Debt Collectors, Debt Complaints - U.S. PIRG
Debt Collectors,Debt ComplaintsThe CFPB’s Consumer Complaint DatabaseGets Real Results for Consumers
Debt Collectors,Debt ComplaintsThe CFPB’s Consumer Complaint DatabaseGets Real Results for ConsumersU.S. PIRG Education FundMiles Unterreiner,Frontier GroupEd Mierzwinski and Laura Murray,U.S. PIRG Education FundFebruary 2014
AcknowledgmentsU.S. PIRG Education Fund and Frontier Group sincerely thank Margot Saunders, counsel at the National Consumer Law Center; Ira Rheingold, executive director of the National Association of Consumer Advocates; and Dick Rubin, consumer attorney, for theirreview of drafts of this document, as well as for their insights and suggestions. The authorsthank Jordan Schneider of Frontier Group for her editorial assistance, Spencer Alt for hisresearch assistance, and Ashleigh Giliberto of U.S. PIRG Education Fund for her assistance with Appendix B of this report.U.S. PIRG Education Fund and Frontier Group thank The Ford Foundation for makingthis report possible.The authors bear responsibility for any factual errors. The recommendations are those ofU.S. PIRG Education Fund. The views expressed in this report are those of the authorsand do not necessarily reflect the views of our funders or those who provided review.2014 U.S. PIRG Education Fund. Some Rights Reserved. This work is licensed under aCreative Commons Attribution Non-Commercial No Derivatives 3.0 Unported License.To view the terms of this license, visit creativecommons.org/licenses/by-nc-nd/3.0.With public debate around important issues often dominated by special interests pursuingtheir own narrow agendas, U.S. PIRG Education Fund offers an independent voice thatworks on behalf of the public interest. U.S. PIRG Education Fund, a 501(c)(3) organization,works to protect consumers and promote good government. We investigate problems, craftsolutions, educate the public and offer Americans meaningful opportunities for civic participation. For more information, please visit our website at www.uspirgedfund.org.Frontier Group conducts independent research and policy analysis to support a cleaner,healthier and more democratic society. Our mission is to inject accurate information andcompelling ideas into public policy debates at the local, state and federal levels. For moreinformation about Frontier Group, please visit www.frontiergroup.org.Cover image: Shutterstock/Palmer Kane LLCDesign: Alec Meltzer Design
Table of ContentsExecutive Summary1Introduction8The Consumer Financial Protection Bureau:A Watchdog for ConsumersThe Consumer Complaint Database: A Critical Part of the CFPB’s MissionHow the Consumer Complaint Process WorksThe Consumer Complaint DatabaseConsumer Complaints about Debt CollectionVolume of ComplaintsComplaints by IssueComplaints by CompanyDisputed ResponsesComplaints by State10111112141516161920Conclusions and Recommendations25Methodology28The Consumer Complaint DatabaseNormalizing Complaints by State Population2828Appendix A: Detailed Data Tables forComplaints Regarding Debt Collection29Appendix B: Searchable Public Databasesof Complaints to Government Agencies35Notes38
Executive SummaryThe Consumer Financial ProtectionBureau (CFPB) was established in2010 in the wake of the worst financial crisis in decades. Its mission is to identify dangerous and unfair financial practices, to educate consumers about thesepractices, and to regulate the financial institutions that perpetuate them.To help accomplish these goals, theCFPB has created and made available tothe public the Consumer Complaint Database. The database tracks complaintsmade by consumers to the CFPB andhow they are resolved. The ConsumerComplaint Database enables the CFPB toidentify financial practices that threaten toharm consumers, and it enables the publicto evaluate both the performance of thefinancial industry and of the CFPB.This is the fifth in a series of reports thatreview complaints to the CFPB nationallyand on a state-by-state level. In this reportwe explore consumer complaints aboutdebt collection, with the aim of uncovering patterns in the problems consumers are experiencing with debt collectorsand documenting the role of the CFPBin helping consumers successfully resolvetheir complaints.Consumer complaints about debt collectionare common. Between July 2013—whenthe Consumer Financial Protection Bureau began recording data on debt collection—and January 16, 2014, the CFPBrecorded more than 11,000 complaintsabout debt collection—the second-highestvolume of complaints received about anyfinancial service during that time period. Consumers have filed an average ofabout 2,000 complaints per month withthe CFPB about debt collection. Despite being the newest type of consumer complaint accepted by theCFPB, complaints about debt collection practices now rank second only tocomplaints about mortgages in averagemonthly complaint volume.Consumers face a wide array of problems with debt collection. More than 2,700 consumers complained about debt collectors’ attemptsto collect debt that did not belong to theconsumers, making it the most commoncause of complaints to the CFPB.Executive Summary1
Other top causes for complaint included: frequent or repeated debt collectioncalls; not being given enough information about the debts owed; and attempted collection of debts that had alreadybeen paid (See Figure ES-1).The list of top complaint recipientsincludes both original creditors andthird-party debt collection agencies. Encore Capital Group, a third-partycompany that buys debts from banksand other financial institutions and attempts to collect on them—and is theparent of debt collection firm MidlandCredit Management and other subsidiaries—was the most complainedabout company by total number ofcomplaints. It was followed by ExpertGlobal Solutions, Inc., Portfolio Recovery Associates, Inc. and Citibank(See Table ES-1).Complaints about companies vary bystate, and state residents vary in theirtendency to reach out to the CFPB. San Diego-based Encore Capital Groupwas the most complained-about company in 31 states. In five states, ExpertGlobal Solutions, Inc. was the mostcomplained-about company. Debt buyer Portfolio Recovery Associates, Inc.was the most complained-about company in Alaska and Wisconsin, while Citibank was the most complained-aboutcompany in North Carolina. Law firmPressler and Pressler, LLP received themost complaints in New Jersey. (SeeFigure ES-2.) The District of Columbia had the mostcomplaints per capita, followed (in order)by Nevada, Florida, Delaware, Maryland, Georgia, Virginia, New Jersey, Arizona and Texas. (See Figure ES-3.)Figure ES-1. Top Causes of Complaints to the CFPB about Debt Collection2Debt Collectors, Debt Complaints
Table ES-1. Top Ten Companies by Complaints to the CFPB about Debt CollectionNumber ofComplaintsShare of TotalComplaints ReceivedEncore Capital Group9118.3%Expert Global Solutions, Inc.4834.4%Portfolio Recovery Associates, Inc.3142.9%Citibank2882.6%Allied Interstate LLC2242.0%Resurgent Capital Services L.P.2141.9%Capital One2071.9%GE Capital Retail2051.9%Sallie Mae2011.8%Bank of America1701.5%CompanyFigure ES-2. Encore Capital Group Is the Most Complained-About Company in 31 StatesExecutive Summary3
Figure ES-3. Complaints About Debt Collection Vary by StateThe CFPB is making a significantdifference for consumers facing difficulties with debt collectors. The CFPB has helped more than 2,300consumers—or more than one in five complainants—to receive monetary or nonmonetary relief as a result of their debt collection complaints. (See Figure ES-4.) Companies vary greatly in the extent towhich they respond to consumer complaints with offers of monetary or nonmonetary relief. Four of the 20 mostcomplained-about companies—Convergent Outsourcing, Dynamic RecoverySolutions, Inc., Diversified Consultants,Inc., and I.C. System, Inc.—reported providing no relief, either monetary or nonmonetary, to any of the consumers who4Debt Collectors, Debt Complaintscomplained to the CFPB. Allied Interstate LLC and Portfolio Recovery Associates, Inc. were the most likely to reportextending monetary or non-monetary relief, providing relief for 98 percent and 79percent of complaints, respectively. About 16 percent of responses fromdebt collectors were deemed unsatisfactory by consumers and were subjectedto further dispute. Of the 20 companies with the most overallcomplaints, the company with the greatestproportion of disputed responses was Encore Capital Group, with 21.4 percent ofresponses disputed. Of these same companies, Expert Global Solutions had thelowest proportion of disputed responses,with 5.2 percent of responses disputed.
Figure ES-4. 22 Percent of Consumers Received Relief after Complaining to the CFPBTable ES-2. Companies with the Highest Dispute-to-Complaint Ratios†Rank†CompanyDisputedResponsesPercent of ResponsesDisputed1Encore Capital Group19521.4%2Sallie Mae4220.9%3JPMorgan Chase3220.6%4Diversified Consultants, Inc.2319.5%5Citibank5619.4%6Capital One3717.9%7Wells Fargo2417.5%8Bank of America2917.1%9Enhanced Recovery Company, LLC1916.1%10I.C. System, Inc.1615.4%Only top 20 companies by total number of complaints analyzed. Of these 20, top ten companies bypercent of complaints disputed are shown.Executive Summary5
The Consumer Financial ProtectionBureau’s Consumer Complaint Database is a key resource for consumerprotection. To enhance the ability ofthe CFPB to respond to consumercomplaints, the CFPB should: Add more detailed information to thedatabase, such as actual complaint narratives, detailed complaint categoriesand subcategories, complaint resolution details, consumer dispute details,and data regarding membership inclasses protected from discriminationby law. Expanded complaint-level details should also include more information about amounts and types of monetary and non-monetary relief. Softwareand other techniques should be usedto protect consumer privacy by giving consumers the right not to providedetails and by taking steps to preventthe release of personally identifiableinformation or the re-identification ofconsumers. It is critical that the CFPBachieve the disclosure of more individual complaint details while simultaneously making every reasonable effortto protect personal data. Add a field listing company subsidiaries,which are often the firms with whichconsumers actually interact. For example, Encore Capital Group, the company with the greatest number of debtcollection complaints in the CFPB database, does business under the names ofseveral subsidiaries. Adding subsidiarycompany information will enable consumers to better apply the informationin the CFPB database to their own experiences, and to the choices they makein the marketplace.6Debt Collectors, Debt Complaints Provide regular trend analyses andmonthly detailed reports on complaintresolutions and disputes. Simplify the interfaces that allow usersto summarize complaint database reports in graphical and printable formats. Publicize information about the CFPBcomplaints process in forums that arelikely to be seen by consumers. Theagency should develop more outreachmechanisms for consumer educationabout the database and its services forconsumers, including creating educational materials to be distributed on- andoff-line, holding more educational eventsoutside Washington, D.C., and partnering with non-profit organizations. Develop free applications (apps) forconsumers to download to smartphonesto access information about how tocomplain about a firm and how to review complaints in the database. Expand the Consumer Complaint Database to include discrete complaintcategories for high-cost credit products such as auto title loans and prepaidcards. We commend the CFPB for adding payday loan complaints to the database in November 2013. Continue to use the information gathered from the Consumer ComplaintDatabase, from supervisory and examination findings, and from other sources to require a high, uniform level ofconsumer protection and ensure thatresponsible industry players can better compete with those who are usingharmful practices.
To protect consumers from unfairdebt collection practices, the agencyshould: Stop debt collectors and buyers fromcollecting debts without proper information and documentation about thedebt and records of prior communications with the consumer. Stop debt collectors from bringingrobo-signed cases in court. Crack down hard on widespread use ofthreats, harassment and embarrassmentand make it easier for consumers to demand a stop to unwanted communications. Prevent debt collectors from makingrobo-calls to cell phones, sending emailor leaving messages in places where theymight be seen or heard by others. Require debt collectors to verify thatthey are collecting the correct debtsfrom the correct consumers before theystart collections. Clarify that debt collection law givesconsumers the right to sue to stop unfairpractices and to collect multiple penalties for multiple violations. Protect servicemembers by strictlylimiting contact with their commanders to verifications of employment andaddress. Protect all consumers by mandatingadditional disclosures concerning theeffect of paying debts on their creditreports, such as a disclosure that says,“Paying this debt will not remove itfrom your credit report.” Adopt additional reforms advocated bythe National Consumer Law Center,Americans for Financial Reform, U.S.PIRG and other organizations. (Seefootnote for details.)1Executive Summary7
IntroductionDebt collection—the process of reclaiming money owed by debtors—has beena feature of American life since the nation’s founding. The old-fashioned way ofdealing with debtors—throwing them in prison—fell out of use in the mid-1800s, but notbefore several signers of the Declaration ofIndependence spent time languishing behindbars for failure to pay their debts punctually.Signatory Robert Morris, chief financier ofthe American Revolution, spent three yearsin debtors’ prison in Philadelphia after his financial empire collapsed, where he receivedfrequent visits from his close friend GeorgeWashington.2 Signatory James Wilson servedtime in debtors’ prison during his term as oneof the first U.S. Supreme Court Justices.3Eventually, the United States abandonedthe old debtors’ prisons as cruel, inhumaneand unnecessary. Modern debt collectionfirms, however, continue to employ questionable (and sometimes illegal) methodsof extracting money from consumers—even consumers who may have been targeted erroneously.In March 2013, for example, the U.S.Federal Trade Commission (FTC) reacheda settlement with a debt buyer and a debtcollection law firm, both of which alleg-8Debt Collectors, Debt Complaintsedly hit consumers with deceptive fees fordebt collection payments. The two companies—Jacob Law Group, PLLC and Security Credit Services, LLC—also allegedlyfalsely threatened to sue consumers in orderto get them to pay—a practice that is illegalunder the Fair Debt Collection PracticesAct (FDCPA), which prohibits using “false,deceptive, or misleading representations ortactics when collecting a debt.”4In January 2012, FTC action resulted ina 2.5 million fine against debt collectioncompany Asset Acceptance, LLC for, amongother things, allegedly making repeated callsto persons who did not in fact owe debt; attempting to get consumers to pay debts forwhich the company did not possess adequateproof; attempting to collect debt that is tooold to be legally enforceable without notifying the consumer of the debt’s enforceability; and providing incorrect information tocredit reporting agencies.5In March 2012, West Virginia AttorneyGeneral Darrell McGraw sued MidlandFunding LLC and Midland Credit Management, both subsidiaries of large debt collectorEncore Capital Group, for obtaining defaultjudgments against West Virginia consumersby “robo-signing” affidavits. “Many consum-
ers,” noted McGraw, “are frightened or unaware of their rights when they are sued andfail to respond to these groundless lawsuits [bydebt collectors], leaving them subject to judgments on debts that cannot be proved.”6Debtors’ prisons are even making a formof comeback, as judges across the country allow debtors to be held in prison for not showing up in court—even if they may not haveknown they were being sued in the first place.As the Wall Street Journal reports, “judgeshave signed off on more than 5,000 such warrants since the start of 2010 in nine countieswith a total population of 13.6 million people,” overwhelming local justice systems andclogging up courts across the country.7Many of these debt collection company practices were in violation of the FairDebt Collection Practices Act (FDCPA),which prohibits debt collectors from using“abusive, unfair, or deceptive practices” tocollect from consumers.8 Yet the debt collection marketplace is enormous—a multibillion-dollar industry populated by morethan 4,500 firms—and can be difficult forauthorities to monitor effectively. According to the Federal Reserve Bank of NewYork, about 30 million consumers in theUnited States have items from debt collection on their credit report, with an averageamount in collections of 1,400.9The persistence of shady debt collectionpractices, coupled with the size and complexity of the debt collection market, underscoresthe need for strong consumer protection inthe debt collection industry. The ConsumerFinancial Protection Bureau (CFPB) fulfillsa series of important roles in providing thatprotection to consumers.The CFPB has the authority to self-designate “larger participants” in any non-bankcredit market for additional supervision andexamination on a regular basis. It completedits larger participant rule for debt collectorsin October 2012, allowing it to supervisethe largest 175 debt collection companies,as measured by annual receipts from debtcollection activities.10 The CFPB’s super-visory authority over debt collectors distinguishes it from the Federal Trade Commission (FTC), which also plays an importantrole in reining in unfair debt collectionpractices.11 The FTC’s authority to issuerules is limited and it does not have supervisory or examination authority over largedebt collectors.Currently, the CFPB is in the midst of using its rule-making authority to improve thedebt collection industry. The agency has issued an advance notice of public rulemakingand is accepting public comments throughthe end of February 2014. The issuance ofstrong rules by the CFPB would go a longway toward alleviating many of the problems consumers face with debt collection.The urgent need for strong new protections has been made apparent by theCFPB’s addition of debt collection to thepublic Consumer Complaint Database,which tracks complaints made by consumers to the CFPB regarding firms in varioussegments of the financial services industry.Although debt collection complaints haveonly been collected since July 2013, debtcollection complaints have emerged as thesecond-most common complaint to theCFPB, demonstrating the intensity of theproblem. The Consumer Complaint Database is shedding new light on which debtcollection practices cause the most troublefor consumers, which debt collectors aresubject to the most complaints, and the rolethe CFPB has played in helping consumersaddress problems with debt collection.In this, the fifth in a series of analysesof the Consumer Complaint Database, wereview the data on consumer complaintsregarding debt collection and recommenda series of actions the CFPB should takeas it establishes guidelines and regulationsfor firms engaged in debt collection activities. America is a long way from having afinancial marketplace that serves consumersfairly—particularly one in which debtorsare treated ethically. To protect consumers,America needs a strong CFPB.Introduction9
The Consumer FinancialProtection Bureau:A Watchdog for ConsumersThe U.S. financial crisis of 2008 wa
Consumer complaints about debt collection are common. Between July 2013—when the Consumer Financial Protection Bu-reau began recording data on debt col-lection—and January 16, 2014, the CFPB recorded more than 11,000 complaints about debt collection—the second-highest volume of complaints received about any
Debt collectors have rules they must follow under the Fair Debt Collection Practices Act, such as providing you with a debt validation notice stating the amount you owe and the creditor’s name. Debt collectors are also limited on when and how often they can contact you. For more information on dealing with debt collectors, see the next page.
Dispute resolution: Complaints DISP INTRO Introduction INTRO 1 Introduction DISP 1 Treating complainants fairly 1.1 Purpose and application 1.1A Complaints handling requirements for MiFID complaints 1.2 Consumer awareness rules 1.3 Complaints handling rules 1.4 Complaints resolution rules 1.5 Complaints resolved by close of the third business day
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abusive debt collection practices are purely intrastate in character, they nevertheless directly affect interstate com-merce. (e) Purposes It is the purpose of this subchapter to eliminate abusive debt collection practices by debt collectors, to insure that those debt collectors who refrain from using abusive debt
Debt Collection Practices Act (FDCPA) was enacted to protect consumers from abusive, deceptive, and unfair treatment by debt collectors. The Federal Trade Commission (FTC) monitors and enforces compliance with the FDCPA. If the FTC receives a sufficient number of complaints about a particular debt collection agency,
letter to a debt collector you owe money to does not get rid of the debt, but it should stop the contact. The creditor or the debt collector still can sue you to collect the debt. Can a debt collector contact anyone else about my debt? If an attorney is representing you about the debt, the debt collector must contact the attorney, rather than you.
G:\Member Services\General\Member Relations\ISSUES & COMPLAINTS\COMPLAINTS\Procedures-Policies-Scripts & training tools\ICHP\Internal Complaints Handling Policy ver 7.doc 1 ARSN 094 718 108 ("Club") A.P.V.C. Limited ACN 093 228 141 (“Responsible Entity”) Internal Complaints Handling Policy & Procedure Manual
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