FTC Confirms that Collection Complaints a Fraction of Total ARM Contacts

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Walter Steele

For anyone in the ARM Industry, the Annual FTC Report on FDCPA Violations is a must read. If you are like me, it is usually received with a degree of contempt as our industry is traditionally portrayed as “evil” or “out of control.” Being a self-professed stat geek and Six Sigma Black Belt, I find this portrayal ludicrous and we may have just seen the FTC confirm that.

For the first time that I am aware of, the FTC finally correlated an error proportion (though not disclosed) in its Annual Report to Congress. This is particularly noteworthy because historically the only figures the FTC included in its report were the absolute number of complaints received and the change in that number from the previous year.  However this year (buried within the report on page 5) is the following statement:

“Although the Commission received over one hundred thousand consumer complaints about third-party collectors in 2010, it recognizes that collectors contact millions of consumers each year. The number of complaints the FTC receives about debt collectors, therefore, corresponds to only a small fraction of the overall number of consumers contacted.”

This two sentence acknowledgement is a tremendous step in the right direction. However, it could be viewed as a gross understatement. This is where the stat geek in me could not resist peeling the onion back further.

As an industry we exceed over 500,000,000 contacts in aggregate per year. That figure is extremely conservative by many estimates and could easily exceed 1,000,000,000. But for the sake of argument, let’s use 500,000,000 contacts industry wide per year. That would correlate to a complaint to contact ratio of 140,036 complaints/500,000,000 contacts or two ten thousandths of a percent. In other words our “wild and unrestrained” industry is successful 99.9998% of the time as far as complaints are concerned.

To say that complaints against collectors represent “a small fraction of the overall number of consumers contacted” is like saying BP spilled a few drops of oil in the Gulf of Mexico.

I give the FTC credit for at least acknowledging this fact, as understated as it was. What we need to do as an industry is figure out a way using an agreed upon entity (one or more of the ARM industry associations, perhaps?) to actually supply the FTC with our aggregate contacts as an industry for a given year.  Furthermore, we should demand that the FTC publish the actual proportion of complaints to contacts in addition to the absolute numbers currently reported going forward. I have heard time and again that debt collection is not rocket science. But considering our industry’s success rate is better than NASA, it kind of makes you wonder.

 

Walter Steele is the Chief Operating Officer of F.H. Cann & Associates (FHC). He is a Six Sigma Black Belt with over 25 years collection experience centered on receivables management and portfolio optimization. Throughout his highly successful career Walter has held key leadership positions with companies such as the publicly traded First Marblehead Corporation (FMD), JP Morgan Chase (JPM), and BankOne.

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Posted in Complaints Background, FDCPA, Opinion .

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  • avatar Manager says:

    Pipe dream!!! They’ll never release info that will actually put us in a positive light. They wouldn’t dare make it seem like they are in our corner to consumers. God forbid that happen. It’s all bogus anyway because we’ll never know how many complaints were actually legitimate complaints. I am still and always will be SHOCKED at how many consumers actually believe that calling on Sunday is against the law!! Even people in my own family believe it to be against the law, regardless of what I tell them. I do agree that this is a step in the right direction for the FTC.

  • avatar Marc Johnston says:

    I agree wholeheartedly, although I doubt I would call the Annual Report to Congress a “must read”. To me, it looks like congress simply hired someone to sit and review InsideArm on a daily basis, jot down some stats from the many articles published throughout the year and regurgitate them into a “report”. Seriously…..I see better and more informative dialer reports on a daily basis. How much do you suppose Congress spent creating and publishing this? Here’s an idea. Lets save a couple million a year and just scrap the report and the people that do the research and writing. I seriously hope no one in congress can say they “learned” anything from this report. What a joke.

  • avatar Seth Hill says:

    Great, entertaining similes Walter. Agreed, this is a great step in the right direction. Continued education and lobbying are needed to better develop our cause for better understanding. In an industry so driven by metrics it’s surprising we haven’t been more effective in getting this message out.

  • avatar Rozanne M. Andersen says:

    I don’t want to burst anyone’s bubble, but the fact is the FTC has been inserting this language into its Annual Report to Congress for many years. In my former position, While working on behalf of the members of ACA, ACA’s regulatory counsel, Andrew Beato and I logged many, many hours attending meetings with FTC representatives about this very issue. If my recollection serves me correctly, the FTC first added this language to its report in 2004 and ACA International recognized this change as a significant win for the industry.

    The following paragraphs are actually excerpts from the FTC’s 2009, 2008, 2007 and 2006 Annual Reports to Congress. For further information visit http://business.ftc.gov/legal-resources/25/34

    2009 Report Page 4
    The Commission recognizes that third-party collectors contact millions of
    consumers each year. The number of consumer complaints the FTC receives about such
    collectors is therefore but a small percentage of the overall number of consumers
    contacted by debt collectors. Nevertheless, the Commission receives more complaints
    about the debt collection industry than any other specific industry.10

    2008 Report Page 4
    The Commission recognizes that third-party collectors contact millions of
    consumers each year. The number of consumer complaints the FTC receives about such
    collectors is therefore but a small percentage of the overall number of consumer contacts.
    Nevertheless, the Commission receives more complaints about the debt collection
    industry than any other specific industry. 10

    2007 Report Page 3
    The Commission recognizes that third-party collectors contact millions of
    consumers each year and, thus, the number of consumer complaints the Commission
    receives about such collectors is but a small percentage of the overall number of
    consumer contacts. At the same time, the Commission believes that the number of
    consumers who complain to the agency represents a relatively small percentage of the total number of consumers who actually encounter problems with debt collectors.8

    2006 Page 3
    The Commission recognizes that third-party collectors contact millions of consumers each year and, thus, the number of consumer complaints the Commission receives about such collectors is but a small percentage of the overall number of consumer contacts. At the same time, the Commission believes that the number of consumers who complain to the agency represents a relatively small percentage of the total number of consumers who actually encounter problems with debt collectors.6

  • avatar Marc Johnston says:

    Thank You Rozanne Andersen. In addition to being absolutely correct…you further illustrated my point about the utter worthlessness of this “congressional report”. They use the same verbiage over and over and over every year. Ridiculous!!!!!!

  • avatar Farley Fjnork says:

    Talk about playing a numbers game…PLEASE!

    You can’t take the total number of ‘contacts’ and divide it by complaints, to come up with any kind of compliance percentage. There may have been 100+ ‘contacts’ with an individual debtor that resulted in one complaint.
    Given the percentages of those that actually answer litigation complaints (about 10%), one could surmise that overall, the general population’s awareness of the legal system, debt collection regulation and even the fact that they can complain and TO WHOM they can complain is likely a similar 1 in 10. Surely, the ‘least sophisticated consumer’ has no idea about the FDCPA, TCPA or likely even the FTC!

    500,000,000 contacts is almost 2x the US population!

    Please – don’t play the numbers game to try to diminish the problem. It IS a problem, and the Feds and States are not going to buy into your .0002% arguement.

  • avatar Walter Steele says:

    Farley what I think you are missing is that number of contacts (though very conservative) means as an industry we have over 500,000,000 “opportunities” where an error can occur. For example, If in one day, Ford Motor Company made 100 error free cars on the assembly line, and one person bought 2 of them, that does not diminish the fact that Ford Motor Comapny made 100 error free cars that day. They had 100 opportunities for an error to occur. The other part that needs to be pointed out is, included in the 140,036 complaints received, are unwarranted complaints where (to your point) the least educated consumers are complaining about things that are perfectly legal and warrant no further action on the part of the FTC. In short, that error rate is actually lower because those unwarranted complaints are included in the total number. With regards to your assertion that the least educated consumer is unaware of regulatory bodies governing our industry, I don’t think you are giving the general public enough credit. I would counter that the American public if far more educated than you portray them to be. With reference to our industry being “the problem” it could be suggested that we are the major contributor to “the solution” of not only compliance related matters, but also a tremendous part of the solution in this economic downturn. In 2007 alone, “pre-financial meltdown”, the ARM industry was responsible for recovering over $40 billion dollars that was otherwise written off. It could be possible in the last few years that number may very well have doubled or tripled. I know it is not the “PC” thing to say, but the truth is, the ARM industry does an incredible job working in conjunction with legislative bodies and governing entities to actually aid them in policing this industry and like it or not, we are a huge contributor to the ultimate recovery of our nation’s economy.

  • avatar Tomio Narita says:

    The other significant limitation found in all of the FTC Annual Reports To Congress on the FDCPA, including the most recent report, is that there is a complete disconnect between the number of “complaints” that are lodged by consumers and counted up by the FTC, on the one hand, and the the number of actual “violations” of the FDCPA that may or may not have occurred, on the other. In fact, the FTC does not investigate any of the complaints to determine if the facts alleged by the consumer are true (unless it is doing a formal investigation into a particular entity), nor does the FTC make any “ruling” that any actual violations of the FDCPA have occurred. The FTC readily acknowleges that many of the complaints, even if true, would not amount to violations of the FDCPA, even though the consumer might think the Act has been violated. For example, the FTC’s 2010 Report States: “On the other hand, the FTC acknowledges that not all of the debt collection practices about which consumers complain are law violations. Certainly, many consumers do complain of conduct that, if accurately described, violates the FDCPA. The FTC, however, does not verify that the information consumers provide is accurate unless the agency undertakes such an inquiry in connection with its law enforcement activities. Even if accurately described, some conduct about which consumers complain does not violate the FDCPA. For example, consumers sometimes complain that a debt collector will not accept partial payments on the same installment terms that the original lender provided when the account was current. Although a collector’s demand for accelerated payment or larger installments may be frustrating to the consumer, such a demand generally does not violate the FDCPA. Also, for example, if a consumer complains that a debt collector has threatened to file a civil lawsuit to collect a debt, the FTC cannot determine whether such conduct violates the FDCPA without investigating whether the debt collector had the requisite intention to file suit.” Similar limiting language by the FTC appears in its past reports. The FTC does a lot of work to compile all of this data each year. But in the end, they are just counting.

  • avatar Walter Steele says:

    Tomio, you are spot on. What I was trying to point out (with tongue firmly implanted in cheek)is that even with the additional unfounded complaints that are included, we still as an industry have a success rate to be very proud of. My main point of this blog was to articulate the need for us all to turn what has become an advertisement for the FTC to portray how well they are supposedly doing their job into an opportunity to prove using the FTC’s own data how seriously we as an industry take compliance and the steps we take to ensure it. No matter what industry you look at (banking, lawyers, car sales, etc) you will find good people and bad. What is important and what the FTC showed is despite perception, we have far more good agencies really working hard to do things the right way than we do bad ones. The issue is that the bad ones get all the press. It is time we all start to work together to change that unfortunate perception.

  • avatar Seth Hill says:

    Since our industry is apparently the one keeping the FTC most busy with inbounding negative feedback what can we do to persuade them to collect better data? Logging, categorizing and tagging complaints so that more valuable information can be extrapolated? There’s fun to be had in remarking on how broad their data is but isn’t there a real opportunity to grease the wheel here and through better engagement produce a better set of statistics?

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