On July 28, the CFPB held a field hearing about debt collection in Sacramento, California coinciding with the release of an outline of the proposals it is considering in connection with its debt collection rulemaking. Together with its release of the outline, the CFPB issued a report, “Study of Third-Party Debt Collection Operations.” In the outline, the CFPB stated that it conducted the study “to obtain a better sense of current collector practices and procedures, so that the Bureau will be able to make informed decisions about the potential costs associated with various rulemaking policy options.”
The study, which was conducted from July to September 2015, gathered data through responses to a written survey from and telephone interviews with firms that would be considered “debt collectors” under the FDPCA (collection agencies, debt buyers, and collection law firms) and telephone interviews with debt collection industry vendors.
The study concluded that, industry wide, “most debt collection firms are small” and that 75% of collection firms employ fewer than 20 people each. However, the most heavily represented group of survey respondents—over 30% of the total respondents—were firms with between 100 and 500 employees. The study admits that “larger firms are overrepresented among survey respondents” with debt collection firms with more than 500 employees representing less than 3 percent of all debt collection firms based on 2012 U.S. Census Data but comprising roughly 19 percent of survey respondents.
Nevertheless, the study revealed that industry practices are relatively uniform in many areas. The great majority of firms—75%—reported having clients that audit the collector’s compliance with federal and state law. Also, the majority of respondents indicated that they always or often receive from clients most of the data fields surveyed by the CFPB, including the consumer’s full name, last known address, phone number, social security number, date of birth, chain of title, debt balance at charge-off, breakdown of post-charge-off fees and interest, account agreement documentation, and billing statements. The survey also asked respondents to categorize consumer disputes as one of four types. Responses indicated that the least prevalent dispute involved a collector contacting the wrong consumer.
The survey responses regarding collection management systems—software platforms handling account-level information—suggest that the industry is relatively standardized with most collection firms using software provided by a few vendors. Furthermore, nearly all respondents reported sending validation notices within 24 to 48 hours of when a debt is placed with them for collection. Only two respondents reported sending validation notices after making contact with the consumer.
The study also surveyed collector communications practices, particularly call frequency. The study concluded that larger respondents generally call no more than two to three times per week. Smaller respondents were unlikely to call more than one to two times per week and generally do not speak to a consumer more than one time per week. Importantly, the CFPB admitted that the survey was qualitative and did “not produce estimates that are necessarily representative of the debt collection industry as a whole.” Of the sample selected, the CFPB ultimately received only 58 responses. Additionally, the CFPB was forthright that the study was skewed towards those debt collection firms and vendors most comfortable speaking to the Bureau.