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.
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.
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.
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.
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:
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.
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.
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:
Our Integrated Support Platform has everything you need to manage and monitor your bad debt across all of your third-party agencies. With visibility into every account and every agency, you can drive enhanced performance, maintain compliance, and unlock new insights. Reach out to see how the NeuAnalytics suite of solutions can support a custom, streamlined approach to your receivables management.
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