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Fair Debt Collection: 1.4.2 Credit Reporting

Creditors and other collectors sometimes turn to consumer reporting agencies (CRAs) to obtain information such as a consumer’s current address or to assess the collectability of their claim.321 Some CRAs also offer monitoring services to debt collectors.

Fair Debt Collection: 1.4.4.1 Collection Prior to Charge-Off

In the Consumer Financial Protection Bureau’s survey of large credit card issuers,337 almost all respondents engaged in targeted outreach to high-risk accounts that were current or past the due date, but not yet delinquent.338 Outreach might include “softer” contact strategies like email or text reminders.339

Fair Debt Collection: 1.4.4.2 Charge-Off

When a credit card account is more than 180 days past due, it must generally be charged-off.346 This means that the debt is no longer carried as an asset of value on the company’s books, giving investors and lenders a more accurate picture of a company’s net worth.

Fair Debt Collection: 1.4.4.3 Collection After Charge-Off

A CFPB report has found that, after charge-off, large credit card issuers can either retain accounts for in-house collection, place accounts with third-party collection agencies, place them for litigation, sell them, or warehouse them.350 Each approach is discussed briefly below. If one approach to collection is unsuccessful, a new approach may be attempted after a period of time.

Fair Debt Collection: 1.4.5 Collection by First-Party Debt Collectors

Two-thirds of large credit card issuers surveyed by the CFPB reported using first-party collectors to supplement in-house collection pre-charge-off.368

First-party collectors used the credit card issuers’ case management system and call technology.369 Accounts were typically allocated randomly between credit card issuers’ in-house collectors and first-party collectors based on collector availability.370

Fair Debt Collection: 1.4.6.1 Length of Placement

The CFPB’s 2015 survey of credit card issuers found that creditors place credit card accounts with a collection agency for a specific length of time, that the length of time ranges “from several weeks to several years,” and that the length of placement tends to increase with the age of the debt.372

Fair Debt Collection: 1.4.6.2 Information Transferred at Placement

The CFPB’s 2016 survey of third-party collectors found that when an account is placed with a third-party debt collection agency, collection agencies generally receive account information electronically via a secure site.375 Typically, review of new accounts was limited to “using external data sources to identify accounts belonging to bankrupt or deceased consumers, and often also to identify address changes, consumers covered by the Servicemembers Civil Relief Act, and litigious consumers.”376 A

Fair Debt Collection: 1.4.6.3 Methods of Consumer Contacts

A 2021 TransUnion survey of collection agencies reports that 57% of collectors communicate with consumers by email, 31% via text, and 3% via social media, compared to 94% by letter and 87% by manually dialed telephone calls.379 For more information about different communication technology used in debt collection, see

Fair Debt Collection: 1.4.6.4 Consumer Disputes and Requests for Verification

In a 2021 TransUnion survey, 31% of respondent reported that 10% or more of their accounts had been disputed in the previous year, while 20% reported that less than 1% of their accounts had been disputed.384 An earlier collection industry survey of third-party debt collection agencies found that consumers requested verification for 18.1% of accounts, raised a dispute in 9.6% of accounts, and closed 47.8% of accounts because of a “valid dispute, wrong person,

Fair Debt Collection: 1.4.7.4 Chain of Title

In addition to original creditors selling debts, debt buyers may also choose to sell debts to other debt buyers. Debt that is sold multiple times may result in ambiguities as to which debt buyer owns the debt, making it difficult to establish an unbroken chain of ownership stretching from the original creditor. There can even be disputes as to who has proper title to a portfolio of debt.419

Fair Debt Collection: 1.4.8 Collection by Attorneys

When an account is placed with a law firm for collection, the law firm may be provided with limited information about the debt that may not include account-level documentation such as the operative contract, payment history, or collection history.421

Fair Debt Collection: 1.4.9.1 Number of Debt Collection Lawsuits

In the CFPB’s survey of consumer experiences with debt collection, fifteen percent of survey respondents who reported being contacted about a debt said that they had been sued by a creditor or debt collector in the previous year.440 Since the CFPB estimated that more than seventy million Americans were contacted by a creditor or debt collector about a debt in collection in the prior year,441 this would mean that more than ten million Americans were sued on a debt during that one-year period.

Fair Debt Collection: 1.4.9.3 Costs of Litigation

According to the Consumer Financial Protection Bureau’s survey of third-party debt collectors, it cost between $35 and $499 to file a collection lawsuit, court service fees cost $10 to $50, the additional cost if the case went to trial was between $500 and $2000, and a garnishment cost the collector $30 per transaction.459 In a study of Utah attorneys using a methodology developed by the National Center for State Courts, “the median cost per side to litigate a debt collection case through trial was $2698.”

Fair Debt Collection: 1.4.9.4 Default Judgments

When consumers do not appear in court for their collection lawsuits, the creditors that filed the lawsuits may be able to obtain default judgments—often without presenting any evidence and despite the fact that consumers may have legitimate defenses.

Fair Debt Collection: 1.4.9.5 Representation by Attorneys

Studies show that the overwhelming majority of consumers are unrepresented by an attorney when they are sued on a debt.475 However, being represented by counsel in debt collection lawsuits dramatically improves outcomes for consumers,476 including increasing the likelihood that the case will simply be dismissed.477 Having access to legal advice can also play a critical role in alerting clients to their rights prior to the filing of debt collection

Fair Debt Collection: 1.4.10 Using Arbitration to Collect Consumer Debts

In the early 2000s, hundreds of thousands of debt collection suits were initiated in perfunctory arbitration proceedings before the National Arbitration Forum (NAF) where the NAF would receive a bare-bones complaint and issue default rulings without any hearing or additional evidence being submitted.492 A state enforcement action493 put a stop to National Arbitration Forum (NAF)’s use of arbitration proceedings in collection suits.