"I know it's a complicated industry, but a lot of debt collectors have really sloppy practices and that's just not acceptable," said Laura Murray, consumer associate with the U.S. PIRG Education Fund, who co-authored the study.
Mark Schiffman, vice president of public affairs at ACA International, the Association of Credit and Collection Professionals, said the industry takes complaints seriously and it will analyze the data.
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"A complaint doesn't mean there was bad behavior in every instance and we caution people who look at this information to keep that in mind," Schiffman said. "Somebody may not like something, the definition of a complaint, but that doesn't mean something wrong was done. Nor are the complaints to CFPB verified for wrongdoing or unlawfulness."
The business of debt
Debt collection isn't what is used to be. This is now a multibillion-dollar industry. The CFPB estimates there are more than 4,500 debt collection firms in the U.S.
Old debt often doesn't go away anymore, as it did in the past. It's now a commodity that is bought and sold and sometimes resold.
"Creditors are selling really old debt for pennies on the dollar and they often provide these debt buyers with very, very, very little information," said Ira Rheingold, executive director of the National Association of Consumer Advocates. "They're not providing the contract or a breakdown of principal and interest, and they're not providing any verification of the debt except to say this person in this location owes this much."
The debt collection industry agrees that it can do a better job of identifying those who truly owe the debt. But ACA International's Schiffman says the problem doesn't lie solely with the collector.
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"We need to get better documentation from the creditor. That's where the information is gathered that is passed on to a debt collector," Schiffman said. "We want to make it better, but this is a group effort."
Is more regulation the answer?
The CFPB is expected to issue new rules for the debt collection industry later this year. U.S. PIRG would like to see the bureau:
- Require debt collectors to stringently verify that they are collecting accurately owed debts from the correct consumers before they start.
- Clarify that the debt collection laws give consumers the right to sue to stop unfair practices and to collect multiple penalties for multiple violations.
- Require additional disclosures about the effect of paying debts, such as: "Paying this debt will not remove it from your credit report."