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Debt Collection Among Top Consumer Complaints in 2016

 

The Consumer Financial Protection Bureau released a monthly snapshot highlighting consumer complaints about financial services. The report revealed problems with debt settlement companies and a great opportunity for financial institutions using robust debt collection services.

When consumers submit a complaint that falls outside one of the bureau’s major complaint categories, their complaint falls under the category “other financial service.” The types of complaints that make up this category include debt settlement, check cashing, credit repair, and money orders.

The report showed that consumer complaints generally revolve around fraud or customer service problems. Debt recovery and settlement was the most complained about “other financial service”:

“The products and services highlighted report are often utilized by people working to make ends meet who can least afford to have issues with their financial products,” CFPB Director Richard Cordray said. “The Bureau will continue to examine complaints submitted about these products to target bad actors in the marketplace.”

For October 2016, debt collection was the most-complained-about financial product or service. Of the approximately 27,000 complaints handled in October, there were 7,749 complaints about debt recovery. The second most-complained-about consumer product was credit reporting, which accounted for 5,369 complaints. The third most-complained-about financial product or service was mortgages, accounting for 4,357 complaints.

Some of the snapshot highlights:

  • Debt settlement was the most complained about “other financial service”: Problems with debt settlement services made up 50% of “other financial service” complaints submitted to the bureau. Consumers complained of payments never forwarded that resulted in lawsuits for unpaid accounts.
  • Consumers complain of trouble redeeming money orders: Consumers complained of difficulty redeeming money orders, with the orders returned to them as invalid or fraudulent. When the consumers attempted to resolve the issue with the money order company, they complained of delays that resulted in no reimbursement for the value of the money order.
  • Product trends: In a year-to-year comparison examining the three-month period of August to October, student loan complaints showed the greatest increase, 108% of any product or service. The bureau received 1,272 student loan complaints between August and October 2016, while it received 612 complaints during the same period in 2015.
  • State information: Alaska, New Mexico, and Missouri experienced the greatest year-to-year complaint volume increases from August to October 2016 period versus the same 12 months before, with Alaska up 53%, New Mexico up 33% and Missouri up 31%.
  • A majority of other financial service complaints involved fraud or scam as the consumer’s primary issue. These complaints involved consumers seeking to settle or consolidate outstanding debts—often student loans—with creditors. Many consumers seeking to consolidate student loans reported some companies advertised being affiliated with the federal government or acting as a third-party vendor to federal student loan servicers. Consumers complained they were fraud victims of upfront fees with no relief provided on their existing student loan debt.
  • Some debt relief companies required upfront fees paid by consumers prior to acceptance as clients. Consumers stated that after paying the fees they often encountered little to no communication from the companies on the status of the accounts needing settling. Some consumers reported their accounts often settled for much less than the amount stated to them by the debt relief company, and that they met resistance when trying to obtain a refund for the difference.
  • Consumers looking to repair their credit expressed concerns because credit repair companies, which provided no relief, scammed them and provided no reimbursement for services not rendered.