A recent report from the Consumer Financial Protection Bureau suggests that many Americans are being hounded by collectors for debt they may not actually owe:
The CFPB’s “Fair Debt Collection Practices Act” annual report [PDF] shows that nearly 34% of complaints received by the Bureau involve consumers being hounded by collectors for a debt the consumer does not believe is owed. Of those complaints 65% of consumers report the debt is not theirs, and 27% report the debt was paid. The reports notes that in many cases the attempt to collect the debt is not the issue, but rather the calculation of the amount of underlying debt is inaccurate or unfair.
David Dayen delves into why the debt collection industry does this:
Can the debt collection industry be so careless as to continually harass the wrong individuals? The more you learn about how debt collection works, the more you’re surprised that they ever find the right target in the first place. When a consumer sustains a debt, the creditor can either attempt to personally collect it, or sell the debt to one of America’s 4,500 collection agencies. That auction process is completely broken, producing the ultimate in caveat emptor.
“Creditors provide debt buyers with almost no data, no original contract, no backup information,” said Ira Rheingold, executive director of the National Association of Consumer Attorneys. “The records are so poor that sometimes the amount of the debt is wrong too.” In a world of big data, the debt buyer market operates like it’s still the 1970s, where the commodity is merely a spreadsheet full of hints and leads, instead of reliable information about debts.