Report: Mistaken Identity Tops Debt Collection Complaints

Illinois Consumers Getting Relief through the Consumer Financial Protection Bureau’s Public Consumer Complaints Database

Illinois PIRG Education Fund

Debt collectors trying to collect debt from the wrong person were the top source of complaints to the Consumer Financial Protection Bureau (CFPB), according to a report released today by the Illinois PIRG Education Fund.

“As American families continue to struggle to get out of debt following the worst economic collapse since the Great Depression, they deserve to work with debt collectors who are honest and transparent,” said Congresswoman Jan Schakowsky (IL-9). “The Illinois PIRG’s CFPB Debt Collection Report provides important information for those families, including its Consumer Complaint Database that helps both consumers and the CFPB identify problem debt collectors and debt collection practices.  It also makes helpful recommendations about policies that can be pursued to ensure that consumers get the accurate, timely information they need and to improve the CFPB’s effectiveness in protecting consumers.” 

“This report shows that the CFPB is doing important work to protect consumers from common and illegal practices by debt collectors, especially harassment,” said Rockford Alderman Tom McNamara. “Debt collectors are known for trying to collect debts that were never owed, such as from victims of identity theft who never had an account, or from consumers whose debts are actually owed by a hospital or insurance company. The CFPB is a useful resource for consumers who have problems with debt collectors.”

“The CFPB is helping consumers get relief from shoddy debt collector practices,” said Dev Gowda, Advocate with the Illinois PIRG Education Fund. “Many consumers who don’t owe debts are being harassed by lazy debt collectors who don’t verify consumer identities.”

The report, “Debt Collectors, Debt Complaints: The CFPB’s Consumer Complaint Database Gets Real Results for Consumers”, is the final in a series of reports by the Illinois PIRG Education Fund that analyze the complaints in the CFPB’s public Consumer Complaints Database. The CFPB began accepting complaints in July 2011 and now accepts complaints about most financial products and services.

Although the CFPB only opened its doors to complaints about debt collection last July, complaints about debt collection have already outpaced those for common products such as credit cards and bank accounts, accounting for the second largest portion of complaints after mortgages between July and January.

Some key findings:

• The CFPB has helped enable more than 2,700 consumers – 22 percent of complainants – to receive relief as a result of their debt collection complaints. The majority of these are non-monetary relief, such as halting harassing phone calls.
• The most common problems were debt collectors trying to collect debt from the wrong person (25 percent) or repeated phone calls (13 percent). State and federal laws protect consumers from harassing phone calls from debt collectors.
• The most complained-about debt collection company in Illinois is Encore Capital Group. Encore Capital Group also received the most complaints nationwide.
• About 16 percent of responses received from debt collectors to complaints filed with the CFPB were deemed unsatisfactory by consumers and were subjected to further dispute.
• Companies varied widely in how frequently they offered relief to complainants. Allied Interstate LLC granted relief to over 97 percent of complainants, while several companies never provided relief.

The report comes as the CFPB finishes collecting comments about debt collection in preparation for rulemaking in the industry. The report recommended that the CFPB make the following improvements to debt collection rules, including the following:

• Require debt collectors to stringently verify that they are collecting accurately-owed debts from the correct consumers, before they start;
• Clarify that the debt collection laws give consumers the right to sue to stop unfair practices and to collect multiple penalties for multiple violations;
• Protect service-members by strictly limiting contact with their commanders to verifications of employment and address;
• Protect all consumers by mandating additional disclosures concerning the effect of paying debts on their credit reports, such as a disclosure that “Paying this debt will not remove it from your credit report.”

“I applaud Illinois PIRG for its CFPB Debt Collection report and support its recommendations for strengthening CFPB’s data collection, reporting, and consumer complaint resolution program regarding debt collection,” said Dory Rand, president of Woodstock Institute, a research and policy nonprofit in Chicago that is focused on fair lending, wealth creation, and financial systems reform. “The CFPB consumer complaint database serves a critical role in shining a light on bad products and practices and on the financial institutions that are causing most of the problems for consumers.”

The report also recommends that the CFPB move to make the database more user-friendly, analyze the data they receive regularly, and use the information and analysis to implement strong consumer protections.

“The CFPB has only been taking debt collection complaints for a short time but is already swamped with them,” concluded Gowda. “Consumers need a strong CFPB that reins in reckless debt collectors who ignore the rules.”

“I thank Illinois PIRG for this important report, and I will continue to work to make sure the CFPB has the resources it needs to continue its work and that consumers are protected against bad debt collectors,” added Rep. Schakowsky.

###

Download the report, “Debt Collectors, Debt Complaints: The CFPB’s Consumer Complaint Database Gets Real Results for Consumers”.

This is the final in a series of five reports by the Illinois PIRG Education Fund that analyze the complaints in the CFPB’s public Consumer Complaints Database. Previous reports have analyzed bank account, private student loan, credit reporting, and credit card complaints.

Visit the CFPB’s public Consumer Complaints Database: www.consumerfinance.gov/complaintdatabase/

###

Illinois PIRG Education Fund works to protect consumers and promote good government. We investigate problems, craft solutions, educate the public, and offer meaningful opportunities for civic participation. www.illinoispirgedfund.org