CFPB issues report on consumers’ experiences with debt collectors

Last week, the Consumer Financial Protection Bureau issued a report titled “Consumer Experiences with Debt Collection.” The report was based on survey data collected between December 2014 and March 2015 from consumers who were contacted by debt collectors. The Bureau touts the survey as providing a more comprehensive picture of consumers’ experiences with debt collection than has been available from other debt sources.

Here are some of the findings I thought were noteworthy:

Nearly one-third of all consumers have been contacted by a debt collector. 32 percent all consumers reported being contacted by a debt collector about a debt within the past year. About 75 percent of these consumers were contacted about more than one debt.

Low income and non-white consumers are more likely to experience debt collection efforts. Over half of consumers with annual household income of less than $20,000 reported being contacted about a debt in collection, compared with only 16 percent for those with household incomes of $70,00 or more. Similarly, more than 40 percent of non-white consumers reported having been contacted by a debt collector, compared with 29 percent of white consumers.

Credit cards, student loans, and medical bills were the most common types of debt. The survey separates the types of debts into two categories: “loans” such as student loans, auto loans, and credit cards; and “past-due bills” such as medical bills and utility bills. Among consumer contacted about “loans,” 44 percent were contacted about a credit card and 28 percent were contacted about a student loan. On the “past-due bills” side, nearly 60 percent of people were contacted about a medical bill.

One in seven people in collections were sued to collect the debt. 15 percent of consumers with a debt collection experience reported that they were sued by a creditor or debt collector during the preceding year. Only about one-quarter of these people reported attending a court proceeding.

Over one-third of people contacted by collectors were contacted four or more times per week. 37 percent of people who were contacted by a debt collector reported that they were contacted four or more times a week. 17 percent reported that they were contacted eight or more times week.

Debt collectors honored a request to stop contact only 25 percent of the time. 42 percent of consumers who were contacted by a debt collector requested that the collector stop contacting them. However, the collector stopped the contacts in only 25 percent of those cases.

Nearly 30 percent of consumers reported being contacted about a debt they didn’t owe. According to the survey, 28 percent of consumers who had been contacted by a debt collector reported that at least one debt was being collected that the consumer believed wasn’t owed. One-third of consumers who had been contacted said the collector was trying to collect the wrong amount.

I talk to people in debt collection nearly every day and these findings are consistent with my conversations and anecdotal observations. I strongly believe that when dealing with debt collectors, knowledge is power. Take some time to learn about the collection process and your rights. Here’s some suggestions to get you started in learning more:

(1) educate yourself about your rights under the Fair Debt Collection Practices Act, which governs what debt collectors can and can’t do. If you feel like a debt collector has broken the law, consider filing a complaint with the CFPB or talking to an attorney about suing the collector under the FDCPA.

(2) if you just want to pay the debt, learn how to best negotiate a settlement with a collector.

(3) if you’re handed a collection lawsuit, always answer it by the appropriate deadline to avoid a default judgment.

(4) after answering the collection lawsuit, learn the typical next steps and how to approach them.

(5) if a collection judgment gets entered against you, know what your options are to minimize the damage.

(6) if you’re being garnished by a collector, learn more about the process and your rights.