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Debt Collection Fact Sheets

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National and State Debt Collection Data


Advocates at Nearly 75 National, State, and Community Groups Urge Consumer Bureau to Protect Consumers from Abusive Debt Collection Practices in 2019

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FOR IMMEDIATE RELEASE: December 20, 2018
Contacts: National Consumer Law Center: Jan Kruse (jkruse@nclc.org) or April Kuehnhoff (akuhenhoff@nclc.org); (617) 542-8010
Americans for Financial Reform: Carter Dougherty (carter@ourfinancialsecurity.org) or Linda Jun (linda@ourfinancialsecurity.org); (202) 251-6700

Washington, D.C. – Advocates from 74 national and state advocacy groups sent a letter yesterday afternoon to new Consumer Financial Protection Bureau Director Kathy Kraninger urging the Bureau to focus on protecting consumers from abusive debt collection practices in anticipation of a proposed debt collection rule expected in March 2019.

“Approximately 71 million adults in the United States had debt in collections in 2017, including medical debt, credit card debt, and auto loans, according to the Urban Institute,” said April Kuehnhoff, staff attorney at the National Consumer Law Center. “With record levels of non-housing consumer debt outstanding, debt and debt collection have sadly become an increasingly common part of American life.”

In the letter, the civil rights, consumer, community, and labor advocates noted that violations are still common more than 40 years after the federal Fair Debt Collections Practices Act (FDCPA) became law. Debt collection problems are a leading source of consumer complaints to the Consumer Bureau, which received approximately 84,500 complaints about debt collection in 2017 alone. The Bureau’s 2017 survey found that one in four consumers contacted by debt collectors felt threatened.

In particular, advocates asked the Consumer Bureau to use the rule to prevent harassment by debt collectors, protect consumer privacy, limit the collection of time-barred debt, and improve the clarity and accuracy of debt collection notices.

“Unrelenting calls from collectors can push consumers to use money they need for rent, food, or medicine in order to pay the most aggressive debt collectors, even for debts they do not owe, just to stop the harassment.” said Linda Jun, senior policy counsel at the Americans for Financial Reform.

In the Consumer Bureau’s survey on debt collection experiences, nearly one in five consumers were contacted eight or more times a week, and 75% of consumers who asked to stop receiving calls reported that collectors did not comply. That is the type of harassing behavior the FDCPA is designed to prevent.

Advocates asked the Consumer Bureau to limit debt collectors to one live call per week. Text and email communications should only be allowed if a consumer gives consent, in full compliance with the federal E-Sign Act, and only to the phone number or email address designated by the consumer.

The Bureau should prohibit collection of time-barred debt, both in and out of court. Debt beyond the statute of limitations is too old to collect without mistakes or deception. At a minimum, the Bureau should prohibit suits on “revived” debt, limit communications to writing only, and require each communication to have clear, consumer-tested disclosures that the consumer cannot be sued.

Additionally, the Consumer Bureau should create a model validation notice and statement of rights that provides comprehensive, clear and accurate information about the alleged debt and the consumer’s debt collection rights. Once created, this model validation notice should undergo consumer testing to confirm that it is comprehensible to the least sophisticated consumers. Each debt collector should be required to send a validation notice and statement of rights even if other collectors previously sent notices.

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Since 1969, the nonprofit National Consumer Law Center® (NCLC®) has worked for consumer justice and economic security for low-income and other disadvantaged people, including older adults, in the U.S. through its expertise in policy analysis and advocacy, publications, litigation, expert witness services, and training.

Americans for Financial Reform is a nonpartisan and nonprofit coalition of more than 200 civil rights, consumer, labor, business, investor, faith-based, and civic and community groups. Formed in the wake of the 2008 crisis, we are working to lay the foundation for a strong, stable, and ethical financial system – one that serves the economy and the nation as a whole.



After Multiple Lawsuits and Court Order, Education Department Finally Agrees to Provide Relief to Students Hurt By School Closures

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FOR IMMEDIATE RELEASE: December 14, 2018 ||  Contacts: Abby Shafroth (ashafroth@nclc.org) or Jan Kruse (jkruse@nclc.org); (617) 542-8010

Boston – Yesterday evening, after multiple lawsuits by borrowers and state attorneys general and a federal court order, the U.S. Department of Education announced that it would begin providing relief to approximately 15,000 student loan borrowers eligible for automatic discharges of their federal student loans because their schools closed before they could complete their programs. Approximately $150 million in federal student loans that borrowers took out to earn degrees that they were unable to complete due to their schools’ abrupt closures will be cancelled.

The Department is required to provide this relief as part of the 2016 “Borrower Defense” regulations passed under the Obama administration, but it delayed implementing the regulations and providing relief for over a year and only acted after a federal court ordered it to do so in October and another lawsuit was filed in November. The National Consumer Law Center filed an amicus brief on behalf of 18 legal aid and nonprofit organizations in the lawsuits that led to the October order.

“This student debt relief has been a long time coming, and is only coming because borrowers and states fought for it and demanded that the Department of Education follow the law,” said National Consumer Law Center attorney Abby Shafroth. “The relief announced so far will apply to eligible student borrowers whose schools closed between November 1, 2013 and December 4, 2015, so some of these borrowers have been burdened for five years with unfair and unnecessary debt for a degree they couldn’t earn. During that time, most borrowers hurt by closures were left struggling to make payments while providing for their families on tightly stretched incomes. Those borrowers who couldn’t afford the loans and defaulted faced damaged credit, heavy collection fees, wage garnishment, and even seizure of important safety net protections, including Social Security and the Earned Income Tax Credit.”

“While implementing the closed school relief is a good first step, there is much more the Department needs to do to comply with the court order to fully implement the 2016 borrower defense rule,” Shafroth said. “Among other things, the Department must make sure that schools profiting from the federal student loan program are not using forced arbitration clauses against their students to prevent them from bringing fraud claims to court, and must adjudicate the over 100,000 borrower defense claims seeking loan relief based on school fraud—which the Department has been sitting on—using the process set out in the 2016 rule. With last week’s closure of the nationwide for-profit school chain Education Corporation of America, it should be clear to everyone that the problems of abrupt school closures and school scams are far from over, and students need protection today.”

Notably, the Department has proposed new rules that would eliminate automatic relief for borrowers hurt by school closures. If these rules are adopted, student debt relief like that announced yesterday would end. As detailed in comments submitted by the legal-aid community, advocates at the National Consumer Law Center strongly opposes restricting relief for borrowers hurt by school closures, and calls on the Department to focus its efforts on protecting students and taxpayers against the risk of abrupt closures rather than making it even harder for students hurt by closures to get relief.

Related NCLC Resources



How California’s New Privacy Law Affects Everyone

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December 13, 2018

A new California law that changes the way companies handle personal information could affect consumers nationwide. The law imposes some of the toughest privacy protections in the country, but the law stops short of tougher measures California was considering.

The law, which takes effect in 2020, mandates a wide variety of new protections for consumers, giving consumers new transparency, access, opt out, deletion, and portability rights. This webinar will provide an overview about what the law does, what it doesn’t do, how the law will be refined as it is implemented, and what is next on the privacy frontier.

Speakers:

Justin Brookman, Director, Consumer Privacy and Technology Policy, Consumers Union
Ariel Fox Johnson, Senior Counsel for Policy and Privacy, Common Sense Media

recording only

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Consumer Bureau’s Shocking New “No Consumer Protection” Policy

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FOR IMMEDIATE RELEASE: December 11, 2018
National Consumer Law Center contacts: Lauren Saunders (lsaunders@nclc.org) or Jan Kruse (jkruse@nclc.org)

Proposed Policy Changes Could Exempt Entire Industries from Consumer Laws and Regulations

Washington, D.C. – In a final affront to American families as acting director Mick Mulvaney headed out the door, just hours before Kathy Kraninger was sworn in as director, the Consumer Financial Protection Bureau (CFPB) has proposed a dramatic revision of its “no-action letter” policy and a new “Product Sandbox” that would give the Bureau broad authority to exempt entire industries from consumer protection laws and oversight.

“In a shocking, brazen, and unlawful move, the CFPB has proposed a ‘no action’ policy and ‘product sandbox’ that is instead a consumer protection desert that could wipe out consumer protection laws for entire industries, giving companies a safe harbor from liability if they harm consumers and from supervision or enforcement by the CFPB against unfair, deceptive, or abusive practices,” said Lauren Saunders, associate director of the National Consumer Law Center. “The enemies of consumer protection failed to persuade Congress to gut the CFPB, and the now the agency is trying to erase itself out of existence, and even stop consumers from protecting themselves.”
The CFPB has proposed two new policies.

Under the Product Sandbox, the Consumer Bureau purports to have authority to exempt companies or entire industries from federal laws and regulations without going through the rulemaking process, seeking public comment, or fulfilling legal requirements governing the consideration of costs, benefits, or impacts on small businesses. It is proposing to give companies “a ‘safe harbor’ from liability under the applicable statute(s) to the fullest extent permitted by these provisions … i.e., the recipient would be immune from enforcement actions by any Federal or State authorities, as well as from lawsuits brought by private parties.” Among others, the policy would permit exemptions from provisions of the laws governing mortgages, credit cards, and other forms of lending; fair lending laws that prohibit discrimination; and the laws protecting bank accounts and electronic payments.

“For example, with only a cursory 60-day review, the Bureau might decide that a computer algorithm used to decide who gets mortgages does not violate fair lending laws, even if the data later show that the algorithm discriminates against equally qualified borrowers of color. Or, the Bureau might try to exempt risky mortgages from the rules that apply to high-cost loans,” said Saunders.

The new “no-action letter” policy would allow companies – and trade associations on behalf of an entire industry – to seek relief from consumer protection laws for products or services on the grounds of potential “uncertainty, ambiguity or barrier.” Once a letter is granted, the CFPB “will not make supervisory findings or bring a supervisory or enforcement action against the recipient,” either under its authority to address unfair, deceptive or abusive practices or under “any other identified statutory or regulatory authority within the Bureau’s jurisdiction.” The Bureau has proposed several changes from the prior policy issued under former director Rich Cordray:

• Companies will not have to share data with the CFPB that would enable the agency to monitor the products for risks for consumers.
• The CFPB expects to grant or deny requests in only 60 days
• The default assumption will be that the letters would last indefinitely.
• The director will not need to approve the letters and will allow designated staff to commit the agency not to exercise its supervisory powers or take enforcement action.
• The Bureau is taking the position that much of the information in the applications will be confidential and not subject to public records requests.

“The CFPB’s proposals are unlawful, outside its authority, and undoubtedly will face a legal challenge,” said Saunders. “The Bureau cannot simply give companies a free pass to violate consumer protection laws, or carve big exemptions without even giving the public opportunity for input and without thoroughly considering the harms to consumers.”

Comments on the proposed policies will be due in mid-February but after the policies are final, the CFPB will not be taking public comment on applications to provide relief to particular companies, products, or services.

Related NCLC Materials

NCLC Comments in Response to CFPB’s Request for Information Regarding the Bureau’s Inherited Regulations and Rulemaking Authorities – electronic disclosures, statements, records and other communications, June 25, 2018

Letter opposing AZ HB 2434, Innovation Regulatory Sandbox, Jan. 24, 2018



Advocates Decry Lack of Compensation in Consumer Bureau Settlement

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FOR IMMEDIATE RELEASE: December 7, 2018

CONTACTS: National Consumer Law Center: Jan Kruse (jkruse@nclc.org) or Chi Chi Wu (cwu@nclc.org); (617) 542-8010
Consumer Federation of America: Christopher L. Peterson, (202) 387-6121 x1020

Consumers Abused by State Farm Deserve Better

Washington, D.C. – Advocates from the Consumer Federation of American and the National Consumer Law Center criticized the Consumer Financial Protection Bureau’s enforcement action announced late yesterday against State Farm Bank for imposing no restitution or fines at all. The CFPB discovered that State Farm violated the Fair Credit Reporting Act by reporting inaccurate information about its customers to the credit bureaus and for illegally pulling credit reports without a permissible purpose.

“State Farm Bank is one of the largest 1% of all banks in the America, said Christopher Peterson, Consumer Federation of America’s director of Financial Services and senior fellow. “Nevertheless, they paid less than a parking ticket to resolve a federal investigation into serious, widespread violations of our consumer protection laws.”

“State Farm wrongly reported accounts as past due, or marred the credit reports of the wrong consumer, depressing their credit scores,” stated National Consumer Law Center attorney Chi Chi Wu. “What’s worse, State Farm should have known this information was inaccurate because it allegedly conflicted with the company’s own records – yet State Farm will not pay one penny for its reckless behavior.”

Peterson also noted that State Farm apparently took months to clear up the errors, even after customers complained or the company otherwise knew the information was inaccurate. In the meantime, customers may have been rejected for credit, jobs, insurance or other benefits because of this false information. As for the illegally pulled reports, in behavior reminiscent of the Wells Fargo scandal, State Farm agents made up nonexistent loan applications in order to make a credit inquiry.

“It is reasonable for a bank with over sixteen billion dollars in assets to pay a substantial fine and reimburse every customer harmed by the bank’s illegal practices. Instead, on his last day as Acting Director of the Consumer Financial Protection Bureau, Mick Mulvaney didn’t even slap the bank on the wrist,” added Peterson. “In over 200 CFPB enforcement cases, I cannot recall another case that was so obviously incomplete.”

Wu advised consumers who are State Farm customers or have “shopped” with the company to immediately obtain their credit reports from www.annualcreditreport.com (consumers are entitled to one free report per year for each of the “Big Three” credit bureaus: Equifax, TransUnion, and Experian). Consumers should check if State Farm or its agents unlawfully pulled their credit reports by reviewing the section called “Hard Inquiries” or “Inquiries Shared with Others” for unfamiliar names.

Existing State Farm customers should check the account history on their credit reports for their State Farm accounts. If there is any inaccurate information in the history, the consumer should submit a dispute to the credit bureau reporting the information, with a copy to State Farm. “It’s important to send the dispute to the credit bureau if you want to preserve your legal rights,” said Wu. “With the exception of California, you can’t go after State Farm in court for messing up your credit report unless you first dispute with the credit bureau.”

More information on how to send a dispute to a credit bureau is available in the National Consumer Law Center’s guide Disputing Errors in a Credit Report.

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Since 1969, the nonprofit National Consumer Law Center® (NCLC®) has worked for consumer justice and economic security for low-income and other disadvantaged people, including older adults, in the U.S. through its expertise in policy analysis and advocacy, publications, litigation, expert witness services, and training.

The Consumer Federation of America is a nonprofit association of more than 250 consumer groups that was founded in 1968 to advance the consumer interest through research, advocacy, and education.