In 2021, the CFPB’s 2021 Consumer Response Annual Report showed a total of nearly 1 million complaints, with more than 70% related to credit and consumer reporting and another 12% related to debt collection. With the implementation of Regulation F last year, these numbers are likely to be even higher in 2022.
Additionally, consumers, attorneys, and credit repair businesses are becoming increasingly more familiar with laws that regulate collection practices, and they are strategically disputing all debts. Sometimes the intention is to overwhelm the credit reporting agencies, creditors and collectors with so many disputes that they can’t respond in the required timeline, thereby hoping the disputed item will simply be removed from their consumer report . If these disputed items aren’t removed, this often will lead to a complaint, or even a lawsuit. To protect themselves, creditors should regularly review their complaint and dispute response processes and ensure compliance from both their internal and third-party collection teams. The CFPB’s complaint portal also contains useful information to track complaint trends.
Collection Complaint Types
The Fair Debt Collection Practices Act, established in 1977, laid out some of the earliest guidelines for collection activities taken by third-party agencies. Intended to protect consumers from “abusive and deceptive practices,” the FDCPA established limitations on when and how collection agencies could contact consumers. However, with new channels such as email, texts, and private messages, new rules were needed to clearly define the requirements for collecting in the digital age. These definitions were provided with the implementation of Regulation F in November 2021.
Best practices are to have a formal, integrated complaint system in place that also can be accessed to verify information about disputes and even fraud claims. A system that can track all three will reduce the time and effort spent getting to resolution.
Disputed Accounts
More than half of the collection complaints received last year were accusations of collection attempts on debt that did not belong to the consumer or that had otherwise been settled or paid. If an account or balance has been disputed or is under investigation, all collection activity must stop until proof has been provided to the consumer. If the account is found to be fraudulent or incorrect, collection agencies and creditors must ensure that the consumer’s credit report is updated to either reflect the correct account status.
Disputes can be sent is various ways and to various entities for the same debt. It’s important that you have a solid communication process in place to ensure disputes are identified and handled promptly.
- A credit bureau dispute will originate with the consumer reporting agencies and will be delivered to the data furnisher via eOscar. These disputes must be responded to within 30 days in order to comply with the Fair Credit Reporting Act (FCRA).
- A dispute made directly to the collection agency, while it doesn’t have the same timeline, should also be investigated and responded to promptly. The agency should loop in the creditor immediately to obtain the information needed to respond. Since collection activity must cease during an active dispute, receivables will be at a standstill until it is resolved.
- A dispute made directly to the creditor, while the account is place with a collection agency, also requires immediate attention. Creditors should inform the collection agency immediately in order to cease collection activities until the dispute is resolved.
Additionally, an account in dispute cannot be reported to a credit bureau until the dispute is resolved. If the account has already been reported to the credit bureau, it should be updated with a ‘dispute’ status until the dispute is resolved.
Harassment
As outlined in the FDCPA and Regulation F, collection agencies cannot call a consumer more than seven times within 7 days or during “inconvenient” hours (between 8 AM and 9 PM in the consumer’s time zone, unless otherwise requested by the consumer). Collectors are also prohibited from contacting or attempting to contact a consumer:
- At their place of employment;
- When they have asked for all further communication to cease; or
- After they have refused to pay the debt
Other harassing behaviors include providing false or misleading information, using obscene or profane language, or making threats of violence, harm, or legal action, when no legal action is intended or allowed.
Written Debt Notification
The original text of the FDCPA only established requirements for the minimum content of the initial demand letter, allowing creditors and collection agencies to add more information. With Reg F, however, the CFPB instituted the Model Validation Notice, a standardized template for the initial demand letter. The model validation has an itemized breakdown of the debt, several disclosures, information on a consumer’s rights, and a tear-off section at the bottom to give the consumer the options to request the original creditor’s name and address, submit a payment, dispute the account, or request the notice be re-sent in Spanish. Failure to provide any of this information could result in additional complaints from the consumer.
Approximately 20 percent of the complaints received in 2021 were for accusations of harassment, including repeated phone calls, phone calls outside of acceptable hours, and ignoring a consumer’s request to stop contacting them. Regulation F established new limitations on the volume of phone calls placed to a consumer, but did not specify limitations on contacting them through other channels.
Safeguarding Against Consumer Complaints
Consumer complaints about debt collection increased by 47% from 2020, and credit and consumer reporting complaints were up by 122%. As a creditor, it’s crucial to have easily accessible account information available at all times and to ensure your third-party agencies are compliant with all the latest regulations. Some ways to protect your organization and minimize the number of complaints include:
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- Consolidate Systems: One of the easiest ways to protect your organization is to designate a single system as the system of record, even if account information is stored in various systems, including several third-party agencies. One, it makes disputes less likely as there is a single source of the truth and therefore less opportunity for glitches and technical issues to affect the consumer interaction, and two, as disputes arise, you’ll have easy access to the records you’ll need and can respond quickly to consumers.
- Make Sure Your Agents Identify Themselves: Even if they’ve connected with the consumer before, collection agencies should disclose who they are - especially through digital communications, which may come as an unwelcome surprise to some consumers.
- Educate Consumers: Collectors should always notify consumers of their rights to dispute the debt, request more information, or opt out of communications entirely.
- Holistic Approach to Consumer Interaction: While Regulation F still leaves room for interpretation as to the volume of digital communications allowed, creditors would be wise to monitor the frequency and efficacy of all communication media as a whole, rather than implementing discrete, disconnected calling, email and SMS strategies.
- Maintain Privacy: Whenever possible, prioritize the privacy of the consumer. Use verified contact information first, and leave limited information in voicemails and other messages.
- Report Quickly: Establish clear processes not only for responding to complaints and disputes, but also for ensuring the information is updated as quickly as possible with your third-party agencies and any credit bureaus who have reported on the account.
- Automate and Monitor: Take advantage of new technologies that allow you to track all third-party activities and manage your complaint and dispute processes seamlessly between you and your collection agencies.
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