Both the ACA and Credit and Collection Risk today shared numbers from the latest WebRecon report about debt collection litigation and CFPB complaints. The report and the response to it demonstrate how the debt collection industry works.
Almost no collection agency will tell you how it works to recover debt. Sometimes because its clients don’t care – or don’t want to know – as long as they don’t get in trouble or get sued. With this mindset, it’s no wonder that agencies are almost giddy about this or that type of lawsuit declining to an all time low. Since no other performance metric is shared, CFPB complaints and lawsuits become the number every company optimizes for – since only what gets measured, gets noticed.
Should lawsuits be the focus for agencies? A lawsuit represents a broken process, whether because an agency broke the law or a profiteering lawyer is looking to use the TCPA’s or FDCPA’s flaws to make some money. Litigation numbers are disconnected from the actual day to day consumer experience in the debt collection process as well as the experience of the collectors that are expected to make them pay.
The CFPB consumer complaints database is a compromise between letting agencies handle complaints themselves and going to court. That’s unfortunate, since you’d expect truly relationship-driven companies to care deeply about customer experience, but it seems that this service by the CFPB is needed. Looking at the breakdown of complaints, we see that customers keep getting contacted about debts they don’t owe, using problematic communication tactics, and without being given all the information they deserve. While some complaints are likely bogus or exaggerated, the split is telling. Quota-driven collectors are expected to do anything possible to collect without getting caught, while playing a cat-and-mouse game with the regulator. The result is an industry that measures itself by complaints to the regulator and number of class action suits, not by Net Promoter Score.
It’s a bad cycle, driven by legacy cost structures and an old-school approach to collections, a transactional approach aimed at milking the consumer for as much as possible before they file for bankruptcy. Creditors should start thinking about the collection process as a way to help customers in need, retain those who should be retained and provide a pleasant off-boarding experience to those who shouldn’t. When debt collection is a relationship-driven extension of your customer care efforts, there is no room for measuring performance by number of lawsuits. The industry as a whole must stay away from that type of boxed-in thinking.