According to an analysis of data received from a Freedom of Information Act (FOIA) request for January and February 2012, debt buyers made up a disproportionately high percentage of complaints against the ten most commonly-complained about third party debt collection agencies. This seems to bolster a common complaint among contingency agencies that debt buyers are giving the ARM industry a bad name.
Over the first two months of 2012, the ten most commonly-named companies in debt collection complaints accounted for 2,724 complaints, or about 10.7 percent of the total, out of a universe of more than 4,000 named companies, according to data from the Federal Trade Commission’s Consumer Sentinel Network. It should be noted that “Unknown Company” was by far the most common company mentioned in complaints and is not counted in this total.
An analysis by insideARM.com revealed that of those ten companies, four were debt buyers, accounting for 42 percent of the Top Ten’s complaints.
Only very large ARM firms appear in the Top Ten list, as companies with more consumer contacts tend to have more complaints filed against them. Indeed, the four debt buyers in the Top Ten are very large.
But there are much larger contingency debt collection operations appearing further down on the list. Some of the largest ARM companies in the world did not have enough complaints against them to warrant inclusion on the Top Ten list while smaller debt buyers did.
Also, only companies named specifically by consumers can be counted in the analysis. So there is a very good chance that some of the contingency debt collection agencies named in complaints were working on behalf of debt buyers. For example, one other company in the Top Ten that does not identify itself directly as a portfolio purchaser lists on its web site debt buyers as one of its major clients, but that company’s complaints were not counted in the debt buyers’ totals.
It’s easy to cast nasty eyes at debt buyers and blame them for the rise in complaints against collection agencies. But we must remember that the volume of debt being sold by original creditors, and by debt buyers into the secondary market, has been rising steadily since the early 2000s. There might have been a hiccup in the market after the financial collapse, but there is still a lot of debt being bought and sold, and the trend is largely driven by creditors.
So debt buyers are finding themselves on the front line more than ever. With consumer contacts increasing, it makes sense that complaints against them would also increase.
The nature of purchased debt itself also probably plays a role in the elevated complaints volume. Debt that is bought rather than forwarded directly by credit grantors to collection agencies tends to be older, especially when it is resold into the secondary market. Purchased debt also no longer carries an expectation of customer service that some banks insist on with their contingency collection vendors. And verification documentation issues often plague accounts – and sometimes entire portfolios – that are sold.
- FTC Debt Collection Complaints Compendium – Q1 2012
- The Complaints Issue
- The Global Debt Buying Report
- The Debt Collection Compliance Handbook