What We Learned from the First-Ever National Debt Collection Survey
The first-ever survey of the American consumer’s interaction with debt collection agencies reveals that the debt collection industry remains fraught with inappropriate activity, according to a recent report issued by the Consumer Finance Protection Bureau.
Over a 12-month period ending in 2015, the CFPB queried America’s debt collection industry to gain insights for future rule-making efforts. While the sector itself includes collections firms of all sizes that collect both specialized and general debts, many of their practices are very similar: They receive data regarding delinquent accounts and work to collect on those accounts either through a collections process or a court proceeding. The survey broadened the CFPB’s understanding of how the industry worked in general and provided data that will be used to devise and implement practice improvements.
One in Three Consumers Involved
Of more than 200 million American consumers, approximately one-third — 70 million — were contacted by debt collectors in 2015. The debt categories that drew the most contacts were those involving credit cards and medical expenses.
CFPB Director Richard Cordray noted in his Jan. 12, 2017, remarks that, while most debt collectors are ethical and follow the rules governing their activities, some are still in need of education or training. And, of those who fell short of the ethical mark, there is a small percentage whose activities border on criminal.
Debt Collection Errors Are More Common Than Not
Slightly more than half of the debtors who responded to the survey (53 percent) reported that the collection notice was wrong in at least one aspect. In some cases, the collector had the wrong person — the debt was owed by a family member or another person with the same name. In other instances, the amount of the debt was in error or the alleged debt was not actually owed.
Rudeness Is Also Common
Debt collectors who were not responsive to requests made by the debtors garnered the most complaints overall:
- One in three consumers complained about being contacted about their debt at inconvenient times. Debt collectors cannot call when they know it would be inconvenient for the debtors, such as at a regular mealtime hour, on a holiday day, or between the hours of 9 p.m. and 8 a.m.
- Almost 40 percent of surveyed debtors reported collector contacts four or more times per week. Almost 20 percent had received communications between four and seven times per week, and more than 15 percent said they received debt collector contacts eight or more times in one week.
- Three-quarters of reporting consumers continued to receive debt collection notices even after they told the collector or creditor to stop contacting them.
Potentially Criminal Activities Occur Too
Of the 70 million, more than 17 million — 27 percent — reported feeling threatened by the debt collector. Whether there was an actual threat or the consumer simply felt intimidated was not made clear by the report, but federal rules prohibit debt collectors from using tactics that might oppress, harass or abuse the consumers they contact.
Lawsuits Can Follow
For 15 percent of delinquent consumers, when the collections process failed to resolve the debt question, a lawsuit was filed to force the issue. The number of outstanding accounts may have played a part in the decision to sue; collections agents sued only 6 percent of debtors with a single account owed but filed cases against 35 percent of consumers with more than five outstanding debts. Surprisingly, three-quarters of those consumers who had these legal actions pending failed to show up in court. That failure to appear in court almost always results in an automatic entry of default judgment against the debtor.
Debt collectors can be an original creditor, a third-party collections contractor, or a debt buyer who purchased the debt (and the debtor’s personal information) for pennies on the dollar and keeps all collected proceeds.