The Consumer Financial Protection Bureau has released a monthly “complaint snapshot” highlighting consumer complaints about debt collection. The report shows that the most common complaint about debt collection has to do with attempts to collect on a debt that the consumer says is not owed.
As of Dec. 1, 2016 the Bureau has handled approximately 1,058,100 complaints across all products, most of them detailed on its public compliant database.
Since the Bureau began accepting complaints in 2011, debt collection has been the most-complained-about financial product or service by over 100,000 complaints compared to the next most-complained-about product. As of Dec. 1, 2016, the Bureau had handled approximately 285,000 debt collection complaints.
Findings in the comliant tally include:
More than a third (39 percent) of complaints submitted about debt collection had to do with consumers reporting being contacted about debts that they no longer owed.
Many consumers complained they were never provided documentation to verify the debt, even after submitting requests for verification.
Consumers complained that their accounts were forwarded to third-party collectors without receiving any prior notice from the original debt holder about an outstanding balance.
Consumers also complained that their accounts were not in delinquent status prior to contact by the third-party collectors.
Many participants said they are subject to frequent daily calls by debt collectors both at home and at work, even after informing the collector that contact at work was prohibited by their employer.
The three companies that the Bureau has received the most average monthly complaints about are Portfolio Recovery Associates, Inc., Encore Capital Group, and ERC.
The CFPB’s compliant data also illustrated emerging trends across financial products and providers. For November 2016, debt collection was the most-complained-about financial product or service. Of the approximately 23,000 complaints handled by the CFPB that month, there were 6,730 complaints about debt collection.
The second most-complained-about consumer product was credit reporting, which accounted for 4,138 complaints. The third most-complained-about financial product or service was mortgages, accounting for 3,954 complaints.
In a year-to-year comparison examining the three-month time period of September to November, prepaid product complaints showed the greatest decrease (59 percent) of any product or service. The Bureau received 183 prepaid product complaints between September and November 2016, while it received 444 complaints during the same time period in 2015.
Among states, Iowa, Georgia, and Alaska experienced the greatest year-to-year complaint volume increases from September to November 2016 period versus the same time period 12 months before. Iowa was up 39 percent, Georgia was up 37 percent, and Alaska was up 35 percent.
The top three companies that received the most complaints from July through September 2016 were credit reporting companies Equifax, Experian, and TransUnion.
Company-level complaint data in the report uses a three-month rolling average of complaints sent by the Bureau to companies for response. This data lags other complaint data in this report by two months to reflect the 60 days companies have to respond to complaints, confirming a commercial relationship with the consumer. Company-level information should be considered in the context of company size.
The Bureau’s promotion of debt collection statistics shouldn’t come as much of a surprise. In July, it moved forward with proposed rules regarding debt collection that have been gestating since 2013.
Debt collectors are already prohibited by federal law from harassing, oppressing, or abusing consumers by the Fair Debt Collection Practices Act of 1977. In 2010, the Dodd-Frank Act revised that law to make the CFPB the primary regulator for the industry.
Among the proposed rules:
Collectors would need to substantiate debts before contacting consumers.
Collectors would be limited to six communication attempts per week through any point of contact before they have reached the consumer.
Imposing a 30-day waiting period after a consumer has died, during which collectors would be prohibited from communicating with surviving spouses and others.
Including more specific information about a debt in the initial collection notices sent to consumers, including their federal rights, whether the debt is too old for a lawsuit, and options for disputing the claim.
If any written notice is sent back within 30 days of the initial collection notice, a collector would have to provide written information substantiating the debt back to the consumer. They could not continue to pursue the debt until that report and verification is sent.
If a consumer disputes, in any way, the validity of the debt, collectors must stop collections until the necessary documentation is checked.
Collectors that come across any specific warning signs that debt information is inaccurate or incomplete would not be able to collect until they resolve the problem. Red flags include a portfolio with a high rate of disputes or the inability to obtain underlying documents to respond to specific disputes.
The proposed rules would apply only to third-party debt collectors, although the CFPB explicitly announced that similar requirements for banks and credit card companies are likely.