CFPB debt collection survey: money misspent?

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Explore:  CFPB Debt Collection OMB

Last Friday, the CFPB published a notice in the Federal Register about its plans to seek approval from the Office of Management and Budget “to conduct a mail survey of consumers to learn about their experiences interacting with the debt collection industry.”

According to the CFPB’s survey explanation submitted to OMB, the CFPB plans to mail surveys to up to 10,000 consumers and estimates a 34 percent response rate. The survey’s recipients will be randomly drawn from a sample of de-identified consumer credit records the CFPB acquired from one of the national credit reporting agencies. The CFPB intends to oversample credit records with recent third-party collections for non-credit related debts (such as tax liens) or credit accounts that appear to have recently entered collection.

The CFPB estimates the survey’s cost to be approximately $200,000. Presumably, at least $50,000 of that cost will be the cash payments the CFPB intends to make to survey recipients. The CFPB expects to pay recipients $5.00 each “as an inducement to complete and return the survey questionnaire” and payment will not be contingent on returning the survey. The CFPB states that “[r]ecipients who fail to respond to the initial survey may receive an additional cash inducement of a similar amount.”

The survey contains 77 questions (with instructions to skip certain questions depending on the recipient’s responses to other questions). Recipients will be asked to respond either by mailing back the paper version using a prepaid envelope or submitting their responses online. 

It is doubtful that the CFPB will be able to draw valid conclusions from many of the responses it receives. For example, the survey asks recipients whether any of the debts they were contacted about were debts they did not owe or for which the collector was seeking a wrong amount. Without verifying the accuracy of the responses to those questions, the CFPB cannot reasonably use such responses to draw conclusions about the frequency with which debt collectors attempt to collect debts that are not owed or wrong amounts.

Moreover, contact with a debt collector is not an event that a consumer can be expected to welcome. As a result, there would seem to be a substantial risk that consumer bias will produce responses that do not accurately reflect consumers’ actual experiences. For example, respondents may overstate the frequency with which they were contacted by debt collectors or characterize their experiences in a manner that is unduly negative, such as reporting that the collector was not polite or made threats.

In June 2013, as part of its on-going study of consumer arbitration mandated by the Dodd-Frank Act, the CFPB announced that it was seeking funding from OMB to undertake a telephone survey of 1,000 credit card holders to ascertain their awareness of and perceptions regarding the arbitration provisions in their contracts. Industry trade groups have submitted comments to the CFPB urging it not to proceed with the survey, calling it “flawed in concept and execution.”

Comments on the CFPB’s debt collection survey plans are due on or before May 6, 2014. We hope industry will weigh in on the survey’s shortcomings and their implications for the CFPB’s plans to use the survey results to inform its debt collection rulemaking.

Topics:  CFPB, Debt Collection, OMB

Published In: Administrative Agency Updates, Consumer Protection Updates, Finance & Banking Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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