By Ed Mierzwinski, U.S. PIRG
Today, we joined Consumer Financial Protection Bureau director Richard Cordray and Washington, DC attorney general Karl Racine at their public event to release major CFPB survey data (CFPB release) on problems consumers face with illegal debt collector tactics. The report also included a detailed drill-down into problems created by the practices of the debt buyer industry, comprised of firms that buy older, uncollected debt for as little as less than a penny on the dollar. Among the key findings of the CFPB consumer survey included in the report Consumer Experiences with Debt Collectors:
- Over one-in-four consumers report threatening contact: Twenty-seven percent of consumers approached about debt said they felt threatened by the conduct of the creditor or collector who most recently contacted them. Debt collectors are generally prohibited from tactics that tend to harass, abuse, or oppress consumers.
- Three-in-four consumers report that debt collectors did not honor a request to cease contact.
- More than half of consumers report incorrect contact for at least one debt: These consumers reported that the creditor or collector sought the incorrect amount, that the debt was not owed, or that the person owing the debt was a family member.
- Over one-third of consumers report being contacted at inconvenient times: Debt collectors generally cannot call at times they know to be inconvenient unless the consumer specifically agrees to it.
- Nearly 40 percent of consumers report that a debt collector attempted contact four or more times per week: About 20 percent of consumers approached by debt collectors reported contact attempts by debt collectors usually four to seven times per week.
- One-in-seven consumers contacted about a debt report being sued: Fifteen percent of consumers contacted about a debt in collection over the prior year report being sued. About 75 percent of those sued do not go to the court hearing, which generally makes them responsible for the debt.
In his own prepared remarks, Director Cordray expressed grave concerns about problems with the debt buyer industry. These firms buy debts from original creditors in a kind of daisy-chain– the first debt buyer may pay a significant percentage of the value of an unpaid debt portfolio, hoping to recoup its costs through aggressive collection. But each successive debt buyer pays less and less for older, often time-barred debt. Their efforts result in a high percentage of consumer problems. As the director explained in those prepared remarks, the debts are bought and sold online. He even used an episode of Last Week Tonight with John Oliver to explain the problems this causes. Oliver purchased $15 million in debt for less than half a cent on the dollar, then retired it. Cordray called this altruistic, but pointed out that the online bazaars put the sometimes garbled and incomplete but highly personal and confidential information of millions of consumers at risk for others who may choose to use it for other, more “nefarious” purposes, not limited to attempting to collect it illegally but also potential identity theft or harassment.
During the event, General Racine also recounted his announcement yesterday that the online lender CashCall had finally agreed to settle his 2015 lawsuit over illegal practices, agreeing to refund consumers $1.8 million and to forgive an additional $1 million in alleged debt. We found in our August 2016 U.S. PIRG report Predatory Loans and Predatory Loan Complaints that CashCall and its debt collection subsidiaries were the source of numerous CFPB complaints.
Also this week, the CFPB announced a settlement with two affiliated Oklahoma law firms that falsely represented that their tactics to collect medical debts were attorney-supervised contacts when they were not. The firms and their president were ordered to refund over $577,000 to consumers.
Finally, at the event Director Cordray previewed several first-person video stories detailing the effect of debt collector harassment on the subjects of the videos. You can watch their stories here. The idea of the CFPB needs no defense, only more defenders.