Debt Collection Complaint Picture Not Likely to Improve Under CFPB

Consumer complaints against debt collection agencies has become the ARM industry’s most visible data point in recent years. The eye-popping numbers are widely circulated in national and regional press and used to paint a sometimes-unfair picture of debt collection industry practices.

When the Consumer Financial Protection Bureau (CFPB) takes over responsibility for debt collection complaints, that image is not likely to improve, based on data already being collected on credit card complaints.

The CFPB’s Consumer Response complaint system has been up and running for credit card complaints for more than a year. In June, the Bureau began making the complaint data public through a pretty fantastic web portal.

In the past year (Dec. 1, 2011 through Nov. 20, 2012), the CFPB has collected nearly 15,000 complaints about credit card companies. Like the FTC’s Sentinel Network complaint system, Consumer Response provides a standard set of issues – or reasons why consumers are complaining – to choose from.

The two most commonly cited issues over the past year were “Billing disputes” and “APR or interest rate,” which isn’t a big shock when discussing complaints about credit cards.

There are two issues that deal directly with debt collection, “Collection practices” and “Collection debt dispute.” When combined, these two issues were the third most commonly cited by consumers in complaints. So even though the CFPB is not currently taking consumer complaints about debt collection, recovery practices of credit card issuers are already a top concern. In fact, in the list of company names in the credit card complaints, a few collection agencies are already popping up.

The CPFB will soon be taking over the work of compiling and handling consumer complaints about debt collectors. Unlike the practice of the FTC, who has previously handled the complaints, ARM companies will be able to respond to the complaints and offer resolution. This should be a very good thing for the industry. [NOTE: A detailed description of the response process is available in the Debt Collection Complaints Compendium – Q1 2012.]

Credit card companies are already using this feature; the vast majority of complaints against them have been addressed by the companies.

But the high volume of debt collection complaints will continue to plague the ARM industry. Collection agency owners and executives should be prepared to continue to deal with the annual publication of very large consumer complaint numbers, even as individual companies are actively addressing them.