On September 25, the Consumer Financial Protection Bureau announced a Project Catalyst research pilot to examine the effectiveness of early intervention credit counseling for consumers who are at risk of default on their credit card debt. The project is aimed at exploring ways to help consumers better manage their credit card debt and avoid default. “Many people who are having trouble paying their credit card debt could benefit from the help of credit counselors, who can help them create more practical budgets and more manageable schedules to repay debt,” according to the CFPB’s press release.
Barclaycard (Barclays Bank Delaware) and Clarifi (Consumer Credit Counseling Service of Delaware Valley) have partnered on the pilot program. Barclaycard will offer cardholders who may need help with managing their credit card debt the opportunity to get help from Clarifi. Cardholders can then choose to enroll in Clarifi’s credit counseling services at no cost to them. As part of the initiative, Barclaycard and Clarifi have agreed to share insights from their trial project with the CFPB. This information will be de-identified, and according to the CFPB, appropriate precautions will be taken to ensure that individual consumers cannot be identified through the data.
A recent survey on consumer finances from the Federal Reserve Board shows that the percentage of families with credit card debt declined from 2010 to 2013, ACA International reported. Median and mean balances for families with credit card debt declined 18 percent and 25 percent, respectively, and the amount of families that pay their complete credit card balances every month has increased. According to the S&P Experian Consumer Credit Default Indices, national credit default rates increased in August. Automobile and home sales are on the rise, which indicates more borrowing and may be the cause of the default rate increases. The CFPB’s research pilot will explore whether certain early intervention strategies can improve consumers’ financial outcomes. This research may also help inform whether similar strategies could be effective for consumers facing default on other products such as home, auto, or other loans.
“Managing credit card debt can be stressful for consumers and will affect their ability to access credit in the future,” said CFPB Director Richard Cordray. “This project can help us better understand what works and does not work to improve life for consumers in the marketplace.”