MSU Extension MI Money Health

It is safe to say that debt collection is a big business. Unfortunately for consumers it also poses big issues. Many consumers are not even aware that they have debts in collections. This is particularly true of medical debt which can be very confusing for consumers. A Consumer Financial Protection Bureau (CFPB) report points out that as the economy improves, the supply of debt is expected to increase across debt markets. One can conclude that as consumers go further in debt, their exposure to debt collectors will continue to increase. The oversight of this industry will continue to be very important for consumers.

The number one complaint by consumers is that debt collectors are attempting to collect on a debt that is not owed, according to the report. Some additional common complaints involve communication tactics or debt collectors that do not properly disclose information about the owed debt or properly verify that the debt is actually owed. Seemingly worse are the complaints that debt collectors are making threats or taking illegal actions.

The primary law on the books since 1977 to protect consumers from unruly debt collectors is the Fair Debt Collection Practices Act (FDCPA). The FDCPA, declares that “there is abundant evidence of the use of abusive, deceptive and unfair debt collection practices by many debt collectors.”

Consumers are able to file such complaints by calling the CFPB at 855-411-2372 or by going online to the CFPB website. Since 2011, they received over 400,500 debt collection complaints, which are 27% of the complaints reported. The CFPB acts on these complaints in a number of ways. They sent 45% of their debt collection complaints to companies for their review and response. Forty-four percent were referred to other regulatory agencies and the remaining 11% were incomplete or are still pending decision with the CFPB.

Of the debt collectors within the supervision of the CFPB, reviews found the following to be the most common complaints: excessive or inconveniently timed telephone calls made to consumers, misleading representations, false threats of litigation, prohibited disclosure of consumer’s information and outright false communication. These prohibited actions were not left unattended. According enforcement actions supported by the CFPB and the FTC have resulted in over $570 million in consumer relief and over $13 million paid into the civil money penalty fund.

The report references several tactics that were the basis for enforcement actions. In one case a debt collector led consumers to believe that they would be sued or subject to criminal prosecution if they did not make their payments. In another case, accusations of false claims had been made and the debt collection firm actually filed more than 350,000 debt collection lawsuits in one state alone over a four-year period. Yet another action found that consumers were deceived into making payments on debts that were voided or otherwise did not have to be repaid. Outright fraud, coercion, intimidation, deception and various threats are common tactics. 

About two-thirds of these complaints were closed by the companies after giving an explanation tailored to the consumer’s complaint and in many cases giving an explanation that met the consumer’s desired resolution. For example, if a consumer claims that they did not owe a debt, the company may respond by telling the consumer that they are right and that they just made a mistake. Sometimes a collector might continue to try collecting debt that is not owed because of a mistaken identity. It may be that the collector has your phone number in the wrong collection file. However, many consumers have complained that they continue to receive calls even after telling the collector that the alleged debtor cannot be contacted by the number dialed. 

The CFPB has been known to document harmful telephone tactics. It is reported that one collection entity made 17,000 calls outside the hours allowed by the FDCPA. Even worse, they documented that this same entity had contacted a few consumers as often as 20 times within two days. In addition to misusing the telephone, some collection entities filed unfounded collection law suits. When someone is sued they have an opportunity to respond to the allegations.

CFPB examiners found that of 70% of consumers that answered the debt collector’s allegations, one or more of the debt collection entities dismissed the suit because they were unable to locate documentation to support their claims. In another situation, debt collectors would not actually file suit, but they would use the possibility of a lawsuit as a threat. 

Violations of the Fair Debt Collection Practices Act are a big issue. If you believe that you may be the victim of unlawful or abusive collection practices, be sure to contact the CFPB or the FTC and file a complaint. If you are struggling with debt problems, Michigan State University Extension offers a variety of money management programs in-person and online throughout the state of Michigan or you can visit their Money Management website for more information.