Debt recovery business practices by financial institutions must be consistently compliant under increasing regulation and consumer scrutiny.
Information and complaints from consumers regarding questionable debt collection activity and compliance failures is increasingly reported in the news and social media.
Money and debts are top of mind with consumers. Consumer Financial Protection Bureau (CFPB) director Richard Cordray explained, “Since opening our doors in 2011, we have handled over 1 million complaints from consumers about their problems with financial products and services. Not only have we achieved substantial relief for consumers, but hearing directly from consumers is fundamental to our mission.”
The business of debt protection is enhanced by consumer feedback. “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.
Debt collection issues typically generate the highest number of complaints. The CFPB reported debt collection was the most-complained-about financial product or service. Of the many complaints the bureau handles, the most popular complaint is about the process. The second most-complained-about consumer product is credit reporting, generating thousands of complaints. The third most-complained-about financial product or service is mortgages.
All payments of money that debt collectors receive must be obtained compliantly. The top three credit-reporting companies that typically receive the most complaints are 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 one year, CFPB officials indicated complaints about debt recovery submitted to the bureau rose 50 percent between July and August. While 6,488 debt related complaints were submitted to the bureau in July, 9,746 debt gathering complaints were submitted in 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 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.
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.