Guest Post: An Unanticipated Regulator of the Future – Credit Averse Millennials

By Mark J. Dobosz
August 22, 2016

A recent New York Times article by Nathaniel Popper reported the following, “Data from the Federal Reserve indicates that the percentage of Americans under 35 who hold credit card debt has fallen to its lowest levels since 1989…” Popper goes on to say, “Their reluctance could have lasting repercussions for millennials, as well as for the financial system and the economy.”  Just when you think all you had were government regulatory rules and regulations that may impact your bottom line, along comes the sleeper regulator of a generation of consumers with an aversion to credit and its risks.

Diversification in the profit centers of your practice has hopefully been part of your business plan in the years following the economic crash of 2008-2009.  Professional firms in all industries saw a new “normal” come to life and creditors rights attorneys and their firms were no exception. Preparing for a future that would need to include litigating collections from a diverse portfolio of creditor sources  (credit card, medical, bankruptcy, student loan, subrogation, commercial – just to name a few) became more and more pragmatic as the years of the recession marched forward.

In the article, Popper also comments, “But more recent data has also suggested that millennials are using credit cards less than people of a similar age did in the past – and they are taking on fewer auto loans and mortgage loans than people of a similar age did before the financial crisis.” One might easily dismiss this and think that they will need to buy homes and cars on relatively soon and so the equilibrium will balance itself. Not so the research reflects as Popper points out,  “ ‘It will probably take them longer to get access to credit,” said Gregory Elliehausen, an economist at the Federal Reserve specializing in consumer finance. “In the meantime their behavior and some of their habits will already have been formed.” ‘

So what does this mean for you and your firm in 2016 and beyond?

When was the last time you reviewed you business plan for your practice and your firm? Have you recently assessed your portfolio risks from a P/L standpoint? Have you projected out what would happen if you lost a significant concentration of your client portfolio? And if so, have you developed an action plan, or more importantly, are you in the process of making the necessary changes?
In addition to practicing a noble profession, never lose sight of the fact that you are an entrepreneur, a small business owner and masters of your fate.  Vigilance in the shifting sands of a credit-based economy has never been more important.

“I don’t want to go out and buy, buy, buy, even though that’s what society wants me to do.” …. “I want to save and invest for the long term.”
 Jason Towner – 32-year old private equity professional with no credit cards

As quoted in “Loaded with Debt, Young Americans Avoid Taking on More”
by Nathan Popper in the New York Times.

About the Author: Mark Dobosz currently serves as the Executive Director for NARCA – The National Creditors Bar Association. Mark is a one of NARCA’s speakers on many of the creditor’s rights issues impacting NARCA members. The National Creditors Bar Association (NARCA) is a trade association dedicated to creditors rights attorneys. NARCA's values are: Professional, Ethical, Responsible.