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More Collection Regulations Coming Amid Growing Complaints

 

It has never been more important that financial institutions assure that they remain in compliance with their debt recovery actions. Every day comes more news involving consumer complaints about questionable activity.

“Since opening our doors in 2011, we have handled over 1 million complaints from consumers about their problems with financial products and services,” Consumer Financial Protection Bureau director Richard Cordray said in the press release. “Not only have we achieved substantial relief for consumers, but hearing directly from consumers is fundamental to our mission.”

“We can better protect all consumers because of what we learn from those who have submitted complaints and shared their experiences with us,” Cordray continued.

For August, the CFPB reported debt collection was the most-complained-about financial product or service. Of the 28,651 complaints the bureau handled in July, there were 9,746 complaints about the process. The second most-complained-about consumer product was credit reporting, which accounted for 5,123 complaints. The third most-complained-about financial product or service was mortgages, accounting for 4,310 complaints.

The top three companies that received the most complaints from April through June were credit-reporting companies Equifax, Experian, and TransUnion.

Another frequent complaint the CFPB referenced was the error resolution procedures at financial institutions. For instance, when an unauthorized transaction occurred, or a consumer believed he or she was the subject of fraud, the CFPB received complaints about prolonged response times and the lack of provisional credit for disputed transactions.

Cordray emphasized how the CFPB will punish financial institutions when it finds wrongdoing.

Debt Recovery Complaint Trends

In a month-to-month comparison, officials indicated complaints about debt recovery submitted to the bureau rose 50 percent between July and August. While there were 6,488 debt related complaints submitted to the bureau in July, the CFPB received 9,746 debt gathering complaints during August.

The Bureau provided an overview of consumer complaints across all categories and geographic locations. The CFPB determined Maine, Nebraska and Idaho experienced the greatest year-to-year complaint volume decreases from June to August period versus the same time period 12 months before, with Maine down 36 percent, Nebraska down 19 percent, and Idaho down 15 percent.

Comparing trends, the CFPB said a year-to-year comparison between the months of May and July last year and this year showed a 64 percent increase in student loan complaints, with a jump from 639 to 1,050 complaints. The states with the greatest year-to-year complaint volume increase were Alaska, Wyoming, and Colorado, up 29, 24, and 20 percent, respectively.

Raised Before

The Bureau has raised some of the problems highlighted by the monthly complaint report with regard to bank products and services. Earlier this year, the CFPB released a compliance bulletin cautioning banks and credit unions “failure to meet accuracy obligations when they report negative account histories to credit reporting companies could result in Bureau action” and urging them to offer lower-risk products, such as “no-overdraft” accounts.

In prepared remarks to the National Association of Federal Credit Unions, Cordray indicated that a first party debt-collection proposal might be coming soon. Banks, credit unions and other financial service companies can expect the proposal to address the documentation a financial institution must provide to third party debt collector prior to any debt gathering. Additionally, Cordray's remarks suggest that provisions addressing to first-party debt collectors setting forth specific dispute resolution procedures are on the way.