At the end of 2016, the Consumer Financial Protection Bureau (CFPB) released its complaint report for November. The complex report reveals the most debt collection complaints, what industry is most affected, what states are most problematic, and highlights abusive or deceitful debt collection tactics. Although debt collection issues are not the only complaints fielded by the organization, they are the majority of complaints in the monthly reports.
What is the CFPB and does it affect debt collection?
What is the CFPB?
The Consumer Financial Protection Bureau was created in 2010 with the passing of the Dodd-Frank Wall Street Reform and Consumer Protection Act. With the financial crisis of 2008/9, Dodd-Frank was passed to create significant regulatory processes for transparency and accountability in the financial and Wall Street sector. Included in the act were revisions to the Fair Debt Collection Practices Act (FDCPA) and other rules to protect consumers from big banks with no or little regulations. Dodd-Frank was passed in the hopes of preventing another recession and also to protect consumers if large banking institutions were to fail.
The CFPB was formed due to the Dodd-Frank Act and the FDCPA revisions and consolidated consumer protections from several different agencies. The CFPB's jurisdiction includes not only banks, but also mortgage and foreclosure (under the Department of Housing and Urban Development), credit unions (under the National Credit Union Administration) and other financial institutions under the Federal Trade Commission, the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC).
The Bureau is an independent federal agency that enforces rules, examines, monitors and reports on financial institutions and markets, and also collects consumer complaints.
What is the CFPB Consumer Complaint Database?
The CFPB collects and tracks consumer complaints with regards to mortgages, student loans, credit cards, auto loans, payday loans or any financial transactions between consumers and lenders. They also accept complaints about other services these financial institutions provide such as accounts, money transfers, credit reporting and debt collection.
The Consumer Complaint Database was launched on the CFPB website in 2012 and started tracking debt collection complaints in November 2013. The CFPB admits that they don't verify the allegations in the complaints (they do verify a commercial relationship) but simply offers consumers a place to lodge a complaint against financial institutions. The complaint database is used as a tool to correct misunderstandings, educate consumers, fix credit reporting errors, get responses from financial organizations and identify trends that warrant closer inspection in the market.
Since it began collecting complaints, the monthly Consumer Complaint Database reports provided by the Consumer Financial Protection Bureau typically highlight debt collection tactics as the most complained about product or service.
HOW DOES THE CFPB AFFECT DEBT COLLECTION?
With the passing of the FDCPA in 1977, consumers were given protective rights from deceptive debt collectors. At the same time, debt collection agency tactics were limited and protected those agencies that were fair, legitimate and reputable. The Consumer Finance Protection Bureau tracks these complaints in order to give special attention to those who aren't following the law.
The recent Consumer Complaint Report shows that of the over 285,000 consumers that have complained about debt collection, 39% were contacted about debts they no longer owed. Consumers have a right to ask for debt verification and, even when these consumers asked, they never received documentation to prove they owed anything.
Other trends from the report included:
- Consumers stated that they were not being notified when their accounts were sent to third-party collections agencies.
- Some consumers said their accounts were being sent to collections even though they weren't delinquent.
- Consumers stated that medical debt payment plans were in place but the account was sent to collections.
- Consumers claimed that collectors are calling repeatedly, at home and at work, even after notification that the employer forbids it.
- The second most complained about product or service was credit reporting.
- Arizona seemed to be the state with the most debt collection complaints.
The report also lists the companies that have received the most complaints. This data is shared with Congress twice each year and also presented to state and federal agencies. The companies that violate the FDCPA may also be subject to litigation.
Consumers are wise to be aware of their rights under the Fair Debt Collection Practices Act and report violations to the Consumer Financial Protection Bureau. Collection agencies are also held to the standards of the FDCPA and the enforcement of the CFPB. If the agency is being fair, honoring consumer rights, providing validation of the debts owed, calling within the hours allocated, and legitimately using tactics that encourage consumers to pay, not only are recovery rates higher but the agency is less likely to find themselves on the complaint list.