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Highlight Updates Collection After Charge-Off

After charge-off, accounts can either be retained in-house for collection, placed with third-party collection agencies, placed for litigation, sold, or warehoused. Each approach is discussed briefly below. If one approach to collection is unsuccessful, a new approach may be attempted after a period of time.

After charge-off some credit card issuers continue to collect on the account in-house. The CFPB found that almost all survey respondents engaged in at least some internal collection after charge-off, but, in 2014, only about ten percent of charged-off balances were initially placed in internal recovery after charge-off.256

All survey respondents reported placing accounts with third-party collection agencies post-charge off,257 with more than forty percent of charged-off balances being placed here initially after charge-off in 2014.258 Half of respondents significantly decreased the number of third-party collectors with which they placed accounts between 2012 and 2015.259 Details of third-party collection practices are discussed at § 1.4.6, infra.

The majority of survey respondents indicated that they file collection lawsuits to collect some of their accounts.260 However, litigation was an initial placement for only about five percent of charged-off balances in 2014.261 Respondents indicated that they typically used collection attorneys around the country to file suit rather than using their internal legal department.262 Some credit card issuers have filed hundreds of thousands of collection actions per year.263

Half of survey respondents sold debt to debt buyers in 2013, and fewer than half sold debts in 2014.264 The respondents that did sell debts in 2014 indicated that they sold debts to fewer debt buyers.265 Volume of credit card debt sold and price paid to purchase debts are discussed in §§ and, supra. Terms of debt sales are discussed at § 1.4.7, infra.

Finally, respondents indicated that the initial placement after charge-off for about twenty-five percent of charged-off balances was “warehousing,” or ceasing collection on the account.266 Credit card issuers that did not sell debts used warehousing more often than those who do sell debts,267 suggesting that at least some credit card issuers are selling debts that they view as too problematic to collect themselves.268


  • 256 Consumer Fin. Protection Bur., The Consumer Credit Card Market 252 (Dec. 2015).

  • 257 Id. at 253.

  • 258 Id. at 251.

  • 259 Id. at 253.

  • 260 Id. at 252.

  • 261 Id. at 251.

  • 262 Id. at 254.

  • 263 Paul Kiel, At Capital One, Easy Credit and Abundant Lawsuits, ProPublica, Dec. 28, 2015 (estimating that Capital One filed more than 500,000 lawsuits per year nationally between 2008 and 2010).

  • 264 Consumer Fin. Protection Bur., The Consumer Credit Card Market, 256 (Dec. 2015).

  • 265 Id. at 258–259.

  • 266 Id. at 251.

  • 267 Id. at 257.

  • 268 See id. at 247 (“‘Warehoused’ debt of this kind is unlikely to be repaid for reasons that may include bankruptcy or death. In general, issuers warehouse an account when the slender possibility of collection is outweighed by the likely cost of collection and/or risk of legal infraction.”).