A new debt collection update was published earlier this week. Unfortunately, consumers continue to struggle to resolve their collection issues. Here are some highlights from the CFPB’s January 2017 report:
- Approximately 1 in 3 consumers with a credit record report they have been contacted by at least one creditor or debt collector during the year prior to the survey. 72% of those consumers reported being contacted about two or more debts;
- Past due medical bills, credit cards, and student loans are the most common types of debts in collection;
- More than 50% of consumers contacted about debts did not recognize them — they report that either the debt is not theirs or they do not agree with the balance;
- While 1 in 7 consumers contacted about a debt were sued on it, only 26% reported attending a court hearing;
- More than 1/3 of consumers contacted about a debt receive at least four collection contacts per week, with 17% of that group reporting at least eight contacts per week; and
- Only 1 in 4 consumers reported success in having collection contacts stop after making such request.
What does this teach us? First, there is still a high incidence of incorrect debt collection efforts. More than half of surveyed consumers did not owe the debt, were contacted about a debt owed by a family member or needed to challenge the amount of the debt. Second, consumers are not protecting themselves by appearing in court when sued. We need to continue to educate consumers about the need to defend themselves. At minimum, if a debt is properly being collected, settlement is often a far better option than risking a judgment. Consumer debt judgments can remain on credit reports for ten years, and can lead to garnishment and other citation proceedings.
Finally, as noted by the Consumerist:
Although ensuring that consumers are treated fairly when it comes to repaying debts is a priority for federal regulators, the way in which debt is sold and transferred among collectors is a growing concern.
The fact that a sampling of these sold debts show most were purchased for cents on the dollar, the personal data shared about consumers is cause for some concern. According to the CFPB, debt portfolios often contain names, Social Security numbers, account numbers, and dates of birth and, “In some instances, the CFPB’s review of 298 debt portfolios found unencrypted, identified personal information had been available to any visitor to a debt marketplace website.”
There must continue to be heightened scrutiny over debt purchasers to ensure compliance with consumer privacy rights.