FTC, PIRG complaint reports highlight consumer dissatisfaction with debt collection industry

Ballard Spahr LLP

The FTC released its annual Consumer Sentinel Network Data Book on February 27, 2014, providing national and state-by-state data on consumer complaints received by the FTC, all U.S. and Canadian Better Business Bureaus, the CFPB and other federal and state agencies in the previous year. For the second year in a row, the total number of complaints received exceeded 2 million, and the top three categories of complaints consisted of identity theft (290,056 complaints, or about 14% of the total), debt collection (204,644 complaints, or about 10%), and banks and lenders (157,707 complaints, or about 7%). Although identity theft remained the most complained-of category, the number of identity theft complaints decreased by over 20% from 2012, while the number of complaints about debt collection increased by 2.5% and the number of complaints about banks and lenders increased by over 15%.

Also on February 27, the PIRG released a report entitled “Debt Collectors, Debt Complaints” analyzing consumer complaints made to the CFPB and tracked in the CFPB’s Consumer Complaint Database.  According to the PIRG report, although the CFPB only began accepting complaints about debt collection in July 2013, debt collection complaints have already outpaced complaints about bank accounts and credit cards and represent the second-highest volume of complaints received about any financial service between July 2013 and January 2014. (Consumers complained to the CFPB most about mortgages during that time period.)  The PIRG reports that the CFPB received an average of 2,000 customer complaints about debt collection each month since July 2013.

The most common debt collection complaints reported to the CFPB involved attempts to collect debts that did not belong to the consumer (about 25% of the total), followed by repeated phone calls (about 13%) and failure to provide information sufficient to verify the debt (13%). Since July 2013, approximately 22% of complainants reported receiving relief in connection with their debt collection complaints.  The majority of those consumers received non-monetary relief, such as stopping repeated phone calls.  Approximately 16% of consumers who received responses to their debt collection complaints found the response unsatisfactory and continued to pursue their complaint with the CFPB.

The timing of the FTC and PIRG reports coincides with the close of the period for commenting on the CFPB’s debt collection Advance Notice of Proposed Rulemaking. In light of the fact that the CFPB has cited the high volume of debt collection-related complaints as a reason for its focus on the debt collection industry, the CFPB likely will use the reported increase in such complaints as further support for the need to impose debt collection regulations.

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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