Today we finally get our first look at the results of the consumer survey conducted in 2014-2015 by the Consumer Financial Protection Bureau (CFPB).
The survey was originally proposed in March of 2014, when the Bureau issued a public notice and request for comment, initiated a 60-day comment period. The notice said the survey would ask consumers whether they have been contacted by debt collectors in the past, whether they recognized the debt that was being collected, and about their interactions with the debt collectors. The survey will also ask consumers about their preferences for how they would like to be contacted by debt collectors, opinions about potential regulatory interventions in debt collection markets, and about their knowledge of their legal rights regarding debt collections.
That first public notice was followed by a re-submission and new comment period, which closed on August 22, 2014.
Industry groups, including ACA International, urged the CFPB to scrap the survey as proposed, saying “The CFPB’s justification of the need for the information request is lacking, and the proposed survey is conceptually deficient.” The group further stressed that “the proposed survey would not yield statistically sound data and therefore will not enable the CFPB to improve its understanding of the debt collection market in support of potential rule writing.”
The American Bankers Association and the Consumer Bankers Association also expressed concerns with the survey, saying the revised version “only perfunctorily responds to stakeholder comments and reflects very little change to the Survey instrument. It fails to resolve material design and methodological shortcomings necessary to ensure that the data generated by the Survey will have practical utility for the debt collection rulemaking.”
In spite of industry objections, the Bureau moved forward with the survey.
The survey was based on a sample selected by the Bureau's Consumer Credit Panel (CCP), which is a 1-in-48 random and deidentified sample of credit records maintained by one of th etop three nationwide credit repositories. The survey was mailed by the repository, and results were processed by a sub-contractor.
Buried within today’s lengthy remarks by Director Cordray, given at today’s hastily organized Debt Collection Event (or at least hastily announced – just a few days ago, with no detail except that there would be an announcement related to debt collection), hosted by the Attorney General of the District of Columbia, he says,
It is important to note that these same statistics also indicate that many debt collectors and creditors respect the laws governing their industry and have good practices in place. Many of the consumers who responded to our survey did not report any negative issues with those collecting debts from them. They were clearly informed about the nature of the debt, they were treated politely, and they reported no harassment or threats. This all goes to show that with the right amount of attention and effort, many debt collectors are able to fulfill their role responsibly.
...We recognize that debt collection is part of the proper functioning of consumer credit markets. If people owe money that they borrowed on their credit card, or because they took out a student loan or received service from their telephone company, they are obligated to pay the money back, and they should do so. Responsible debt collectors that do their work with care and treat consumers with respect are a natural and even an essential part of the financial marketplace.
Among many findings, here is what the Bureau chose to highlight:
According to the CFPB debt collection survey, about one-third of consumers – or more than 70 million Americans – were contacted by a creditor or debt collector about a debt in the previous 12 months. Consumers are most often contacted about medical and credit card debt. The CFPB survey also found that:
Over one-in-four consumers report threatening contact: Twenty-seven percent of consumers approached about debt said they felt threatened by the conduct of the creditor or collector who most recently contacted them. Debt collectors are generally prohibited from tactics that tend to harass, abuse, or oppress consumers.
Three-in-four consumers report that debt collectors did not honor a request to cease contact: About 40 percent of consumers contacted about a debt in collection said they asked at least one debt collector or creditor to stop contacting them. Of these consumers, three-in-four said the debt collector did not honor the request to cease contact attempts.
More than half of consumers report incorrect contact for at least one debt: Fifty-three percent of consumers contacted about a debt in the year prior said at least one collection effort was mistaken in some way. These consumers reported that the creditor or collector sought the incorrect amount, that the debt was not owed, or that the person owing the debt was a family member.
Over one-third of consumers report being contacted at inconvenient times: Thirty six percent of consumers contacted about a debt in collection said that the creditor or collector who most recently contacted them called between 9 p.m. and 8 a.m. Debt collectors generally cannot call at times they know to be inconvenient unless the consumer specifically agrees to it.
Nearly 40 percent of consumers report that a debt collector attempted contact four or more times per week: Thirty seven percent of consumers contacted about a debt in collection report that the most recent creditor or collector to contact them usually did so four or more times in a week. About 20 percent of consumers approached by debt collectors reported contact attempts by debt collectors usually four to seven times per week. Another 17 percent said a creditor or debt collector tried contacting them eight or more times per week.
One-in-seven consumers contacted about a debt report being sued: Fifteen percent of consumers contacted about a debt in collection over the prior year report being sued. The share ranges from 6 percent sued among those contacted about a single debt to 35 percent sued among consumers contacted about five or more debts. About 75 percent of those sued do not go to the court hearing, which generally makes them responsible for the debt.
Finally, Cordray noted in his remarks that,
We believe these findings will help policymakers and the public understand more about this important marketplace. Going forward, the results of our survey will inform the Consumer Bureau’s approach to overseeing the debt collection industry.
There is a lot here. The negative perspective on the industry is presented much more dramatically than the positive. But that is hardly surprising. That was not the purpose for the survey or this announcment. For future reference, the CFPB web page to highlight personal stories of consumers about their debt collection experiences practically begs for negative stories only. The legitimate players in the industry often get letters, emails and phone calls commenting on the professionalism displayed by their representatives. But, it seems clear that the CFPB is not interested aasking for or highlighting those stories.
We will dig into the details of the Consumer Experiences Survey and Debt Sales reports and provide further perspective in the coming days. What we will say now is that debt collection is a complicated market. It is not surprising that many of the experiences would be negative; the whole concept of being contacted about a debt is negative.
Also, given that the majority (72%) of consumers are contacted about two or even more than five debts in the same timeframe, it can often be difficult to know who exactly has contacted you when or how many times. Sometimes the behavior of one caller is attributed to the behavior of another. So rulemaking that would be effective in stopping bad behavior is not a straightforward task. Will players who don’t follow the rules ever follow any rules?
Stay tuned for more.