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DEBT COLLECTORSCFPB Data Reveal ConsumerComplaints by Company

Gideon Weissman, Frontier GroupEd Mierzwinski and Mike Litt, U.S. PIRG Education FundJune 2018Debt Collectors 1

U.S. PIRG Education Fund thanks the Ford Foundation for making this report possible.Thanks also to Tony Dutzik and Alana Miller of Frontier Group for editorial support.The authors bear any responsibility for factual errors. The recommendations are those of U.S.PIRG Education Fund. The views expressed in this report are those of the authors and do notnecessarily reflect the views of our funders or those who provided review.2018 U.S. PIRG Education Fund. Some Rights Reserved. This work is licensed under aCreative Commons Attribution 4.0 License. To view the terms of this license, public debate around important issues often dominated by special interests pursuing theirown narrow agendas, U.S. PIRG Education Fund offers an independent voice that works onbehalf of the public interest. U.S. PIRG Education Fund, a 501(c)(3) organization, works toprotect consumers and promote good government. We investigate problems, craft solutions,educate the public and offer Americans meaningful opportunities for civic participation. Formore information, please visit our website at Group provides information and ideas to help citizens build a cleaner, healthier andmore democratic America. We address issues that will define our nation’s course in the 21stcentury – from fracking to solar energy, global warming to transportation, clean water to cleanelections. Our experts and writers deliver timely research and analysis that is accessible to thepublic, applying insights gleaned from a variety of disciplines to arrive at new ideas for solvingpressing problems. For more information about Frontier Group, please Image: Shutterstock/Palmer Kane LLCDebt Collectors 2

Executive Summary . 4Introduction: The CFPB At Risk . 6Predatory and Illegal Debt Collection Practices Harm Consumers . 8Consumer Complaints Reveal Debt Collection Problems by Company and State . 10Encore Capital Group Is America’s Most Complained-About Debt Collection Company . 10Georgia Leads all States in Debt Collection Complaints per Capita . 11Conclusion: Americans Deserve a Consumer Champion Directing the CFPB . 16Methodology. 17Notes . 18Debt Collectors 3

Created in the wake of the 2008 financialcrisis, the Consumer Financial ProtectionBureau, or CFPB, has been a critical ally forconsumers in the financial marketplace.Over its history the CFPB has secured 12billion in relief for wronged consumers,provided recourse to consumers facingproblems with financial companies, andtaken action against companies that breakthe law.The Trump administration, however, hasworked to undermine the effectiveness ofthe CFPB, retreating from criticalinvestigative work and seeking to slash theCFPB’s budget and limit its ability toprotect consumers. The CFPB has alsoreduced the usefulness of its research onconsumer financial complaints. Its latestsuch report, spotlighting debt collectioncomplaints, does not include the names ofcompanies that receive the most complaintsfor abusive debt collection practices.An analysis of CFPB consumer complaintdata fills in the gaps of the bureau’s report,telling the story the Trump administrationwon’t about the problems consumers facewith debt collection agencies acrossAmerica.Encore Capital Group is the mostcomplained-about debt collectioncompany. Among complaints published in theCFPB’s Consumer ComplaintDatabase as of April 2018, thecompanies that have received theDebt Collectors 4 most debt collection complaints areEncore Capital Group, PortfolioRecovery Associates, ERC, Citibank,and Synchrony Financial.The top 10 companies for debtcollection complaints account formore than a fifth of all suchcomplaints. Four of these companies– Encore Capital Group, PortfolioRecovery Associates, Citibank andTransworld – have been the subjectof CFPB enforcement actions fordeceptive or illegal debt collectionactivities.1Georgia leads all states in debt collectioncomplaints per capita. The states with the most debtcollection complaints per capita areGeorgia, Delaware, Florida, Nevadaand Maryland. Washington, D.C.,has more complaints per capita thanany state, possibly due to localfamiliarity with the CFPB.Encore Capital Group, the nation’smost complained-about debtcollection company, is also the mostcomplained-about company in 32states and Washington, D.C.Portfolio Recovery Associates is themost complained-about company infour states.With a Senate-confirmed consumerchampion at its helm, the CFPB can be apowerful ally for American consumers,giving consumers recourse when they are

wronged and helping to create a fairmarketplace for financial services. Under the Trump administration, theCFPB’s future has been put at risk, and itsongoing efforts to protect consumers havebeen severely hampered. To ensureAmerican consumers are protected in thefinancial marketplace, the president shouldswiftly nominate a consumer champion tothe director position of the CFPB.Policymakers should oppose attempts todefund or defang the CFPB, even ifrecommended by its acting director. To fulfill its mission of protectingconsumers, the CFPB should: Reinstate all delayed or terminatedrulemakings, investigations andenforcement actions.Complete a strong debt collectionrule improving protections forconsumers.Maintain public access to a vibrant,transparent and complete consumercomplaint database that encouragesconsumers, competitors, academics,other researchers and thecomplained-about companiesthemselves to study ways to makethe marketplace work better.Resume monthly publication ofconsumer complaint analyses andinclude data on complaints bycompany.Figure ES-1. Encore Capital Is the Most Complained-About Company in 32 StatesDebt Collectors 5

The 2008 Wall Street meltdown was partlycaused by, and helped to expose, theenormous risks and mistreatment thatconsumers faced in the financialmarketplace. In the years leading up to themeltdown, consumers facing problems withfinancial companies – including banks,mortgage companies, payday lenders, anddebt collection firms – lacked a dedicatedally at the federal level to turn to forprotection against illegal or predatorybehavior.That all changed in 2011 with the openingof the Consumer Financial ProtectionBureau, or CFPB. The CFPB, the first federalagency dedicated to protecting consumersin the financial marketplace, immediatelygot to work enforcing the law, returningmoney to wronged consumers, and creatingcommon-sense financial protection rules. Bythe end of 2016, the CFPB had alreadysecured 12 billion in relief for wrongedconsumers.2 The CFPB’s ConsumerComplaint Database enabled the bureau tospot patterns in emerging consumer threatsand allowed citizens and watchdog groupsto highlight the places in the country withthe most complaints and the companies thatwere the subject of the most concern.Today, however, the Trump administrationis failing to uphold the CFPB’s mission.Mick Mulvaney, as the CFPB’s actingdirector, has moved to slash the CFPB’sbudget, dramatically limit its effectivenessprotecting consumers, and put its futurefunding at the mercy of congressionalDebt Collectors 6appropriations.3 The CFPB has also scaledback or halted investigations into financialwrongdoing – including, according toreports, limiting its probe into the failure ofEquifax to protect its customer data thatresulted in the one of the largest and mostserious consumer data breaches in history.4The Trump administration’s CFPB is alsofailing to inform consumers about threats inthe financial marketplace by making its ownmonthly consumer complaint reports moresporadic and reducing the amount ofinformation in the reports. Those reports,which the CFPB had issued on a monthlybasis since 2015, had not been publishedsince October 2017. The CFPB’s first reportsince then – a report on debt collectioncomplaints issued on 31 May 2018 – ismissing key information of value toconsumers and policy-makers (and concernthat research publication will not resume ona monthly basis may be bolstered by thereport’s name change from MonthlyComplaint Report to Complaint Snapshot.) Thiscomes even as the Mulvaney-led CFPB hasput consumers at added risk to predatorydebt collection by scaling back paydaylending protections. (See page 9.)The analysis in this report providesinformation the Trump administrationchose not to provide in its most recentreport: the names of the companies thatreceive the most complaints for abusivedebt collection practices across the countryand in each of the states. (See Methodologyfor details.)

Consumers deserve to be protected againstunfair treatment and predatory behavior inthe financial marketplace. The CFPB canprovide just such protection – but to do so,it needs a director dedicated to fighting forconsumers.Debt Collectors 7

Debt collection is a big business, affecting 70million consumers and consisting of at least6,000 debt collection firms.5 Although somedebt collection companies are reputable,others employ deceptive, predatory orillegal tactics. These include targetingconsumers that do not owe debt; makingthreats of arrest or even bodily harm;harassing consumers with incessant calls;posing as someone else, including as policeor lawyers; and filing lawsuits againstconsumers whose debts are not verifiable orenforceable.6These aggressive tactics can result not justin stress or disruption for consumers, butalso in consumers paying debts that they donot owe as a result of confusion orDebt Collectors 8pressure.7 Consumers also may spend timeand money disputing debts or defendingagainst legal action.8The CFPB has taken extensive action toprotect consumers against unfair treatmentby debt collection companies.9 The CFPBhas halted deceptive and predatory debtcollection behavior and forced companies torefund money to consumers. The bureauhas proposed rules to protect consumersagainst abuse and from contact over debtsthat are not theirs. And it has receivedalmost 400,000 debt collection complaints,using those complaints to uncoveremerging threats in the marketplace and tohelp guide the agency’s actions.10

Acting Director of the CFPB Mick Mulvaney has indicated that, under his direction, thebureau’s enforcement division may prioritize debt collection.11 However, Mulvaney hasalready directed the CFPB to take actions that create new risk of harmful payday lendingpractices – actions that could ultimately result in more exposure to predatory debt collection.Under Mulvaney, the CFPB has: Started the process of revising or killing a previously proposed rule to ensure thatpayday lenders vet whether borrowers can repay their loans.12 The proposed rulewould also curtail lenders’ ability to make repeated attempts to debit paymentsdirectly from borrowers’ bank accounts, which can result in bank fees and lead toaccount closure.13Dropped its lawsuit against four online lenders that it had accused of deceivingconsumers by collecting debts not legally owed, for loans with interest rates at high as950 percent.14 In originally announcing its lawsuit, then-CFPB Director RichardCordray said, “[w]e allege that these companies made deceptive demands andillegally took money from people's bank accounts. We are seeking to stop theseviolations and get relief for consumers.”By creating more opportunity for deceptive and predatory lending practices, these actionswill put consumers at increased risk of racking up debt – and more risk of contact with debtcollectors and predatory collection practices.Debt Collectors 9

Beginning in 2015, the CFPB published aMonthly Complaint Report to provide a“high-level snapshot of trends in consumercomplaints.”15 Through April 2017, thesereports included data on companies thatreceived the most complaints.Over the last year, these reports have beenpublished less frequently, and haveincluded more limited information. FromApril 2017 through October 2017, reportswere no longer published on a consistentmonthly basis, and no longer includedcompany data.16 After October 2017,publication of monthly reports was haltedaltogether. The CFPB’s first report sincethen – a report issued on 31 May 2018highlighting debt collection complaints –also fails to include analysis of complaintsby company. To tell this missing story, thisreport provides a more detailed look at datareported in the CFPB’s public ConsumerComplaint Database. (See Methodology fordetails.)Among complaints published in the CFPB’sConsumer Complaint Database as of April2018, the companies that have received themost debt collection complaints are EncoreCapital Group, Portfolio RecoveryAssociates, ERC, Citibank, and SynchronyFinancial.Debt Collectors 10The top 10 companies for debt collectioncomplaints account for more than a fifth ofall such complaints. Four of thesecompanies have been the subject of CFPBenforcement actions for illegal debtcollection activities: Encore Capital Group and PortfolioRecovery Associates were bothpenalized by the CFPB for usingdeceptive tactics to collect bad debt.The CFPB found that the companiespurchased debt that was“potentially inaccurate, lackingdocumentation, or unenforceable,”and then “collected payments bypressuring consumers with falsestatements and churning outlawsuits using robo-signed courtdocuments.”17 The CFPB ordered thecompanies to pay a combined 61million in consumer refunds.18Citibank was penalized by theCFPB for deceptive collectionpractices. When calling customers tocollect on delinquent debt, Citibankoffered consumers the option to paydebts by using a checking account topost to the account on the same day– a transaction that included a 14.95fee. Citibank failed to explain thepurpose of the fee and failed todisclose free payment alternatives,despite the fact that, according to theCFPB, "it was rarely in the

consumer’s interest to pay the fee sothat the payment would post on thesame day." For this and other illegalpractices, Citibank was required topay 700 million in consumerrelief.19Transworld was penalized by theCFPB for illegal debt collectionlitigation practices.20 Transworldfiled false or misleading legaldocuments while suing students forloan debt that was either unproven,or that was too old to be recoveredvia lawsuit. Transworld was orderedto pay a 2.5 million civil penalty.Table 1. The 10 Companies That Have Received the Most Debt Collection ComplaintsCompanyEncore Capital GroupPortfolio RecoveryAssociatesERCCitibankSynchrony FinancialConvergent ResourcesCapital OneTransworld SystemsDiversified ConsultantsResurgent Capital ServicesTotal (Top 10)Complaints8,8426,827Percent of All DebtCollection %complaints per capita, possibly due toconsumer familiarity with the CFPB.Among complaints published in the CFPB’sConsumer Complaint Database as of April2018, the states with the most debtcollection complaints per capita areGeorgia, Delaware, Florida, Nevada andMaryland. Washington, D.C., ranks first inDebt Collectors 11Encore Capital Group, the company thatreceived the most debt collectioncomplaints in the country, also received themost debt collection complaints in 32 statesand Washington, D.C. Portfolio RecoveryAssociates received the most debt collectioncomplaints in four states.

Figure 1. Debt Collection Complaints by State per 10,000 ResidentsFigure 2. Encore Capital Is the Most Complained-About Company in 32 StatesDebt Collectors 12

Table 2. Debt Collection Complaints by State as of April 2018StateAlabamaTotal Number Complaints perof Debt 10,000 cut1,6204.5Delaware89410.0District bt Collectors 13Rank of MostComplaints per ComplainedCapita AboutCompany(Complaints)22 Encore CapitalGroup (122)47 PortfolioRecoveryAssociates (17)8 Encore CapitalGroup (217)46 PortfolioRecoveryAssociates (51)12 Encore CapitalGroup (1195)13 Wakefield &Associates (147)31 Encore CapitalGroup (104)3 BYL CollectionServices (51)1 Encore CapitalGroup (38)4 Encore CapitalGroup (1017)2 Encore CapitalGroup (442)24 Encore CapitalGroup (28)28 Alorica (30)21 Encore CapitalGroup (321)40 Encore CapitalGroup (100)50 Encore CapitalGroup (50)38 Encore CapitalGroup (58)

StateTotal Number Complaints perof Debt 10,000 NevadaNewHampshireNew JerseyNew MexicoNew YorkNorth CarolinaDebt Collectors 14Rank of MostComplaints per ComplainedCapita AboutCompany(Complaints)39 GLA CollectionCompany (125)15 Encore CapitalGroup (110)35 The ThomasAgency (52)6 Encore CapitalGroup (226)43 Encore CapitalGroup (139)32 Encore CapitalGroup (265)45 Encore CapitalGroup (89)37 FranklinCollectionService (42)23 PortfolioRecoveryAssociates (117)36 CollectionBureau Services(23)41 Encore CapitalGroup (30)5 Encore CapitalGroup (86)33 Encore CapitalGroup (29)9 Pressler &Pressler (322)26 Tormey BewleyCorporation (50)18 Encore CapitalGroup (507)19 OptimumOutcomes (161)

StateNorth DakotaTotal Number Complaints perof Debt 10,000 de Island5084.8South Carolina3,1776.9South .74682.5Wisconsin2,0233.6Wyoming2063.7West VirginiaDebt Collectors 15Rank of MostComplaints per ComplainedCapita AboutCompany(Complaints)48 Encore CapitalGroup (10)20 Encore CapitalGroup (258)30 Encore CapitalGroup (76)17 Ray Klein, Inc.(98)27 Encore CapitalGroup (344)25 Encore CapitalGroup (39)10 Encore CapitalGroup (122)34 Credico (40)14 Encore CapitalGroup (161)7 Encore CapitalGroup (889)29 ExpressRecoveryServices (66)49 PortfolioRecoveryAssociates (14)11 Encore CapitalGroup (248)16 Encore CapitalGroup (165)51 Encore CapitalGroup (26)44 Americollect(111)42 Encore CapitalGroup (13)

Consumers should be able to save, investand manage their money without fear ofbeing trapped, tricked or ripped off by theinstitutions they trust with their future.They should also be free from abusivecontact by debt collection companies andshould never be contacted about debt thatisn’t theirs.But, as has been shown time and again,consumer interactions with financialcompanies are often rife with problems.Abusive, predatory or negligent behaviorby companies like Equifax and Wells Fargo,along with many of America’s biggest debtcollection companies, shows that consumersneed strong protections in the financialmarketplace – and that means a strongConsumer Financial Protection Bureau.With a Senate-confirmed consumerchampion at its helm, the CFPB can be apowerful ally for American consumers,giving

for abusive debt collection practices. An analysis of CFPB consumer complaint data fills in the gaps of the bureau’s report, telling the story the Trump administration won’t about the problems consumers face with debt collection agencies across America. Encore Capital Group is the most complained-about debt collection company.