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.