Acting Deputy Director of the Consumer Financial Protection Bureau
CFPB/FTC Debt Collection Roundtable
“Life of a Debt: Data Integrity in Debt Collection”
June 6, 2013
Thank you, Commissioner Brill, and thank you to everyone for joining us today. I would also like to thank our colleagues from the Federal Trade Commission for hosting this event. Since the Bureau launched in July 2011, we have come to realize that we could not have a better group of partners to protect consumers across this country.
Today’s event follows similar industry roundtables on debt collection practices that the FTC organized. These have proven valuable in surfacing important issues and allowing a wide range of stakeholders to air their views and discuss policy solutions. So, again, we are delighted to be here today.
As we continue to emerge from the devastating fiscal crisis of 2007-2008, we now find that debt collection is a central issue of our times. Currently, there are about 30 million consumers – nearly one out of every ten Americans – with at least one debt in collections, for amounts that average about $1,500 apiece.
At the Bureau, we recognize that debt collection is an essential part of the credit system. Debt collectors remind borrowers that repaying debt is a serious obligation and that not repaying has consequences. But we also recognize this is a market where consumers can’t “vote with their feet.” While many debt collectors play by the rules and are simply doing their jobs trying to collect what is legally owed – there are also those who cut corners on compliance and others who are bad actors.
From the complaints we get at the Bureau on credit cards and mortgages, we know many consumers find dealing with debt collectors to be frustrating and often stressful. These complaints raise a number of concerns. We worry whether the consumer is being told the straight story about the consequences of not making payments. We worry whether the debt being claimed is for the right amount. And we worry whether it’s the right person being called. We hear too often about such problems.
My hope is that today’s roundtable allows us to gather information and work toward making this industry better for consumers and the honest businesses that are doing good work.
Our job, and that of our partners at the FTC, is to take appropriate action against collectors that violate the law. Not only do bad actors hurt consumers, but they are also a detriment to every debt collector who is faithfully following the law. In fact, a stated purpose for the Fair Debt Collection Practices Act is that Congress wanted “to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged.”
The Bureau began its supervision of debt collection practices at large bank lenders and payday lenders to make sure they are complying with federal consumer financial law. Then, in January this year, we started something never before done on the federal level: We began examining the larger nonbank debt collection firms. We monitor these debt collectors just as we monitor the large bank lenders. We make sure the company’s business practices are in accordance with the law. This supervisory authority extends to about 175 debt collectors and debt buyers, which account for over 60 percent of the industry’s annual receipts in the consumer debt collection market.
More broadly, the shared objective of both the FTC and the Bureau is to seek and evaluate broader solutions to overall challenges in this market. The focus of today’s roundtable – the integrity of the recordkeeping processes and data that are used to collect on a debt – is also one of the most important focuses of our early supervision and enforcement efforts in this industry. Data accuracy and availability, and the maintenance of that accuracy across the different market participants, are critical for having collection processes that are fair and for having communications that consumers can trust. Questions of data integrity in the collections process are the subject of many of today’s panels.
Allow me to illustrate three areas of focus. First is the accuracy of the data that debt collectors are using to pursue consumers and that is communicated to consumers who may owe a debt. When third-party collectors or debt buyers are involved this issue becomes important. Original creditors should ensure that a sufficient amount of information about the debt is being made available. So we pay close attention to whether debt collectors have accurate information when they are collecting debts.
Second, is the extent to which the accuracy of the information – including such fundamental facts as the consumer’s identity and the amount of the debt – deteriorates as it ages or gets passed down the line to secondary or tertiary buyers. If any piece of that information is incorrect, or if the owner of the debt has changed, debt may become unrecognizable.
Third, consumers need to be able to dispute debts they believe to be incorrect. If the debt collector has furnished information about the debt to a credit reporting company, the collector has additional obligations under the Fair Credit Reporting Act to investigate disputes and inform the company of any inaccuracies it finds. Given the impact that a credit report can have on a consumer’s life, it is critical that the credit reporting companies have accurate and up-to-date information.
Another topic today is the information that is required as evidence in debt court cases. This issue has been highlighted by the FTC in its 2009 roundtable and influential report on debt litigation: “Repairing a Broken System.” This has proven to be an influential report and has helped spur reforms in court rules and rules of evidence in a number of states to assure that consumers receive proper notice that they are being sued and that plaintiffs adequately document their claims before they obtain judgments. As litigation has become an increasingly used collections activity, we have been following these court reforms and their impact on evidentiary requirements. We are also aware that states are looking into these issues and what records should be maintained and provided to consumers when creditors pursue debt collections through the courts.
Today’s roundtable brings together many stakeholders in the debt collection process. These include creditors, collection agencies, debt buyers, consumer advocates, plaintiff’s lawyers, attorneys general, academics, court officials, technology vendors, and regulators. All of us have a stake in ensuring the integrity of information that’s used in the debt collection process. It’s fundamental to fairness and transparency that consumers are able to trust the information they receive from collectors and to make decisions that are in their best interests. But the nature of information is that it’s a systemic responsibility. Multiple market participants create, communicate, update, and use common sets of information or even shared information systems in their roles in the debt collection process. So each of us has a role to play in formulating solutions –whether they are technologies, recordkeeping practices, data standards, or designing new systems, disclosures, or rules.
We ask for your help today in identifying solutions. We want to create a system where accurate information is maintained in this market so that collectors are calling on the right consumer to collect the right amount. And we want consumers to feel confident when answering the phone, that they will get a straight story, hear accurate information, and be able to make the best choices, given their circumstances. This, in turn, will be another step towards our collective goal of moving toward a debt collection market in which consumers are treated fairly, they retain their dignity, and they are prompted, appropriately, to pay their legitimate debts.
We are looking forward to our collaboration on these significant issues. Thank you for joining us today.
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.