The CFPB released the findings from its long-awaited national debt collection consumer survey. The survey was originally proposed on March 7, 2014, when the CFPB published a notice in the Federal Register, providing notice of its intent to conduct a “consumer” survey on debt collection and to request public comment on the survey methodology. The notice said that the “CFPB plans to conduct a mail survey of consumers to learn about their experiences interacting with the debt collection industry.” The notice also explained that the survey would ask
consumers “whether they have been contacted by debt collectors in the past, whether they recognized the debt that was being collected, and about their interactions with the debt collectors.” In addition the survey would also gather information about consumers’ preferences with regard to how debt collectors should contact them, their opinions about potential regulatory interventions in debt collection markets, and about their knowledge of their legal rights regarding debt collections.
The Bureau ended up re-submitting the notice and extended the deadline to submit comments on the proposed survey to August 22, 2014.
In spite of industry objections from ACA International, American Bankers Association and Consumer Bankers Association, and other industry members regarding the survey’s flawed methodology and the unreliable data that the Bureau intended to collect and analyze, the CFPB Bureau moved forward with the survey. And now, over two years later, the CFPB has finally released the results of that survey.
The Bureau’s press release headline announces that “over one-in-four consumers contacted by debt collectors feel threatened” during the collections process. The press release also highlights certain aspects of debt collection that will likely be the focus of CFPB’s ongoing efforts to reform the industry. Those items include failure to honor cease-and-desist requests, collecting on debt affected by erroneous information (e.g., wrong amount, do not owe, different family member), failing to comply with call-time restrictions, excessive contact, and default judgment rates in debt collection lawsuits.
Here are some of the Bureau’s survey findings:
- 27% of consumers reported threatening contact: 27% of consumers surveyed said they felt threatened by the conduct of the creditor or collector who most recently contacted them.
- Approximately 75% of consumers who ask collectors to cease communications were still contacted: Of the consumers surveyed, roughly 40% were contacted about a debt requested that the debt collector or creditor cease contacting them. Of these consumers, 75% the cease contact request was not honored.
- 53% of consumers report incorrect contact for at least one debt: 53% of consumers contacted about a debt claimed that at least one collection effort was mistaken in some way. Common errors included demanding payment in the incorrect amount, attempting to collect a debt that was not owed, or contacting the consumer when the individual owing the debt was a family member.
- 36% of consumers report being contacted at inconvenient times:36% of consumer contacted about a debt said that the creditor or collector who most recently contacted them called after 9 PM or before 8 AM. In general, debt collectors should not call at times they know would be inconvenient unless the consumer instructs otherwise.
- 37% of consumers report debt collector attempted contact four or more times per week: 37% percent of consumers contacted about a debt reported that a creditor or collector attempt to contact them four or more times in a week. About 20% reported attempted contact of four to seven times per week. Another 17% reported attempted contact of eight or more times per week.
- 15% of consumers report being sued for a debt: 15% of consumers contacted about a debt in collection over the prior year report being sued. About 75% of those sued said they did not appear at the court hearing.
The Bureau’s press release also includes a link to its new whitepaper that discusses the sale of charged-off consumer debt online, which has been a significant area of focus at both the state and federal level recently.
Finally, the Bureau’s press release also links to consumer “Debt collection stories.”
What we Think:
The CFPB is clearly focused on the negative aspects of the debt collection process. This is apparent in the way they interpret the survey results and their Debt Collection Stores page which exclusively highlights negative consumer experiences. It is not surprising that the Bureau’s portrayal of the industry cast a negative light on creditors and debt collectors. It’s also no surprise that consumer feedback has a negative slant; the entire notion of being contacted about an outstanding debt is bathed in negativity.
In reality, this announcement is just as we expected. The CFPB has been slowly inching toward debt collection rulemaking for almost five years now. There are a few things we can glean from the Bureau’s press release:
- The CFPB’s survey was flawed and suffered from substantial negative bias. For example, the survey contained heavy use of leading questions and non-neutral language. Industry members brought attention to these issues, but the CFPB largely ignored their concerns and proceeded as planned. This strongly suggests that the CFPB’s survey was designed to elicit negative responses from consumers in order to support the CFPB’s predetermined conclusion about how the industry is flawed and in need of significant reform.
- The CFPB’s presentation of the survey results are hardly impartial. CFPB Director Richard Cordray prepared remarks acknowledge that the survey data indicated that “many debt collectors and creditors respect the laws governing their industry and have good practices in place.” Any positive findings, however, were buried and completely overshadowed by the CFPB’s decision to cherry-pick and highlight statistics that are most critical of the industry.
- The Bureau highlighted the fact that “[c]onsumers are most often contacted about medical and credit card debts.” We expect credit card debt to remain a regulatory focus. What is more telling is the Bureau’s mention of medical debt, especially in light of the recent consent order against debt collection law firms specializing in medical debt. These details seem to suggest that the Bureau may increase its focus on collection of medical debts. This could be especially meaningful if the Trump administration and Congress reform the Affordable Care Act and shift health insurance toward a self-pay model. That would likely mean collection of medical debts would skyrocket.
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