WASHINGTON, D.C. – A Consumer Financial Protection Bureau (CFPB) report released today found that over one-in-four consumers contacted by debt collectors felt threatened. The report was drawn from the first-ever national survey of consumer experiences with debt collectors. Over 40 percent of consumers who said they were approached about a debt in collection requested that a creditor or collector stop contacting them. Of these consumers, three-in-four report that debt collectors did not honor their request to cease contact. The CFPB is also releasing a study of potential risks in the online debt marketplace, where consumer debts and personal information are for sale for fractions of pennies on the dollar. Finally, the CFPB is unveiling an online series of consumers’ stories about their debt collection experiences.
"The Bureau today casts light on troubling problems in the debt collection industry,” said CFPB Director Rich Cordray. "More than one-in-four consumers report feeling threatened by a debt collector, and a majority of those contacted about debt say the calls persist even after requests to stop. The Bureau is working to clean up abuses in this industry, and to see that all consumers are treated with fairness, decency, and respect.”
Debt collection is a multi-billion dollar industry affecting 70 million consumers who have or are contacted about a debt in collection. Banks and other original creditors may collect their own debts or hire third-party debt collectors. When they fail to collect debts on their own, they often sell these debts to debt buyers. The buyers may try to collect on these debts, or hire third-party debt collectors to do so. More than 6,000 debt collection firms are estimated to operate in the United States.
Consumer Survey of Debt Collection Experiences
The CFPB survey, the first of its kind, provides an in-depth analysis of consumers’ encounters with the debt collection industry. The national survey is part of an ongoing CFPB effort to explore industry practices and consumer experiences with debt collectors. Consumers were asked about their encounters with debt collectors for loans and unpaid bills. Questions included whether consumers had been contacted by debt collectors in the past year, how frequently, and the nature of the debt.
According to the CFPB debt collection survey, about one-third of consumers – or more than 70 million Americans – were contacted by a creditor or debt collector about a debt in the previous 12 months. Consumers are most often contacted about medical and credit card debt. The CFPB survey also found that:
- 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: About 40 percent of consumers contacted about a debt in collection said they asked at least one debt collector or creditor to stop contacting them. Of these consumers, three-in-four said the debt collector did not honor the request to cease contact attempts.
- More than half of consumers report incorrect contact for at least one debt: Fifty-three percent of consumers contacted about a debt in the year prior said at least one collection effort was mistaken in some way. 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: Thirty six percent of consumers contacted about a debt in collection said that the creditor or collector who most recently contacted them called between 9 p.m. and 8 a.m. 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: Thirty seven percent of consumers contacted about a debt in collection report that the most recent creditor or collector to contact them usually did so four or more times in a week. About 20 percent of consumers approached by debt collectors reported contact attempts by debt collectors usually four to seven times per week. Another 17 percent said a creditor or debt collector tried contacting them eight or more 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. The share ranges from 6 percent sued among those contacted about a single debt to 35 percent sued among consumers contacted about five or more debts. About 75 percent of those sued do not go to the court hearing, which generally makes them responsible for the debt.
To illustrate consumers’ experiences with debt collection, the CFPB today is sharing personal debt collection stories from consumers. It is part of an ongoing effort to highlight issues in the debt collection marketplace and to inform consumers about their rights. These online videos highlight consumer stories about being pursued for debts that weren’t owed, consumers who felt they were contacted too often, and consumers who were threatened with jail by debt collectors. The Bureau is encouraging more consumers to tell their stories.
CFPB Report On Risks in the Online Debt Sales Market
As a further effort to inform public understanding of the debt collection industry, the Bureau is also releasing a white paper highlighting potential risks to consumers’ personal information posed by debt sales online. Many debts sold in online marketplaces come with sensitive personal information attached, and are easily available at extremely low prices. The report raises questions about protections for that information and the dangers of it falling into the wrong hands.
When original creditors fail to collect debts on their own, they may sell the debt, sometimes for fractions of a penny on the dollar, to realize some return. The new debt owner has legal rights to seek to collect the full amount of the original debt or to resell debts that are uncollected. Some of these debts are sold online, through small internet marketplaces. This marketplace is made up of websites and, in at least one instance, through social media, where written-off bundles, or portfolios, of consumer debt are put up for sale. Typically, these debt portfolios contain the sensitive personal and financial information of consumers. This information can include names, social security numbers, account numbers, and dates of birth. In some instances, unencrypted, identified personal information has been available to any visitor to a debt marketplace website.
The report is based on a Bureau review of 298 portfolios of debt that surfaced among three online marketplaces the Bureau monitored between January and August 2015. All told, these portfolios were advertised as containing information on more than 1.2 million consumers, with a combined face value of almost $2 billion. The asking price for these debts was only about $18 million, or less than a penny on the dollar on average. Almost half of the accounts offered were payday loan debts and another 25 percent were credit card debts. These online marketplaces list debts that the sellers claim were originated by at least three of the largest credit card lenders.
Most of the debt for sale in these online marketplaces, along with the attached personal information, cost very little. Of the 214 portfolios that listed both the asking price and the number of accounts for sale, 25 cost less than $1 per consumer account. Another 37 portfolios were priced between $1 and $2. More than half of these debt portfolios were priced less than $5 per consumer account. Some portfolios, including one with a face value of $156 million on sale for $125,000, had asking prices lower than one-tenth of a penny per dollar. Most of the debt sold is at least five years old and 75 percent had been previously pursued by at least two other collectors.
More consumers complain to the CFPB about debt collection than any other financial product or service. To date, the CFPB has taken several steps to improve the debt collection marketplace and study the industry. Since 2011, the Bureau has brought more than 25 debt collection cases against first- and third-party collectors. These cases allege violations of the Fair Debt Collection Practices Act, or unfair, deceptive, and abusive collection tactics that violate the Dodd-Frank Wall Street Reform and Consumer Protection Act. These cases have brought a total of $100 million in civil penalties against debt collectors, more than $300 million in restitution to consumers, and $4 billion in debt relief for consumers.
In October 2012, the CFPB issued a larger participant rule establishing supervisory authority over nonbank debt collectors with more than $10 million in annual receipts from consumer debt collection. This covers about 175 debt collectors that generate more than 60 percent of the industry’s annual receipts. The Bureau has also ordered creditors and debt collectors to stop collecting on debt based on bad information, and to refund hundreds of millions of dollars for unlawful debt collection. The CFPB is continuing to consider proposals to reform the debt collection industry.
The Consumer Financial Protection Bureau (CFPB) is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit www.consumerfinance.gov.