Identity theft is once again the top consumer complaint in 2010, per the Federal Trade Commission. But, debt collector complaints are on the rise and they’re closing the gap going from 119,000 complaints in 2009 to over 144,000 in 2010. The rise in debt collection complaints isn’t a surprise considering the amount of defaulted debt that has been purchased by debt collectors over the past 24 months.
In 2010 ID theft complaints represented 19% of the FTC’s complaints with debt collection at 11%. The gap between the two has narrowed from 2009 when ID theft represented 21% and debt collection represented only 9%. The increase in debt collection complaints is validated by the fact that roughly 12,000 FDCPA (Fair Debt Collection Practices Act) lawsuits were filed in 2010, a record number that we’re on pace to match in 2011.
Interestingly, the number of credit bureau related complaints went from 31,629 in 2009 to 28,724 in 2010 and the number of credit repair complaints went from 41,448 to 31,726. The FTC continues to lump credit repair with advance fee loan services despite the two having nothing to do with each other. The actual number of credit repair complaints is likely much lower, which contradicts the agency’s stance that credit repair is a scam.
Credit card complaints are down from 45,203 in 2009 to 33,258 in 2010. This seems to confirm that the CARD Act has had some success in curbing the more abusive credit card practices, such as retroactive rate increases, fee harvester credit cards and aggressive marketing to young consumers who don’t have the ability or wherewithal to manage credit card accounts.
Not everyone is pleased with the findings though and my point about lumping together credit repair with advance fee scams isn’t the only such “lumping” concern. On March 9th the ACA (The Association of Credit and Collections Professionals) released a statement saying, among other things, that the “FTC data tells an incomplete story.” They point out 3 flaws in the results;
- First, the complaint data is actually comprised of both inquiries and complaints, meaning there is no regard for whether the consumer is contacting the FTC with a question or a legitimate complaint.
- Second, the FTC does not verify whether each complaint is actually illegal or a violation of the Fair Debt Collection Practices Act (FDCPA), or whether the complaints were resolved. What rarely gets shared is, that when given the opportunity, debt collectors resolve complaints they receive. According to the Better Business Bureau, debt collectors resolve 85 percent of the complaints received against them-significantly higher than other industries.
- Third, the debt collection data in this report lumps together first-party (creditors who own and collect the debt) and third-party debt collection (businesses contracted by creditors to collect debt on their behalf), which creates an incomplete portrait of consumer complaints.
Let the debate over the FTC results continue…
John Ulzheimer is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling. He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.