ARM Companies Show Differing Strategies in Debt Collection Complaint Responses

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Although the debt collection complaints data from the Consumer Financial Protection Bureau (CFPB) has been public for only a few weeks, ARM firms and creditors have been responding to the incoming complaints since July. An analysis of the responses show varied strategies in the companies’ interactions with consumers and the CFPB.

insideARM looked at the top 10 companies with the most debt collection complaints in data released by the CFPB. The agency notes that the data it has published contains only complaints for which the company has completed a response.

The top 10 companies account for about 30 percent of the total of debt collection complaints. Each company has at least 100 complaints. The top 10 list also provides an interesting cross-section of company types; five are ARM companies (debt buyers and collection agencies) and five are creditors.

There are no real surprises at the top of the list; the most commonly-cited firms are the largest ARM firms and lenders in the country and have the most debt collection contact with consumers. The company with the most debt collection complaints is debt buyer Encore Capital Group, followed by NCO Group and Portfolio Recovery Associates. Citi has the highest number of debt collection complaints among creditors.

When a company receives a complaint from the CFPB, there are a number of ways it can respond. The ultimate goal is to “close” the complaint (addressing it to the satisfaction of the CFPB). Companies can simply close it, close it with an explanation and take no action, close it with monetary relief, or close it with non-monetary relief, like ceasing to continue collection efforts.

The companies’ strategies for responses vary fairly widely. “Closed with explanation” and “Closed with non-monetary relief” are the two most common dispositions, but companies appear to choose one to favor over the other.

In the chart below, we show the percentage of each disposition by company for all complaints that have been resolved. Under the company name is the total number of debt collection complaints filed against a company from July 2013 to November 20, 2013.

Company-responses-collection-complaints

It should be apparent that “Closed with Explanation” is the most common response for most companies. But two ARM companies, Portfolio Recovery Associates and Allied Interstate, lean more heavily on “Closed with non-monetary relief.”

Closing complaints with monetary relief is very uncommon, especially among ARM firms. Creditors are the only companies with significant percentages of complaints that required some sort of monetary exchange, with GE Capital Retail and Citi (two of the largest financial institutions in the world) leading the way.

After a company has responded to a consumer through the CFPB, the consumer has the opportunity to dispute or accept the response. Most often, according the CFPB’s data, the consumer does nothing which requires no further action from the company. But in about 20 percent of cases, when the consumer is asked by the CFPB “Do you dispute the company’s response,” they will answer Yes or No.

So did different response strategies bear different dispute rates? Not really. The dispute rate seems to be tied more to the company than their response strategy.

Did-consumer-dispute

Encore and NCO had nearly identical response strategies, but NCO had the lowest dispute rate of any company in the top 10 and Encore had the highest. Likewise, Portfolio Recovery and Allied Interstate were the only two companies to use “Closed with non-monetary relief” as the most common response, but their dispute rates were quite different. Student loan provider Sallie Mae had the worst ratio of disputes to acceptance among creditors.

As the task of complaint response matures in the ARM industry, we are sure to see more standardized data. But it is interesting that companies are approaching the task differently in the early going.

Editor’s Note: If you need help developing a complaints response strategy, insideARM can help! We just recently published To the Point: Complaints and Dispute Resolution wherein three ARM attorneys discuss a wide range of regulatory issues, including appropriate complaints response. Learn more.

 

Continuing the Discussion

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  • avatar Ryan Carver says:

    I read this article which provides great information but it concerns me that only 20% of consumers actually take the time to respond to the responses they receive. You would think that valid complaints should include 1) complaint is filed 2) Company responds to complaint and
    3) Consumer accepts or rejects the complaint until resolved. I don’t understand how this process helps the situation other than slamming the large ARM firms and creditors with a number(number of complaints). If complaints aren’t valid, they shouldn’t count in my opinion so consumers should be required to respond to the responses or this is just another channel to blast ARM firms without complete validation of the complaint. I’m all for getting this industry right and eliminating bad practices, outdated laws and companies that violate the law but I’m not sure if this current process helps to answer these questions.

  • avatar ryon gambill says:

    This happens with the BBB too. You spend an hour carefully crafting a response that benefits everyone, investigate their claim, validate the debt one more time; and the debtor ignores it.

    I’m telling you they don’t give a cramp what happens. They don’t want to pay and they hear rumors that if you complain we won’t pursue them.

    We now have the bbb, 50 ag’s, thousands of consumer attorneys, ACA, CAC, FTC, licensing divisions, state bar associations, some cities get involved, labor boards, Secretary of State, us senate, our clients, and on and on; regulating us into extinction. Name one industry besides ours that has this many watchdogs. It’s insane.

  • avatar Time For Change says:

    You nailed it Ryon Gambill! We tirelessly move forward with each new regulation. Complaints are a valid part of any business and should be dealt with accordingly. Collection agencies waste precious time dealing with erroneous disputes. I say erroneous because although a portion disputes received are real disputes resulting from identity theft or another valid reason. The dark side of the issue is that an even larger portion of disputes received are due to the simple fact that consumers just don’t want to pay their bill. I too was once one those people. In 1998, I tried to dispute two very low balance accounts from when I lived in another state. The bottom line was, I thought I could get out of paying them (not proud of it but i did it). ***It didn’t work. I had to pay them and I did pay them. Most people that work at debt collection agencies have been there themselves. Debt collectors are looking through an open window right into the lives of consumers/debtors. They’ve seen it all and probably done it themselves! I was a social worker, a general manager for retail and how I’m on my 3rd career in the debt collection industry. Everyone in this industry has their own story. I’m proud that I work at a collection agency and glad I’m not the one dodging the calls any more!

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