The Consumer Finance Protection Bureau recently released its 2016 Annual Report outlining actions it took to administer the Fair Debt Collection Practices Act over the last year. While the report is officially delivered to Congress, it provides strong insights into the Bureau’s practices and is an excellent resource for accounts receivable and collection industry leaders. Understanding what led to consumer complaints and how the CFPB responded can help debt collectors improve their compliance with the FDCPA and reduce their risk of enforcement action or litigation.
Top Consumer Complaints in 2015
The CFPB’s Office of Consumer Response collects consumer complaints online, by phone and by mail. In 2015, the Bureau received a total of 85,200 consumer complaints through these channels. This represents a slight decrease from the 2014 total of 88,300. The complaints were categorized into six key categories.
1. Continued Attempts to Collect Debt Not Owed — 40 Percent
This category includes complaints that a debt did not belong to the consumer, that the debt was previously paid, was the result of identity theft or was previously discharged in bankruptcy.
2. Communication Tactics — 18 Percent
The majority of these complaints were over the number of calls made. A smaller number were over the content of the calls, including threats of legal action or the use of abusive language. Consumers also reported being called at inappropriate hours (before 8 a.m. or after 9 p.m.) or after they sent a written notice not to call. Other complaints were received because the wrong person was called repeatedly due to a wrong number, a changed number or a similar name.
3. Disclosure Verification of Debt — 15 Percent
These complaints included allegations that debt collectors did not provide a written notice of a consumer’s right to dispute a debt within five days of their initial communication or that debt collectors did not provide documentation with information that consumers needed to dispute a debt. A small number of reports were received that a communication did not disclose that it was an attempt to collect a debt.
4. Taking or Threatening an Illegal Action — 11 Percent
This category includes threats of arrest or jail, threats to sue despite the statute of limitations having expired, legal actions taken without proper notice, suing in the wrong court and attempting to collect from funds or accounts that are exempt from collections.
5. False Statements or Representation — Nine Percent
Most of these complaints involved attempts to collect the wrong amount from the consumer. This category also includes complaints of debt collectors impersonating law enforcement officers or other government officials as well as false statements that it is a crime to not pay a debt. A handful of complaints involved giving advice that was actually adverse to a consumer’s interests, such as telling them not to respond to a lawsuit.
6. Improper Contact or Sharing of Information — Seven Percent
The primary cause of these complaints was improper sharing of information about a debt with third parties, including contacting an employer after being told not to. Just under a quarter involved a debt collector continuing to contact a consumer after being told not to or contacting a consumer directly after being told to contact their attorney.
Top Enforcement Actions in 2015
Many consumer complaints resulted in a settlement with the consumer and may have also included an agreement to pay a fine. For particularly egregious violations, the CFPB itself filed a lawsuit against a debt collector. Some of the largest settlements and verdicts in 2015 included
- $2.5 million in refunds and debt forgiveness plus a $100,00 civil penalty for claims related to debt collection from military members and other consumers including filing lawsuits far away from where the debtor lived and wrongfully disclosing information about the debt to third parties.
- $16 million in redress plus a $2.5 million civil penalty for making collection calls early in the morning or late at night, misrepresenting interest amounts and deceptively overstating the minimum payment due.
- $10 million in civil penalties plus up to $42 million in consumer relief for threats and deception in collecting debts that the debt collector should have known were not collectible.
- $15 million penalty and $48 million in consumer redress for failing to honor loan modifications, providing poor service that financially impacted consumers and deceptively charging convenience fees when making payments.
- $30 million civil penalty and $50 million in restitution from a major bank who sold erroneous and unenforceable charged-off credit card accounts to independent debt buyers.
Avoiding Enforcement Actions in 2016
The CFPB will continue to respond to consumer complaints and take enforcement actions when appropriate. It is also promoting education and outreach initiatives to help make consumers more aware of their rights under the FDCPA and other consumer laws. This will increase the likelihood that a complaint is made even for relatively minor violations of the FDCPA. Keep in mind that consumers have a negative view of debt collectors, and many may feel that filing a complaint is a way to get back at them.
Collection agencies should thoroughly review the complaints received in the previous year and ensure that their policies and procedures prevent their employees from taking similar action. FDCPA compliance should not just be left to the legal team, but should be something that all employees are thoroughly familiar with to prevent a situation where an employee “thinking outside the box” commits an FDCPA violation not specifically listed as prohibited in company policy. Special attention should be given to employees and managers with compensation incentives tied to the amount of debt collected.
Working with legal counsel to review current practices, proposed changes to business practices and adjust for new laws is an excellent way to maintain compliance.