The report, based on findings from the CFPB’s flawed consumer debt collection survey that ACA strongly opposed, attempts to paint the debt collection industry in a negative light despite the CFPB’s own acknowledgment that none of the findings are statistically significant.
Yesterday, the Consumer Financial Protection Bureau released the long-awaited report on findings from its survey of consumers about their experiences with debt collection. The report was released in conjunction with a public event held in Washington, D.C. at the office of the District of Columbia Attorney General. The CFPB provided little notice of the event and virtually no details of what the substance of the event would be other than the fact that it would involve debt collection.
During the event, DC Attorney General Karl Racine – the first elected Attorney General in DC – provided opening remarks, noting a recent enforcement action based on the charging of illegally high interest rates and applauding the CFPB for its work in changing the landscape for consumer protection. For his part, Director Richard Cordray delivered lengthy prepared remarks, generally cherry picking the “findings” of the survey that could paint the most damaging view of the debt collection industry, much in the same fashion as the CFPB’s related press release, despite the fundamentally flawed nature of the survey instrument itself and the self-acknowledged limitations of the resulting data.
Following Cordray’s remarks, a video was played during the event that showed a handful of consumers sharing personal stories involving different types of negative experiences related to debt collection that were reported to the CFPB. The CFPB has placed these videos online and is encouraging more consumers to tell their personal stories.
Finally, the CFPB also concurrently released a report on the risks in the online debt sales market that was discussed during the event. According to the CFPB, the report highlights potential risks to consumers’ personal information posed by online debt sales, raising questions about protections for personal information and the dangers of it falling into the wrong hands.
ACA team members Maria Wolvin, Vice President and Senior Counsel of Regulatory Affairs, and Andy Madden, Vice President of State Government and Unit Affairs, attended the event on behalf of ACA International.
Background on the Debt Collection Consumer Survey
According to the CFPB, the consumer debt collection survey was conducted between December 2014 and March 2015, with the stated goal of “expand[ing] the understanding of debt collection in the United States by providing the first comprehensive and nationally representative data on consumers’ experiences and preferences related to debt collection.”
ACA International submitted comments strongly opposing the survey on May 5, 2014, stressing that the survey would fail to yield statistically sound data and therefore would not enable the CFPB to improve its understanding of the debt collection market in support of its rule writing efforts. Specifically, in its comments, ACA described how the survey design was flawed and how the content suffered from substantial negative bias. Given these fundamental shortcomings, ACA rightly predicted that the CFPB would unlikely be able to draw credible conclusions from the proposed survey given that the resulting data would be highly unreliable and therefore misleading. Despite opposition from ACA and several others, the CFPB decided to nevertheless move forward with the survey which has culminated in the recently-released report.
According to the CFPB, the survey “provides an in-depth analysis of consumers’ encounters with the debt collection industry. The national survey is part of an ongoing CFPB effort to explore industry practices and consumer experiences with debt collectors. Consumers were asked about their encounters with debt collectors for loans and unpaid bills. Questions included whether consumers had been contacted by debt collectors in the past year, how frequently, and the nature of the debt.”
The CFPB mailed surveys to more than 10,000 consumers, and received 2,132 responses. The sample of consumers from the survey is from the CFPB’s Consumer Credit Panel, which includes a random, anonymous sample of records. Nevertheless, in their survey report, the CFPB adds the caveat that “the report does not present standard errors or statements about the statistical significance of the differences,” a critical shortcoming that was not mentioned in either the CFPB’s incendiary press release on the report or the prepared remarks of Director Cordray – yet a fact that substantially undermines the conclusions the CFPB draws from the survey results.
Findings from the Survey
According to the report, in the past 12 months about 32 percent of consumers in the sample, representing roughly 682 individuals, were contacted by a creditor or debt collector about a debt. Most of the contact was in reference to medical and credit card debt.
“We also learned that more than half of Americans contacted in the past year by debt collectors reported substantial inaccuracies in what they were told about the debt,” Cordray said in his remarks. “To be specific, many consumers said they did not believe they owed the debt at all, that the creditor or collector sought an incorrect amount, or that the debt was owed not by them but by another family member.
It is important to note, however, that the “half of Americans” Cordray refers to are limited to only half of the sample population of 682, a significant distinction.
Additional findings selected by the CFPB to highlight include:
- Twenty-seven percent of consumers contacted about debt said they felt threatened by the conduct of the creditor or collector who most recently contacted them.
- 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 this sub-set of consumers, three-in-four said the debt collector did not honor the request to cease contact attempts.
- Fifty-three percent of consumers contacted about a debt in the previous year said at least one collection effort was mistaken in some way.
- 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.
- 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. Nearly 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.
- 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.
Once again, however, it is important to note that the percentages presented in the survey report and its accompanying materials are a subset of the 32 percent of respondents who reported being contacted by a debt collector in the CFPB survey and not a percentage of all consumers in the U.S., a crucial distinction that is not readily apparent.
ACA’s Response to the Survey Findings
ACA International unequivocally condemns fraudulent, abusive and unethical debt collection practices. There are more than one billion consumer contacts made by the debt collection industry annually. The credit and collection industry is one of the most highly regulated industries by both federal and state laws, and consumers have rights and protections under the law. As a result, legitimate debt collectors are focused on compliance and treat consumers lawfully and with respect.
While ACA and our members welcome the opportunity to work with government agencies to stop bad actors, such collaboration is thwarted by government reports like this one – along with seemingly calculated sensationalized press releases and prepared remarks – that appear to be designed to broadly paint the industry in a negative light.
“As an industry of professionals that work incredibly hard to keep the engine of America’s credit economy running, the legitimate debt collection industry works collaboratively with millions of Americans to resolve their justly-owed debts. Unfortunately, the CFPB’s so-called ‘findings’ are yet another thinly-veiled attempt to discredit the legitimate debt collection industry for its own political purposes,” ACA International CEO Pat Morris said. “The CFPB has made a calculated move to release inflammatory but unreliable findings in an obvious attempt to strengthen its justification for its very existence in Washington. The CFPB’s tactics illustrate why there is growing concern about its legitimacy.”
Please click here to see ACA’s full response to the CFPB’s consumer survey on debt collection experiences.