare this to outside providers, whose cost to the bank, measured by the same volume, ranges from $7 to $12 per delinquent account.

Fertile Climate for Change

The move toward leanness and flexibility, common to many U.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
Loading One moment ...
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited article

Card Issuers Can Achieve Big Savings by Turning to Collection Firms
Settings

Settings

Typeface
Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

While we understand printed pages are helpful to our users, this limitation is necessary to help protect our publishers' copyrighted material and prevent its unlawful distribution. We are sorry for any inconvenience.
Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.

Are you sure you want to delete this highlight?