Credit card debt at root of collection complaints

No one relishes getting a call from a debt collector, so it is not surprising that -- according to federal regulators -- collection draws more complaints than any other industry.

Now, details gleaned from the 39,240 collection complaints filed at the U.S. Consumer Financial Protection Bureau in 2014 provide a look at the hottest friction points between consumers and collectors. The surprising result: credit card debt collection -- a declining task for collectors -- is the top grievance.

Debt collection complaints take aim at credit cards

Credit cards were the cause of 21 percent of gripes about debt collectors in 2014, the federal consumer watchdog's records show. That makes cards the most complaint-prone type of debt in collection last year, the first full year for which detailed collection complaints are available.

Medical debts accounted for 11.5 percent of complaints about debt collectors in 2014, the next-largest single source after credit cards.

A catchall "other" group received 27.6 percent of complaints, but those are split between phone bills, gym memberships and other miscellaneous subscriptions and obligations. Another 22 percent of debt collection complaints were linked to undetermined industries. Hacked-off consumers generate the complaint data as they complete forms, usually online or by phone.

According to the CFPB, medical debt is the biggest form of debt in collection, based on a review of credit reports. In a December 2014 report, the agency said that 43 million Americans have unpaid medical debt weighing on their credit profile.

"About 19.5 percent of credit reports -- nearly one in five -- contain one or more medical collections trade lines," the report said.

Industry surveys say that credit card bills are a shrinking part of the workload at collection agencies. The industry trade group ACA International found that card debt shrank to 3 percent of debts in collection in 2013 at a sample of member agencies, down from 20 percent in 2010.

So why is collection of unpaid credit card debt the scourge of consumers?

ACA International Vice President for Public Affairs Cindy Sebrell said the industry group doesn't know why cards get more grumbling than other debts, and lacked the data to confirm the trend. Tom Gavinski, a board member of ACA and vice president at collection company IC System Inc. in St. Paul, Minnesota, was also stumped. "That's a tough one to explain," he said.

One finding from the watchdog agency's report may help explain why complaints about credit card debt collections top those about medical debt collections. The consumer protection bureau said people are often unaware an unpaid medical debt has been "parked" on their history until they review their credit report, or they run into trouble applying for a loan.The average medical debt in collection is just $579, far below the average $1,000 for nonmedical debts. So instead of spending time trying to call debtors, medical collectors may just report the debts to credit bureaus and wait for the hapless debtors to call them.

And the disparity between the two types of complaints may not last. Grousing about medical debt is on the rise. Medical debt made up 13.6 percent of collection complaints in December, up from 9.5 percent when the year began -- so kvetching may be catching up to its status as the No. 1 consumer delinquency.

Many debt collection complaints are aimed at banks, rather than hired-gun collectors, the CFPB complaint data show. Citibank, GE Capital Retail (now Synchrony Financial), Capital One and JPMorgan Chase are among the top 10 complaint targets in the CFPB data. The lenders all have large credit card businesses.

The top draw for complaints was Encore Capital Group, whose 2,503 gripes were more than double the next-most-disliked collector, Portfolio Recovery Associates. In an e-mail response to questions, Encore said that its complaints amount to less than one-10th of 1 percent of its account volume, and that its mix of business is different from No. 2 Portfolio Recovery. Furthermore, Encore's complaint volume dropped 25 percent from October to December 2014, the company said. Encore, whose U.S. operating subsidiary Midland Credit Management is a name known to many debtors, is the largest debt buyer, with about $745 million in revenue from its debt holdings internationally in 2013.

To review complaints at the CFPB, or file one of your own, visit the agency's complaint portal on the Web, or call them at (855) 411-2372.

See related: CFPB moves to soften medical debt's impact

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Updated: 01-20-2018