The American Financial Services Association (AFSA) today released Impact of Collection Call Restrictions on Consumer Delinquencies in Vehicle Finance and Installment Lending. The study was performed in conjunction with CenturyLink’s data science practice and is being submitted to the Consumer Financial Protection Bureau (CFPB) in response to its proposed rule on debt collection. While the proposed rule would only apply to debt collection agencies, AFSA is concerned that borrowers would be harmed if the CFPB or others lumped creditors and debt collectors together and treated them the same way, even though their businesses are very different.

The study determined that limiting creditors’ ability to work with their customers on repayment of past-due accounts could negatively affect consumers’ credit standing.

“The results of the study suggest among those borrowers entering collections (1-29 days past due), restricting the number of call attempts could increase the number of those borrowers who end up 90+ days past due by nearly 70% for installment loans and over 50% for vehicle finance contracts. Because creditors typically charge off and/or repossess at or around 90+ days past due, we would expect the number of charge offs and repossessions to increase at similar rates.”

As a result of the study, AFSA recommends that the CFPB Clearly limit call restrictions to third-party debt collectors. “Whereas debt collectors do not have any prospect of having future or ongoing relationships with borrowers and most do not make any attempt to salvage borrowers’ credit scores, creditors have an incentive to maintain a relationship with borrowers,” the study concludes. “Creditors risk losing the relationship, in addition to the entire balance, while borrowers may lose opportunities to work to maintain their financial wellness if they cannot effectively communicate with a borrower.”

The study is available here.