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CFPB Issues First Ever Debt Collection Survey on Its Path to Regulating the Industry

January 17, 2017

The Consumer Financial Protection Bureau ("CFPB" or "Bureau") released findings of a survey (the "Survey") on consumer views on debt and the debt collection process. The Survey takes aim at not only third party debt collectors, those who collect debt on behalf of creditors, but creditors who collect their own debt. Unfortunately, the CFPB's data raises more questions and does not provide a complete or accurate picture of a complex industry.

The Survey sample was selected from the Bureau's Consumer Credit Panel, which took a 1-in-48 random and de-identified sample of credit records maintained by one of the three major credit reporting agencies. Survey recipients therefore were consumers who in fact had a credit report, although not all had a delinquent account that was being reported. 9,879 consumers received the Survey, but only 2,132 responded, approximately 21%. Not all of the results from the Survey were released and the Bureau gave no indication why they chose to cherry-pick the data. 

It is important to note that of the 2,132 responses only 32% (682 consumers) stated they had been contacted by a debt collector or creditor in the past year and 491 of those people had been contacted about two or more debts. This is the subset of respondents that the CFPB draws the remainder of its data. 

The following Survey responses were released by the Bureau:

  • Contacts by Error: 53% (361 consumers) who were contacted by a debt collector or creditor report that the debt was not theirs, was owed by a family member or was for the wrong amount. 27% (184 consumers) report that they disputed the debt they were being contacted about.
  • Law Suits Filed: 15% (102 consumers) report that they were sued after being contacted by a debt collector or a creditor and, of that group, 86 consumers attended the hearing while 16 consumers did not.
  • Contacts by Debt Collectors and Creditors: 33% (225 consumers) report being contacted less than once per week about a debt, whereas 37% (252 consumers) report being contacted four or more times per week. 17% (115 consumers) report being contacted as much as 8 times per week. Contacts, for purposes of these findings, were both successful and attempted contacts.
  • Cease Communications:  42% (286 consumers) report that they asked a debt collector to stop contacting them and only 1/4 of those consumers (71) report that collections did, in fact, cease.
  • Creditors More Favorable than Debt Collectors: 77% (525 consumers) report that, when contacted by a creditor that creditor provided accurate information while only 49% (334 consumers) report that a debt collector provided accurate information. The Survey concludes that consumers found creditors provided options to pay and were more polite while debt collectors were not.

The CFPB did not report the results of the following questions:

  • What was the single most important reason why the consumer paid the debt after being contacted and how sure were they that the debt was theirs?
  • What was the single most important reason why the consumer did not pay the debt after being contacted?
  • What information would be helpful in figuring out whether the consumer owed the debt?
  • In instances where a debt collector contacted a consumer about two or more debts, did the consumer pay off some or all of the debt after being contacted?
  • What did the creditor or debt collector do after the consumer disputed the debt?
  • What additional information did the creditor or debt collector provide in response to their dispute?
  • What was the most important reason why the consumer did not appear in court after they were sued?

This information would have been vitally useful for the industry in developing best practices in order to better serve consumers, as well as to prepare and respond to potential rulemaking. The fact that the CFPB has not released these findings is troubling.

Like prior CFPB research, including the Arbitration Study, the sampling size is very small. The Bureau's own data in its Outline of Proposal for Debt Collection states that at least 77 million consumers have an account in debt collection. A survey of 2,100 people and a sample size of 682 is hardly representative of a complex industry that communicates with so many consumers on a daily basis. Furthermore, the results of this Survey fail to take into account the CFPB's own complaint portal, which has not only a high rate of resolution, but approximately 87% of consumers report being satisfied with a company's response to their complaint.

The CFPB's Survey was subject to public comment for three years prior to the final questionnaire. ACA International, American Bankers and Consumer Bankers expressed significant concerns about the content and clear bias of many of the questions as well as the methodology. These concerns were completely rejected by the Bureau, and thus industry had no input whatsoever into the formulation of this Survey.

Asking consumers how they feel about debt collection is like asking someone how they feel about going to the dentist. A positive response is highly unlikely. The CFPB's Survey fails to recognize that debt collection is a process and that the conduct surrounding debt collection is governed by statute and that certain outcomes, which the CFPB may find objectionable, are only the result of the debt collector following the law. For example, the Survey found that 42% (286 consumers) have requested that a debt collector stop contacting them; 3/4 of those same consumers report that the debt collector failed to do so. However, if that request was made verbally, the debt collector is under no obligation under the law to stop collecting. These nuisances in the law and in practice are completely absent from the Survey.

Director Cordray's public remarks regarding the Survey acknowledge that more than half of the respondents report positive comments about debt collectors and creditors and those same players are abiding by the law. However, these best practices will not be considered and quite possibly be overlooked when the CFPB establishes rules for the industry. Instead, the CFPB's Survey pits debt collectors against their creditor clients and looks to discourage appropriate resolutions of legitimately owed debts. 

Clark Hill's Consumer Financial Services Regulatory & Compliance Practice Group is a national leader in the field of consumer financial services law, providing strategic legal counsel to clients in all areas of consumer finance. We provide counsel, consultation and litigation services to financial institutions, law firms and debt buyers throughout the country. Our group can help you navigate this rapidly evolving regulatory environment. Our exceptional team of lawyers and government and regulatory advisors has extensive experience in – and an in-depth understanding of – the laws and regulations governing consumer financial products and services. We can assist you in developing and implementing compliance programs, as well as defending consumer litigation and regulatory enforcement actions.

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