mug blittIn December 2015, the CFPB issued its first major report on the credit card market since 2013. While the report in 2013 focused largely on the impact of the 2009 Credit Card Accountability Responsibility and Disclosure Act (CARD Act), this report largely examined trends in the consumer financing market but what was most interesting to me was the report’s section analyzing credit card debt collections where I found some interesting statistics.

The report noted that for 2014, it had received 88,300 complaints concerning debt collection of which one in seven were related to credit card debt. As we all know, the CFPB does not investigate the veracity a vast majority of these claims, meaning this complaint figure is of dubious value in measuring the conduct of the businesses policed by the CFPB. The statistic is of seemingly greater value for CFPB press releases or news articles on the dangers of debt collectors. However, if you consider that one in seven number and do some quick arithmetic, you get a figure of about 12,500 complaints regarding credit card debt. “So what,” you say. Well, let me put this in some context, with some numbers found in the report and some I uncovered thanks to Google.

First, consider an August 2014 Federal Reserve Bank of New York report regarding household debt and credit. According to that report, approximately 30 million Americans have at least one debt in collections. Now, consider that the 2009 FTC study entitled Collecting Consumer Debts: The Challenges of Change showed a majority of the cases on many state court dockets on a given day are debt collection matters. This finding was specifically quoted by the CFPB in this report. Couple those facts with a 2014 Bureau of Labor statistics Report, that showed 250,000 people are employed directly by banks to collect debt with an additional 130,000 more people devoted to third party collection. Hence, with nearly 400,000 people servicing 30 million delinquent accounts, many of which dominate court dockets, the credit card collections amounts to a complaint rate of 0.0004%. As you can guess, that is not the spin the CFPB put on the 88,300 figure. What makes that oversight more telling is that, but for the Federal Reserve report, all of these reports were cited and footnoted within this 2015 CFPB study. Regarding the Federal Reserve report, I went with their more conservative number, as I found another report that claimed 70 million Americans had accounts in collections.

While I am on a roll, let’s consider more figures. According to the CFPB, at the height of the Great Recession, 2010, nearly 11% of all accounts were considered charged-off. This tells you that there is an enormous universe of files that would be subject to consumer collections and therefore subject to the CFPB’s oversight and statistics. Yet, even with that volume, the complaint rate for credit card accounts is well under 1%.

Now, I understand that the numbers are not a complete apples to apples comparison. However, given the laserlike focus of Congress, the president and regulators on consumer debt, particularly with the heavy publicity directed to credit issuers, debt buyers and collection attorneys since 2009, our industry appears to have consistently done what it has always done – practiced collection law ethically, professionally and pragmatically.

Obviously, this is my spin on the facts and figures; the CFPB would never give our industry credit, or would they? They actually do come close! The Report, even though you do have to look hard to find it, actually gets it right when it comes to the business of collections. In commenting on a collection system, which rewards 3rd parties who demonstrate the best collection returns, the CFPB stated that system can “optimize the rate of recovery for issuers which can benefit consumers in terms of decreased cost and increased availability of credit.”

Something else caught my eye, again allowing me to reach a conclusion that the regulators would never make. In examining the debt selling practices of credit issuers (and keep in mind this report was compiled prior to any of the major consent decrees) the report noted that credit issuers had provided the CFPB with their account documentation policies and practices. What is revealed was that after 2013, many of the issuers were making warranties as to title, compliance with relevant consumer laws and an affirmative statement as to accuracy and completeness of the information the debt buyer was purchasing. In fact, the report noted that only a minority of the debt sale agreements made no warranties and none of the agreements made caveat as to accuracy and that most stated the information was materially true and correct. While the report notes this was neither universal nor as far as the CFPB thought they should go, it is a clear sign the industry was working to address concerns before the consent decrees emerged.

Our clients and our industry will remain in the crosshairs for the foreseeable future. That being said, what this report shows is we continue to practice ethically and adapt rapidly to change. Moreover, while none of us welcome the scrutiny, it is clear that many of the decrees will only help to reduce the target. With greater amounts of documentation, more robust guarantees from debt sellers, the consumer and the courts can feel confident when we proceed to settle or litigate, our firms commitment to ethical collection will be reinforced by all our partners along every rung of the collection ladder.

Fred N. Blitt, Esq., is a partner with Blitt and Gaines, PC in Illinois and Couch, Conville and Blitt in Louisiana. He is past president of NARCA.