Investigating Complaints Against the Debt Settlement Industry

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Jeff Dickey, Persolvo Data Systems

Jeff Dickey,
Persolvo Data Systems

In 2012, insideARM submitted a FOIA (Freedom of Information Act) request to the FTC, asking for complaint data against the collection industry. In part, the goal was to see what made up the complaints — 199,721 in 2012; 180,928 in 2011 — since the collection industry is often dinged in the press for its complaints numbers: usually the second highest category each year in the FTC’s complaints report.

Upon close examination of the reports, however, what insideARM discovered is that a significant percentage of those complaints… weren’t. Or, rather: a consumer complained; however, the complaint, though attributed to a collection agency, may have instead been with the original creditor. Or the complaint may be been with the product purchased, but the complaint was lodged against the collection agency because that’s who happened to call.

Since the FTC doesn’t verify the complaints that come in for accuracy, non-complaints get mixed in with legitimate complaints and we end up with those earlier couple-hundred-thousand data points. Arguments about the professionalism of the collection industry are made and based off data that, while not rife with error, isn’t 100 percent verified and doesn’t tell the whole story.

We here at Persolvo were very interested in the process insideARM used, and the conclusions it reached in its investigation into the FTC’s complaints data. The debt settlement industry finds itself in similar waters. Historically, the debt settlement industry has enjoyed a less than stellar reputation in the eyes of most ARM professionals. While that’s softening a little (see our two whitepapers: “Debt Settlement Survey: How Creditors and Collectors Increase Collections” and “Debt Settlement Survey Round II: How Creditors and Collectors Increase Collections“), in our most recent suvey of ARM professionals, over 30 percent of those who do not use a debt settlement company as part of their complement of services said it was due to “legal concerns (FDCPA) about dealing with third parties.”

So we asked insideARM to submit a FOIA request that looked at consumer complaints against the debt settlement industry. The next several blog posts will share our findings, opinions, conclusions, and suggestions. We’ll also look in some detail at the ways in which the ARM industry is and isn’t utilizing the debt settlement industry.

Continuing the Discussion

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  • avatar Mark Guimond says:

    A previous FOIA to the FTC for the debt relief industry yielded some very interesting information. (see: http://www.ftc.gov/os/comments/tsrdebtrelief/543670-00211.pdf

    In the data of 7308 individual consumer complaints, there were several hundred complaints that were unable to be identified or classified due to a complete lack of company name or vague references that also caused the identification of the company to not be made. We found:

    No designation at all 464
    Unable to designate 100
    “Account Services” 42
    “Card Services” 62
    “Credit Card Account Services” 25
    “Credit Card Services” 62
    “Financial Services” 20
    “Unknown” 443

    The data also yielded a substantial number of creditor complaints that were not against “debt relief” organizations but rather actual lenders or their servicing partners. For example, the data includes the following complaints:

    America’s Servicing Company 47
    Capitol One 119
    Citi Financial 51
    HSBC 1,036
    Pay Pal 683
    Sears 118
    Wells Fargo 16

    Within the complaint universe, there were numerous complaints that clearly had no relevancy
    whatsoever to “debt relief”. These included auto warranties, carpet cleaning services, the Disney movie club, Country Music Television, freight forwarding, gift cards and 8 complaints against government agencies.

    The data also has extensive groupings of complaints against credit card processing, credit bureaus, credit repair, currency exchanges and 116 separate creditors.

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