Yesterday, the CFPB released its annual report on debt collection, along with a press release. The headline, according to the Bureau, is that “Consumers Report Being Hounded About Debts Not Owed,” and the Bureau reported that more than one-third of the complaints it received were about collection efforts with respect to debts the consumer did not believe was owed. Accompanying this revelation was a strongly-worded quote from Director Cordray that the Bureau “will not tolerate” illegal conduct in connection with debt collection.
The disappointing thing about the report and the press release is that they draw conclusions from the complaints standing alone, even though the Bureau acknowledged in the report (but not in its press release) that the complaints were not necessarily valid and it was well within the Bureau’s ability to actually investigate whether the complaints were well-founded. Whether a debt “belongs” to a consumer or not is an objectively ascertainable fact, but the Bureau made no effort to actually learn whether the consumer complaints were accurate or not. This is despite the fact that the CFPB’s complaint portal provides an opportunity for the entity complained about to submit a response and provide supporting documentation – but the CFPB made no effort to analyze the complaints and responses together. Rather, the Bureau’s headline message was that consumers are plagued by collections on debts they do not owe, even though the Bureau has made seemingly no effort to support that conclusion with data.
Anyone who has reviewed any significant volume of debt collection complaints knows the unfortunate fact that the small number of legitimate complaints are almost always buried in an avalanche of complaints that have no merit whatsoever. Consumers are urged in numerous places on the internet to make complaints to stop further collection activity. As a result, debt collectors receive massive numbers of form-letter complaints or conclusory “I dispute everything” letters, without any supporting information. The investigation of those complaints typically reveals that almost all of them have no basis whatsoever.
The CFPB has done enough examinations of debt collectors, and has served enough CIDs on debt collectors, to know that this is the case. It also has the ability to separate the wheat from the chaff in its own complaint portal by at least reviewing the company responses and any consumer disputes of those responses. Indeed, buried on page 14 of the Report – but not mentioned in the press release – is the fact that the CFPB only passed along approximately one-third of the complaints it received to the complained-about company; the company responded 82% of the time; and the consumer disputed the company’s response only 17% of the time. Only in 1,500 cases did the consumer dispute the company’s response to the complaint, but the CFPB’s press release quotes only the raw number of complaints – 30,000.
The debt collection industry – both first-party and third-party – needs to help the CFPB come to terms with the fact that consumer complaints about debt collection are particularly unreliable as evidence that the complained-about conduct occurred. An objective, meaningful study of the rate of meritorious complaints as compared to all complaints submitted would be powerful evidence that the CFPB would be obligated to consider in connection with its anticipated debt collection rulemaking. For now, however, the CFPB has shown itself willing to draw unwarranted conclusions from extremely suspect data, and that is disappointing for an agency that holds itself out as transparent and data-driven.