On April 15, the CFPB issued its Annual Report on the Fair Debt Collection Practices Act (FDCPA) to Congress. In the Report, among other things, the CFPB describes common consumer complaints, issues identified by examiners, and enforcement actions related to the FDCPA and debt collection generally. This article will discuss the consumer complaints addressed in the Report. Future articles will address the supervisory issues and enforcement actions. It should be noted that the issues discussed herein are not limited to the FDCPA and creditors not subject to the FDCPA and Regulation F (12 CFR Part 1006), its implementing regulation. Any entity collecting debts, whether they are collecting debts owed to them or are a third-party debt collector, should take note of this Report.
The most common type of consumer complaint related to debt collection involves the collection of debts the consumer does not owe. In nearly half of these complaints (48%), consumers claim the debt is not their debt. These complaints include creditors and debt collectors calling them about debts they do not recognize, attempts to collect a debt that belongs to someone else, and being in collections for services or products they did not receive. More than a third of these complaints (36%) involve debts related to identity theft. Many consumers complained that their debt was paid (14%) or was discharged in bankruptcy and is no longer owed (3%). Debt collectors subject to the FDCPA should be sure to send the debt validation notice required by § 1006.34 of Reg. F along with, or within five days of, its initial communication with the consumer. To avoid a potential UDAAP, creditors and other entities not subject to the FDCPA should take reasonable steps to ensure that they are verifying the consumer owes the debt before attempting to collect the debt.
The second most common type of consumer complaint related to debt collection involves written notifications about debt. As mentioned above, § 1006.34 of Reg. F requires debt collectors to provide the consumer with a written notice verifying the debt and informing them of their right to dispute the debt. In nearly three-quarters of these complaints (74%), consumers stated they had not received enough information to verify the debt. Often, consumers complained that the notices were vague and did not have enough information to identify the account in question. In twenty-five percent of these complaints, a consumer complained that the notices did not state that the consumer has a right to dispute the debt. A small percentage (3%) of these complaints involved notices that did not state that it was an attempt to collect a debt. Debt collectors subject to the FDCPA should be sure the debt validation notice includes all the information required by § 1006.34 of Reg. F, including a statement that it is an attempt to collect a debt, sufficient information to identify the debt, and a notice of the consumer’s right to dispute the debt. To avoid a potential UDAAP, creditors and other entities not subject to the FDCPA should include a statement that it is an attempt to collect a debt, sufficient information to identify the debt, and a notice of the consumer’s right to dispute the debt in their initial communications with a consumer about the debt they are collecting.
The third most common type of consumer complaint related to debt collection involves taking or threatening to take negative or legal action. More than half of these complaints (52%) involved threats or suggestions that consumers’ credit histories would be damaged. These complaints also included threats to sue on an old debt (17%), not providing proper notification of the lawsuit before being sued (11%), seizing or attempting to seize property (9%), threatening to arrest or jail consumers if they did not pay (5%), collecting or attempting to collect exempt funds such as child support or unemployment benefits (5%), suing a consumer in an improper venue such as a different state from where the consumer lives or where the consumer signed the contract (2%), or threatening to deport or turn the consumer over to immigration ( > 1%). Debt collectors and creditors collecting debts should ensure that they are not taking unfair, deceptive, or abusive actions in the collection of debts, including threatening to arrest or imprisonment of any person or the seizure, garnishment, attachment, or sale of any property or wages of any person unless such action is lawful and the debt collector or creditor intends to take such action or threatening to take any action that cannot legally be taken, or that is not intended to be taken. When taking legal action, debt collectors and creditors should ensure that they are bringing the legal action in the proper venue and providing proper notification of the legal action.
Many consumers complained of false statements or representations. Most of these types of complaints involved attempts to collect the wrong amount from the consumer (81%). Other of these types of complaints included companies impersonating an attorney or a law enforcement or government official (13%), indicating the consumer committed a crime by not paying the debt (5%), or indicating that the consumer should not respond to a lawsuit (2%). Debt collectors and creditors should ensure that they are not making any false statements or representations when collecting debts.
Consumers also complained about debt collectors’ and creditors’ communication tactics used when collecting debts. More than half of these types of complaints (51%) involved frequent or repeated calls. Almost a third (30%) involved debt collectors’ or creditors’ continued attempts to contact the consumer despite the consumer’s requests to stop contact. Other complaints involved debt collectors’ or creditors’ using obscene, profane, or abusive language (15%) or the debt collector or creditor calling at inconvenient calling hours (presumed to be from 8:00 a.m. to 9:00 p.m. at the consumer’s location) (4%). Debt collectors and creditors should ensure that they are not engaging in any conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a debt, including repeated or continuous calls; attempting to contact the consumer after the consumer has requested not to be contacted; using obscene, profane, or abusive language; or calling at inconvenient times or places.
Next month, I will discuss the common issues identified by examiners and my next article will address recent enforcement actions by the CFPB, other federal regulator agencies, and the FTC. Until then, debt collectors and creditors should review the CFPB’s Report and Reg. F to ensure that they are avoiding potential UDAAPs in their debt collection practices.