cfpb Consumer Complaints

Transcription

1 cfpb Consumer Complaints March 6, 2014 Research

2 Table of Contents: I. Executive Summary... 2 Introduction... 2 Key Findings... 2 Concerns with CFPB s Complaint Database... 3 Recommendations to the CFPB and Others Regarding Complaints... 3 II. Overview... 4 The purpose of the Report Analyzing CFPB Consumer Complaint Data... 4 ACA Members and Complaints... 4 ACA and the CFPB... 4 The Recovery of Consumer Debt is Vital to Federal, State and Local Economies... 4 III. Data Analysis... 5 Proportion of Consumers with Collection and Average Collection Amount per Person... 5 Amount of Consumer Complaints Received by Month... 5 Number of Complaints by Sub-Products... 6 Percentage of Complaints Coming from Third-Party and Creditors... 6 Number of Complaints by Key Issues... 7 Breakdown of Issues by Sub-Group... 7 Allocation of Issues by Sub-Group... 8 Complaints Received in a Timely Fashion... 8 Outcome of the Progress Status of Companies Complaints... 9 Complaints by Submitted Channel... 9 Number of Complaints by State in Comparison to the Total Debt Collected in Top 50 Companies Receiving Complaints...11 IV. ACA Recommendations/ Conclusion...11 About ACA International ( With offices in Washington, D.C. and Minneapolis, ACA International is the largest trade association representing the consumer credit and debt collection industry. Our nearly 5,000 member organizations employ more than 300,000 men and women as third-party debt collectors, debt buyers, collection attorneys, creditors and industry service providers. ACA has 41 state-level units representing the 50 states and one unit representing more than 60 countries abroad. The recovery of consumer debt is very important to America s credit-based economy and, according to an economic impact study by Ernst & Young, third-party collection agencies recovered $55 billion on behalf of creditor clients in

3 I. Executive Summary Introduction ACA International s Research Department created the following analysis of the Consumer Financial Protection Bureau s (CFPB) complaint database for debt collection. We undertook this study to gain insight into consumer complaint issues and, in particular, to learn more about the information and to use it for the collection of debts. Our goals with this analysis are to improve communication between debt collectors and customers, and to mitigate the number of complaints made by customers. This report is based on a sample of 14,328 complaints received by the CFPB between July 2013 and February In addition, this report uses data from the Quarterly Report on Household Debt and Credit from the Federal Reserve Bank of New York to show the average balance of accounts in thirdparty debt collections (Q Q4 2013). Since the 1980s, the use of consumer credit rose steadily reaching its peak in 2008, when the United States economy entered into the biggest economic downturn since the Great Depression. Consumer spending habits created massive growth in the level of delinquent/defaulted debts owed to businesses and government. This includes both discretionary and non-discretionary spending. America s credit-based economy relies on the recovery of rightfully owed consumer debt. As the nation s economy faltered, it triggered wide-spread efforts by public and private sector creditors, third-party debt collectors working on behalf of creditor clients, and companies that have purchased written-off consumer debts to seek to recoup what was possible. Without these efforts, companies can t pay their bills and keep people employed; the price for goods and services increases; the availability of affordable credit decreases; and governments are forced to cut services and/or raise taxes to cover shortfalls. A heavier reliance on credit coupled with economic turmoil has resulted in more than one billion consumer contacts per year. Conversely, complaints by consumers contacted about a delinquent or defaulted debt also increased. Consumers don t want to be told they owe money and it often produces an emotionally charged response when contacted. ACA International members take complaints against debt collectors very seriously and have pledged to work with key stakeholders including the CFPB, Federal Trade Commission (FTC), Better Business Bureau, state lawmakers, state regulators and state attorneys general to best balance consumer protections and the ability to recovery a rightfully owed debt. Key Findings The CFPB makes publicly available data that includes company name, consumer ZIP code, product, sub product, issue, complaint submission date, and response timeliness. Comparison of key findings from ACA s previous report on CFPB complaints in November 2013 finds little to no changes among general trends in February In addition, ACA supplemented analysis of the CFPB s data with the Quarterly Report on Household Debt and Credit of the Federal Reserve Bank of New York to provide a snapshot of the average balance of accounts in third-party debt collection: The average balance of accounts in third-party debt collection increased from $1,458 in the third quarter of 2013 to $1,520 in the fourth quarter of 2013, representing a 4.29% increase. The highest number of identifiable complaints was for credit card and medical debts. However, taking into account the category others and not specified together, 50.41% of the complaints were not associated with a particular debt collection product. 2

4 The most reported consumer concern was being contacted about a debt they did not believe they owed. In second place was communication tactics followed by disclosure verification of a debt. However, there is no subsequent follow-up on whether these consumer concerns were resolved after communications with creditors or debt collectors. Further, a closer look at the communications tactics sub-section identifies the most frequent concern was the frequency of calls. It should be noted that a catch-22 under the Fair Debt Collections Practices Act (FDCPA) is prompting an increasing number of debt collectors to not leave voic and instead make more calls to consumers in the hope of reaching a live person. Almost all the complaints received by the CFPB were responded to in a timely fashion. Based on the data, 96% of the complaints were responded to with a timely response. Of the 14,328 complaints analyzed, 94% were closed, closed with non-monetary relief or closed with explanation. Concerns with CFPB s Complaint Database There is a lack of clarity in the data as to whether complaints are against first-party creditors, payday lenders, third-party debt collection companies or others. Aggregating these creates uncertainty about complaints possibly reported more than once, painting an inaccurate portrait of third-party debt collectors. The limited amount of information provided about consumers to debt collectors in the CFPB complaint process makes accurate identification and timely response difficult. The CFPB s description of a complaint, coupled with the fact that it does not investigate whether any real wrongdoing has occurred or whether it is an inquiry/request for additional information, enables the data to create an inaccurate perception of the extent of wrongful conduct. Due to the 60-day lag time from company response to consumer dispute of the company response, coupled with a lack of completeness in the database, an accurate assessment on the number of disputes cannot be made at this time. Recommendations to the CFPB and Others Regarding Complaints Clearly identify first-party collections from third-party collections to ensure accuracy in complaint reporting and avoid the potential for double counting. Maintain context by resisting the temptation to use a broad-brush to paint debt collectors negatively or make assumptions about the behavior of an entire industry solely on top line volume data. Provide more consumer detail to debt collectors who are the subject of a complaint to increase the likelihood of more easily identifying the information needed to resolve the consumer s complaint. Adopt definition of a complaint that is limited to consumer allegations of wrongful conduct and does not include the amorphous concept of general consumer dissatisfaction outside of wrongful conduct. 3

5 II. Overview The purpose of the Report Analyzing CFPB Consumer Complaint Data In 2010, the U.S. Congress passed the Dodd-Frank Act that created the CFPB. Among its many responsibilities, the CFPB supervises the third-party debt collection industry and maintains a database of complaints against debt collectors. In July 2013, the CFPB officially began accepting consumer complaints pertaining to debt collection whereby consumers may register a complaint and have it reviewed/resolved through communications with a debt collector. ACA International s Research Department has analyzed a total of 14,328 debt collection complaints released by the CFPB, dating from July 2013 to February Comparison of key findings from ACA s previous report on CFPB complaints in November 2013 finds little to no changes in February The purpose of this analysis is to better understand the data beyond simply reviewing the total number of complaints. ACA Members and Complaints Third-party consumer debt collectors make approximately one billion contacts to consumers per year. ACA members are aware of consumer complaints and want to work seriously with the consumers to resolve their concerns. ACA s Code of Ethics requires each ACA member company to identify a specific contact designated to work with consumers to address complaints against a third-party debt collector. ACA is committed to helping members better understand and comply with federal, state and local laws governing the collection of consumer debt. Moreover, we provide exceptional training to help members prevent complaints from occurring and to meaningfully resolve them if they do. ACA members realize that consumers most often prefer to share complaints with intermediaries such as the CFPB. However, we welcome the opportunity to work directly with consumers to resolve complaints. Communication is the cornerstone for effective consumer debt collection and, when given the opportunity, ACA members continue to show they can be successful in appropriately resolving consumer complaints. According to the Better Business Bureau, in 2012, collection agencies resolved 86% of the consumer complaints received compared to the national average of 77% for all other industries combined. ACA and the CFPB ACA has sought a mutually respectful and collaborative relationship with the CFPB. ACA efforts have included, but are not limited to, the following: Educating CFPB leaders on the complexity of the debt collection industry. Monitoring the CFPB s actions and responding as appropriate on behalf of ACA members. Inviting CFPB leaders to speak at our conferences and interact with industry members. Participating in industry relevant hearings, work groups and panels. Preparing ACA Members for supervision, rulemaking, enforcement and complaint resolution. 4

6 03:Q1 03:Q3 04:Q1 04:Q3 05:Q1 05:Q3 06:Q1 06:Q3 07:Q1 07:Q3 08:Q1 08:Q3 09:Q1 09:Q3 10:Q1 10:Q3 11:Q1 11:Q3 12:Q1 12:Q3 13:Q1 13:Q3 TAKING A CLOSER LOOK: The Recovery of Consumer Debt is Vital to Federal, State and Local Economies America s credit-based economy relies on the recovery of rightfully owed consumer debt. As the nation s economy faltered, it triggered wide-spread efforts by public and private sector creditors, third-party debt collectors working on behalf of creditor clients, and companies that have purchased written-off consumer debts to seek to recoup what was possible. Without these efforts, companies can t pay their bills and keep people employed; the price for goods and services increases; the availability of affordable credit decreases; and governments are forced to cut services and/or raise taxes to cover shortfalls. ACA regularly conducts research to assess the actual impact third-party debt collection has on the national and state economies. Our most recent data, conducted by Ernst & Young in 2011, can be found at III. Data Analysis This section provides an analysis of the data gleaned from the 14,328 consumer complaints pertaining to debt collection that have been submitted to the CFPB between July 2013 and February Additionally, we have used the available data from the Quarterly Report on Household Debt and Credit provided by the Federal Reserve Bank of New York. Proportion of Consumers with Collection and Average Collection Amount per Person The graph below shows the proportion of consumers with collection at a national level between 2003 and 2013, represented in the blue line and read from the left axis. The purple line is read from the right axis and represents the Average Collection Amount per Person. The proportion of consumers in collection has increased over the past 10 years, remaining at a relatively constant rate of 14% over the past four years. The average collection amount per person increased 4.29% from $ 1,458 in the third quarter of 2013 to $ 1,520 in the fourth quarter of % 1, % 13% 12% 11% 10% 9% 8% $1,600 $1,500 $1,400 $1,300 $1,200 $1,100 $1,000 $900 $800 Proportion of Consumers with Collection (left axis) Average Collection Amount per Person(right axis) Data Source: Federal Reserve Bank New York 5

7 Amount of Consumer Complaints Received by Month Based on the data below, consumer complaints per month are trending upward. The increase from September 2013 of 2,010 complaints to December 2013 of 2,415 complaints represents an increase of 20.15%. The number of complaints in January 2014 did increase to 2,886. Data for February only reflects complaints through 17 days of the month Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Number of Complaints by Sub-Products Taking a closer look at the sub-products, the highest number of identifiable complaints was for credit cards with 3,313, followed by medical products with 1,381 complaints. A total of 4,191 complaints were not directly associated with a certain debt collection product (e.g., phone, health club, etc.) and 3,032 complaints were not specified Other Credit card (phone, health club, etc.) 3032 Not specified Medical Mortgage Payday loan Auto Non-federal Federal student loan student loan Percentage of Complaints Coming from Third-Party and Creditors ACA reviewed the list of companies and was able to identify the number of companies that were not third party-debt collectors, including a number of financial institutions and banks. Of the total of 14,328 complaints, approximately 2,822 or 20% were made against companies conducting firstparty collections (credit card companies, pay day lenders, or other direct creditors). 20% 80% First Party/ Others Third Party 6

8 Number of Complaints by Key Issues A total of 5,764 complaints pertained to a debt the consumers believe they did not owe. Communications tactics followed at 2,911. The third most reported complaint is disclosure verifications of a debt totaling 2,497. However, there is no follow-up data on how many of these complaints were eventually proven to be accurate by the debt collectors in question Cont'd attempts collect debt not owed Communication tactics Disclosure Improper contact verification of debt or sharing of info False statements Taking/threatening or representation an illegal action Breakdown of Issues by Sub-Group Analysis of the key sub-groups provides a deeper look at complaints. Cont'd attempts collect debt not owed Communications tactics Debt is not mine 3575 Frequent or repeated calls 1870 Debt was paid Debt resulted from identity theft Threatened to take legal action Called after sent written cease of comm Used obscene/profane/abusive language Debt was discharged in bankruptcy 264 Called outside of 8am-9pm Disclosure verification of debt Improper contact or sharing of info Not given enough info to verify debt 1776 Talked to a third party about my debt 556 Contacted me after I asked not to 321 Right to dispute notice not received 573 Contacted employer after asked not to 259 Not disclosed as an attempt to collect 148 Contacted me instead of my attorney False statements or representation Taking/threatening an illegal action Attempted to collect wrong amount 860 Threatened arrest/jail if do not pay 278 Impersonated an attorney or official 120 Threatened to sue on too old debt Sued w/o proper notification of suit Indicated committed crime not paying 79 Seized/Attempted to seize property 121 Indicated shouldn't respond to lawsuit 24 Attempted to/collected exempt funds Sued where didn't live/sign for debt

9 Allocation of Issues by Sub-Group The graph below shows the allocation of issues by sub-group, demonstrating the percentage of each sub-group to its main issue. It is interesting to observe that 47% of the complaints belonging to medical issues are related to debts that consumers believe they do not owe. In the same way, medical debt has a relatively high rate of complaints related to disclosure/verification of debt. Student loans have one of the highest rates of complaints related to communications tactics and false statement or representation. 100% 90% 80% 70% 9% 10% 6% 15% 9% 17% 10% 6% 12% 2% 5% 8% 23% 6% 5% 5% 6% 8% 15% 8% 9% 8% 18% 22% 15% 3% 7% 4% 17% 60% 12% 17% 11% 22% 15% 9% Taking/threatening an illegal action 50% 40% 30% 33% 33% 24% 47% 33% 26% 48% 5% 16% 46% Improper contact or sharing of info False statements or representation Disclosure/ verification of debt Cont'd attempts collect debt not owed Communication tactics 20% 10% 25% 21% 30% 15% 21% 31% 15% 33% 23% 0% Auto Credit card Federal student loan Medical Mortgage Non-federal Other student (phone, loan health club, etc.) Payday loan Not specified Complaints Received in a Timely Fashion The vast majority of the complaints were responded to in a timely manner, 96% respond on time, whereas 4% did not respond on time. This shows the commitment of the debt collection industry to comply with the CFPB s established timeline for responding to complaints. 4% 96% No Yes 8

10 Outcome of the Progress Status of Companies Complaints In all, 93.71% of complaints were closed, closed with non-monetary relief or closed with explanation. Of the 14,328 complaints, 10,209 (71%) were closed with an explanation. A total of 2,693 complaints were registered as closed with non-monetary relief. A total of 349 complaints were listed as closed with monetary relief Closed with explanation 2693 Closed with non-monetary relief Closed In progress Closed with monetary relief Untimely response Complaints by Submitted Channel It is essential to find out through which channels the consumer complaints were made. Without any doubt the CFPB website, with 10,439 complaints received, represents the most popular submission method by a significant margin. represents the platform of lowest submission with 3 complaints Web Phone Referral Postal mail Fax 9

11 Number of Complaints by State in Comparison to the Total Debt Collected in 2010 Column two shows the number of complaints for each state. Column three shows the percentage of complaints each state represents to the total number of complaints received by the CFPB. Column four shows the amount of total debt collected in 2010, followed in column five by percentage of the total amount of debt collected. Column six shows the difference between the percentage of complaints and the percentage of debt collected in State Complaints % of Complaints Total Debt Collected 2010 (in million)¹ % Debt Collected 2010² Difference AL % % -0.2% AK % % 0.0% AR % % -3.5% AZ % % 1.6% CA % % 5.6% CO % % -0.4% CT % % 0.3% DE % % -0.3% DC % % 0.6% FL % % 3.6% GA % % 0.0% HI % % 0.3% ID % % 0.2% IL % % -1.8% IN % % 0.0% IA % % -0.4% KS % % -0.6% KY % % -0.2% LA % % 0.1% ME % % 0.1% MD % % 1.3% MA % % -0.8% MI % % 1.3% MN % % -2.3% MS % % 0.0% MO % % -0.7% MT % % -0.1% NE % % -0.6% NV % % 0.1% NH % % -0.4% NJ % % 1.3% NM % % 0.5% NY % % -2.9% NC % % 0.7% ND % % -0.1% OH % % -1.3% OK % % -0.4% OR % % 0.4% PA % % -0.7% RI % % 0.3% SC % % 0.6% SD % % -0.2% TN % % -1.9% TX % % -0.1% UT % % 0.1% VT % % 0.0% VA % % 1.4% WA % % -0.2% WV % % -0.4% WI % % 0.1% WY % % -0.1% 10

12 Top 50 Companies Receiving Complaints According to the data, the top 50 companies by complaint volume, as identified by the CFPB, total 7,900 complaints. Of the top 50, a total of 37 companies are identified as third-party collectors (5,645). Thirteen companies (totaling 2,255 complaints) are considered something other than a traditional debt collector (e.g., credit card, student loan servicers, creditors and pay day lenders). Their inclusion creates confusion in comparing third-party debt collectors, who are subject to the FDCPA and a myriad of state laws and regulations that creditors do not have to follow. Moreover, it also raises concerns about duplicative listings for complaints on a debt filed with both the creditor and the debt collector seeking to recover the debt on behalf of a client. IV. ACA Recommendations/Conclusion ACA International undertook this study to gain insight into consumer complaint issues and, in particular, to learn more about the information and to use it for the collection of debts. The main goal of this analysis is to improve the communication between debt collectors and customers, to mitigate the number of complaints made by customers. It is important to ensure all possible options to get efficient resolutions that need to be considered for every consumer. Informing consumers about all their options in the debt collection process and the consequences of non-payment should be essential. Third-party debt collectors would benefit from future study and examination of these and other issues relating to debt collection. Understanding the data and doing a thoughtful analysis of consumer complaints can be a useful tool in determining trends and areas for concern as well as areas for improvement by the industry. ACA pledges to continue working with our members to improve compliance, preventing complaints and resolving them if they occur. ACA desires to help the CFPB improve its complaint database so that collectors, consumers, policymakers, regulators and others have an accurate snapshot. We offer the following suggestions to the CFPB: Clearly identify first-party collections from third-party collections in complaint reporting and avoid the potential for double counting complaints that stem from the same underlying issue. Maintain context by resisting the temptation to use a broad-brush to paint debt collectors and make assumptions about the behavior of an entire industry solely on the volume of complaints. Provide more detail to debt collectors who are the subject of a complaint to increase the likelihood of more easily identifying the information needed to resolve the consumer s complaint. Adopt a definition of complaint that is limited to consumer allegations of wrongful conduct and does not include the concept of general consumer dissatisfaction outside of wrongful conduct. 11