Pub. 6 2018 Issue 3

www.uba.org 24 COMPLIANCE CORNER The Bureau of Consumer Financial Pro- tection (CFPB) routinely publishes reports breaking down complaints it receives. In a report published May 31, 2018 entitled, “Complaint Snapshot: Debt Collection (the Report), the CFPB dis- cussed the average number of complaints received from January 1, 2018 through March 31, 2018, and compared those numbers to the same time period in 2017. The Report provided an overview of com- plaints the CFPB receives, as well as an additional section focusing on complaints regarding debt collection practices. An interesting trend was the significant increase in the number of complaints in the areas of “Money transfers or service, virtual currency” and “Credit or con- sumer reporting,” which have more than doubled in the past year. The categories with the most complaints — representing approximately 74% of the total complaints in March 2018 — were: “Credit or consumer reporting,” “Debt collection,” and “Mortgage.” “Credit or consumer reporting” complaints made up approximately 37%, “Debt collection” complaints made up approximately 27% and “Mortgage” made up approximately 10% of the total complaints for March 2018. These three categories combined to make up a majority (69%) of the total complaints since the Bureau began receiv- ing complaints. In a comparison between the first quar- ters of 2017 and 2018, the “Money transfers or service, virtual currency” complaint-category increased 184% — from an average of 352 complaints to 1,000 complaints. The Bureau also noted a majority of those complaints arose from issues with the availability of funds from virtual currency exchanges. In 2017, vir- tual currency (cryptocurrency) became a popular investment, and the leading cur- rency was Bitcoin. Investors used virtual currency exchanges to purchase crypto- currency, which, as with the development of all technology, experienced difficulties. The spike in complaints coincided with the drop in price of Bitcoin in January 2018 as investors sought to sell and with- draw their funds. The second most significant increase from the first quarter 2017 to 2018 involved the average number of com- plaints regarding “Credit or consumer reporting,” which increased 129% from an average of 4,848 complaints to 11,107 complaints. The Bureau attributed this increase in the average to improvements made to the complaint submission pro- cess in April 2017. Since there are three more days in March than February, the amount of complaints was expected to increase slightly from February, which is what occurred with a 7% increase in complaints in March. Notably, “Prepaid card” complaints increased 21% and “Debt collection” complaints increased 14% in March. An interesting decrease for March was that “Money transfer or service, virtual currency” decreased approximately 14% to 696. As noted previously, that category averaged 1,000 complaints each month for the first quarter of 2018. Comparing January 2018 to March 2018, there was an approximately 54% decrease in the number of complaints in March. The statistics indicate that January 2018 was an anomaly for the number of complaints in this category. In fact, January 2018 was the first time that the Office received more than 1,000 complaints for this cat- egory and coincided with the large price drop in Bitcoin. Also, the Report includes a list of the aver- age complaint per capita by state. It does not break down the type of complaints by state, but the list is interesting nonetheless as it shows the location of the complain- ants. Washington D.C. is the location of the most complaints per capita by a wide margin — nearly 60% more complaints per capita than the state with the second-most complaints, Delaware. In fact, Washington D.C. has more than 4 times the amount of complaints than 18 other states. This large discrepancy may likely be attributed to the fact that D.C. is the nation’s capitol, and, thus, the D.C. citizens are more aware of the CFPB’s ability to handle complaints. Generally, there are fewer complaints per capita in the Midwest states. Reviewing the CFPB’s Recent Complaint Report By Zack Smith, Associate General Counsel, Compliance Alliance Zack serves as Associate General Counsel for Compli- ance Alliance working on our hotline aiding members with compliance questions. He received his B.B.A in finance from the University of Texas at Austin and his J.D. from Baylor Law School. Prior to joining C/A, Zack specialized in tax law where he represented clients in front of the IRS. This report also compares the changes in the number of complaints per state from the first quarter of 2017 to the first quarter of 2018. The three states with the largest increase in complaints were: Mississippi with a 30% increase, Alaska with a 29% increase, and Louisiana with a 19% in- crease. South Dakota, North Dakota, and Maine all had a significant decrease in the number of complaints with decreases of over 40%. Overall, there was an increase in the number of complaints in only 13 states. Debt collection remains one of the areas that consumers complain about most. When the CFPB receives a debt collec- tion complaint, it contacts the companies for review and response. Over half of the debt collection complaints come from the “Other debt” and “I do not know” cate- gories. Nearly 40% of those complaints were for “Attempts to collect debt not owed.” A prevalent issue was the lack of written notifications about the existence of debt. Some consumers did not learn of existing debts until the debts appeared on their credit report. In fact, they had to request information about the debt, including the amount in collection, from the debt collector. Tracking the types of complaints will be interesting over the coming months and years. Using the reports published by the CFPB, bankers have the ability to monitor the practices that are causing consumers the most problems, and an opportunity to correct any potential issues that may arise. To investigate the entire report, find it here: https://s3.amazonaws.com/ files.consumerfinance.gov/f/documents/ bcfp_complaint-snapshot_debt-collec- tion_052018.pdf n