Opinion

Enhancements to CFPB’s Consumer Complaint Database Are Long Overdue

Third-party debt collectors across the nation are dedicated to empowering customers to find financial freedom and success. In fact, most debt collection agency employees contribute their time to volunteering and engaging with charitable causes to build relationships with their communities and local businesses. As we move into the 21st century, innovative technologies have altered and enhanced the way businesses engage with consumers. For third-party debt collectors, this means prioritizing convenience and security as we continue to improve our communication methods and provide excellent service for the modern consumer.

On top of its substantial economic contribution to governments and taxpayers, the third-party debt collection industry has helped families and individuals find the path to financial freedom by working with consumers to purchase or restructure debts. In addition, small businesses without significant cash cushions rely on debt collection agencies to resolve outstanding payments hindering service to their customers and barring them from competition with larger institutions.

With all the good that third-party debt collectors provide for local governments — including uncollected taxes or fines — the industry has unfortunately become mischaracterized as a trade of deception. Legitimate collections agencies that follow the law are continuously met with burdensome and ineffective regulations that result in frivolous lawsuits or the inability to operate altogether. Thanks in part to the Consumer Financial Protection Bureau’s (CFPB) inception in 2010, this perception hasn’t improved much.

In the CFPB’s efforts to conduct oversight and enforcement of consumer finance laws, it has regulated what’s seen as controversial industries into the ground — all in the name of consumer protection. As its primary gauge on industry activities and issues, the CFPB uses the Consumer Complaint Database. Long riddled with controversy, CFPB Director Kathy Kraninger reexamined the effectiveness of this database in 2018 and requested feedback from financial services stakeholders.

While Kraninger nobly attempted to boost context surrounding complaint data back in September, continued enhancements must do more to address the problem of grouping wide-ranging industries into individual buckets, which has contributed immensely to the misrepresentation of the good work that third-party debt collectors do.

To date, the consumer complaint database has significantly misled the public by unfairly lumping in general or unrelated comments and requests with complaints. In reality, the industry is consumer- and solutions-focused.

If you look at the number of CFPB complaints in 2018, the highest percentage were regarding credit reporting, credit repair services and other personal consumer reports — a distinction not yet made in the publication of agency data. Further, collection complaints accounted for just 0.006 percent of all consumer contact with the debt collection industry in the first half of 2018. Sadly, however, the agency tells consumers, lawmakers and policy makers that the debt collection industry is the worst in the financial services sector.

As a member and former chair of the Institute for Collection Leadership (ICL), we are committed to ushering third-party debt collectors into the light of financial freedom for consumers and as a significant buttress to the overall economy. Without our vital industry, American families would pay more for goods and services, and small businesses would be left in the lurch when customers fall behind.

Overall, ICL is encouraged by these changes from the CFPB to more appropriately address inquiries, rather than meritless complaints, and we believe this is a step in the right direction in regard to transparency and the accuracy of their process. Kraninger’s recognition of the database issue will help drive a more productive partnership with the private sector and, hopefully, the efficiency of the agency as a whole. Her actions should be seen as a positive step for both consumers and the third-party debt collections community.

 

Lisa Im is a Board Member and the former Chair of the Institute for Collection Leadership. ICL is an innovative organization made up of large-company members in the credit and collections industry.

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