Debt Collection Complaints to CFPB Decline
The bureau’s annual FDCPA report to Congress shows continued timely responses to complaints from companies while more context and characterization is needed to accurately reflect consumer contacts made by the debt collection industry.
4/8/2019 9:30 AM
In 2018, the bureau handled approximately 81,500 debt collection complaints, compared to 84,500 in 2017, according to the Consumer Financial Protection Bureau’s eighth annual report to Congress on the Fair Debt Collection Practices Act.
From Jan. 1, 2018 through Dec. 31, 2018, the CFPB sent approximately 51,700 (63 percent) of the 81,500 debt collection complaints it handled during that time to companies for review and response.
The report notes that the bureau’s analysis excludes multiple complaints submitted by a given consumer on the same issue and whistleblower tips.
Collection agencies continue to respond to and resolve complaints effectively and efficiently. According to the CFPB report, companies already responded to approximately 49,400 complaints, or 95 percent, of those they received for last year.
The bureau also refers complaints to other agencies when it is not the primary federal regulator for those companies, such as a mobile phone or Internet service provider.
The most common type of debt collection complaint, 40 percent, is from consumers who report attempts to collect a debt that is not owed.
Among those consumers, they say the debt is not owed because it is not their bill (53 percent), it was paid (23 percent), resulted from identity theft (20 percent) or was discharged in bankruptcy and its no longer owed (4 percent.)
Complaints about attempts to collect a debt not owed because it was the result of identity theft were more prevalent in 2018 compared to 2017, resulting in reports from consumers that they receive negative marks on their credit report or collection attempts by third parties for accounts they attempted to previously dispute with merchants or first-party creditors.
“In response to these complaints, third-party collectors report that they initiate an investigation into the purported fraud, detail the documents needed to process a dispute, return the account to the first party or discontinue collection attempts entirely,” according to the report.
While the CFPB report reflects companies’ timely and comprehensive responses to complaints, the broad definition and characterization of complaints fails to reflect that they represent a small percentage of consumer contacts made by the debt collection industry.
In a white paper to review consumer complaint data to the CFPB for the first half of 2018, ACA International found that while the overall raw number of complaint submissions appears high for the debt collection industry, once the data has been properly contextualized, the number of consumer complaints is remarkably low. This finding remains consistent despite the CFPB’s overly broad characterization of what constitutes a complaint.
Notably, ACA found that the total number of debt collection complaints received by the CFPB represents an incredibly small number of consumers (0.006 percent) who had contact with the debt collection industry during 2018 and are remarkably consistent with other financial services industries. Further, the complaints account for only 0.04 percent of all Americans estimated to have a debt in collection.
The activities of the CFPB and FTC related to the FDCPA are central to the members of ACA International. It is therefore crucial that debt collection regulation, supervision and enforcement is done in a fair and transparent manner. ACA will continue to advocate on behalf of the accounts receivable management industry to ensure that federal regulators act in a well-reasoned and evidence-based way when engaging in efforts that impact the debt collection market.
Supervision and Enforcement Activities
According to the report, the CFPB announced six new law enforcement actions in 2018 related to alleged FDCPA violations. The CFPB continues to be involved in active litigation in four other FDCPA cases. The bureau also filed amicus briefs in two cases arising under the FDCPA: one in the Supreme Court and the other in a federal court of appeals.
In addition, based on its authority to review activity at firms with more than $10 million in annual receipts from consumer debt collection activities, the CFPB found a number of FDCPA violations in 2018 through its supervision of debt collection companies.
The report notes violations related to failure to obtain and mail debt verification before engaging in further collection activities.
However, as is true with the CFPB's Supervisory Highlight reports, while this type of information is useful as a reminder to agencies to ensure their practices are compliant, without more information it is unclear what precedent is set by one-off actions.
Debt collection amicus briefs filed by the bureau include two cases arising under the FDCPA, one in the U.S. Supreme Court and one in a federal court of appeals. In addition, one case in which the bureau filed an amicus brief in 2017 was decided in 2018.
One of the cases, Obduskey v. McCarthy & Holthus LLP, focuses on whether a law firm hired by a mortgage company after a consumer defaulted on a loan is not defined as a debt collector as outlined in the Fair Debt Collection Practices Act.
In June 2018, the Supreme Court granted certiorari in the case, Obduskey v. McCarthy & Holthus LLP, to determine whether nonjudicial foreclosure proceedings and those who are involved in them are subject to the FDCPA, ACA International previously reported. (Members may read more background on this case on the Industry Advancement Program website.)
The bureau’s brief states, “initiating a nonjudicial-foreclosure proceeding generally does not constitute debt collection under the FDCPA.”
The U.S. Supreme Court heard oral arguments in the case in January and on March 22 unanimously affirmed the U.S. Court of Appeals for the 10th Circuit, “holding that parties who enforce security interests are not debt collectors within the meaning of the Fair Debt Collection Practices Act provided that they do no more than the bare minimum required by state law to enforce the security interest,” according to the SCOTUS blog.
The bureau also filed an amicus brief in Lavallee v. Med-1 Solutions LLC, where a consumer accused an ACA International member collection agency of failing to comply with the FDCPA’s requirement that a debt collector “send the consumer a written notice containing” statutorily required information about the debt, even though the agency transmitted a proper validation notice to the consumer by secure email attachment, ACA International previously reported. ACA also filed an amicus brief with the Seventh Circuit ask the appellate court to provide guidance to the debt collection industry, establishing that email can be “written notice” within § 1692g(a)’s meaning, and the bureau urging the appellate court to address the applicability of the Electronic Signatures in Global and National Commerce Act (E-SIGN Act) to circumstances in which a debt collector wants to use email to comply with the FDCPA’s requirements to send written validation notices.
The court heard oral arguments in the case in May 2018 and has not yet issued a decision.
The CFPB also provided an overview of legal matters initiated before 2018 and FTC law enforcement actions in the report.
ACA International members interested in discussing legislative and regulatory issues such as this with key policymakers, join ACA International’s advocacy staff May 14-16 in Washington, D.C. for the annual Washington Insights Fly-In. Registration is now open!
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