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CFPB Study Underscores That Consumers Contacted By Debt Collectors Feel Threatened

Thursday, January 12, 2017
Melissa Stegman
Lisa Stifler

Today, the Consumer Financial Protection Bureau (CFPB) released a survey which highlights that over one-in-four consumers contacted by a debt collection agency felt threatened. Additionally, the CFPB noted in their survey that one in seven consumers contacted about a debt during the previous year were sued in state court. About 75 percent of those sued do not go to the court hearing, which generally makes them responsible for the debt. The CFPB survey, a first of its kind, provides comprehensive and nationally representative data on consumers’ experiences with debt collection.

"The Bureau's survey demonstrates the urgent need for a strong federal rule on debt collection," said Melissa Stegman, Center for Responsible Lending (CRL) Senior Policy Counsel. "The overwhelming majority of people who are in debt and being pursued by collectors are not in debt by choice, but due to circumstances such as unexpected job loss or serious illness. And unfortunately we see too often that communities of color, lower-wealth families, servicemembers, and older Americans are more likely to be harmed by unscrupulous collection practices. We commend the CFPB for exploring this important topic in depth and look forward to the Bureau proposing a strong rule that frees consumers from abusive debt collection practices."

Debt collectors generate more complaints to the Federal Trade Commission (FTC), CFPB, and many state Attorneys General than any other industry. Debt collectors, when they acquire or purchase debts, often receive limited or outdated information about the debts they are collecting and individuals who allegedly owe the debts. Collectors very rarely receive account documentation establishing the debt, who owes it, and for what amount.

CRL recently issued a study where it found that debt collectors frequently use state court to pursue Colorado residents, even for debts the individuals may not owe or where they lack information to support the lawsuits. According to the study, 71% of the cases brought by four large debt buyers ended in a default judgment, meaning the consumer did not respond to the lawsuits.

"States should continue to strengthen the rules and laws for debt collection to better protect consumers," said Lisa Stifler, CRL Deputy Director of State Policy. "Too often we've seen debt collectors file lawsuits in state courts against the wrong person or for a debt not owed. State legislatures and courts must stop this abusive financial practice by holding debt collectors accountable for initiating unwarranted legal actions."

The CFPB also released a study of potential risks in the online debt marketplace, where consumer debts and personal information are for sale. This study found that most of the debt sold is at least five years old and seventy five percent of those debts had previously been collected two or more times.

For more information, or to arrange an interview with a CRL spokesperson on this issue, please contact Ricardo Quinto at ricardo.quinto@responsiblelending.org.