Data can be accurate, but without context it could mislead. That was the message former CFPB Senior Advisor Jim McCarthy delivered to industry attendees of last week’s insideARM Larger Market Participant Summit in Washington, D.C.

The CFPB cares about data and accuracy, McCarthy noted, but it is not pairing collections complaint data with necessary context before it presents that data to the general public. And so long as that context is missing, CFPB complaint data could mislead the general public and the media about the nature of the collections industry, McCarthy warned.

McCarthy urged the collections industry to be good stewards of the complaint data in whole and to press the regulator to continue to improve data and transparency standards when it comes to collections complaint data.

How is the CFPB’s complaint data missing context? McCarthy points to a significant example: the full volume of complaints attributed to the industry and how the Bureau counts those complaints. Of the 834,400 collections complaints the Bureau received, a large percentage of complaints, around 34% or 283,387 complaints, have not been routed to or responded by any company. McCarthy believes the majority of the un-routed complaints could be debt collection complaints.

Many, perhaps most of those unattributed complaints likely belong to the bad actors in the industry – firms who have no interest in joining the CFPB complaint portal, investigating consumer complaints or in improving their processes. However, the Bureau often uses the full set of complaints, routed and un-routed, when analyzing collections complaint data for their Congressional Report and when it presents the Annual Consumer Response Report to the public. When the Bureau lumps complaint data involving unresponsive collections firms in with data pertaining to firms which do respond to complaints, it skews perceptions of the industry.

Jim McCarthy, former CFPB Senior Advisor, Consumer Response

Specifically, Bureau reports note that collections complaints lead daily and monthly volume of complaints handled in 2015. The CFPB’s annual report also notes that only 47% of debt collection complaints are even sent to a company for response. That doesn’t sound so hot. And that’s the impression the public and the media take away from the CFPB’s report. If the Bureau reported on the performance or attributes only of complaints routed to a company for a response, the bureau’s reports would better communicate how the “responsive” debt collectors perform.

Another factor which would benefit from context in the public database is whether a consumer filed a complaint against the debt collector AND the original creditor. Because this counts as two complaints in the public database, McCarthy says, context about how those complaints are related would improve how that data is consumed and analyzed. Without context one could assume that complaint volume went up, when actually the way the bureau takes in debt collection complaints doubles (creates two complaints out of one) a percentage of all debt collection complaints. Simply noting whether a debt collection complaint is filed against the debt collector and the creditor would help normalize the data.

“Companies that are receiving and responding to complaints are shouldering the burden for the full volume of collection complaints in the CFPB reports, which includes un-routed [complaints directed at] the predators in the industry,” McCarthy said. “There is reputation risk in the public data base, but when there is no context explaining that the public database often includes two complaints for one consumer debt collection issue the message could get misunderstood. The public database contains only complaints for responsive companies. The data associated to the non-routed complaints, which one could assume represents the most harm, isn’t even in the public database and the work of the public data is limited.”

The Bureau doesn’t need to change methodologies, but it should explain those methodologies and what they actually measure, McCarthy said. “The CFPB doesn’t provide any context here to allow readers to understand that those complaints are not actually two separate complaints,” he adds.

What should the industry do? Explain the need for context, McCarthy argued. The industry has to make regular, reasonable arguments to the CFPB that the way it presents its data is not complete, that it lacks necessary context, and that CFPB data, as currently contextualized, can lead to a misleading view of the collections industry.

McCarthy believes the CFPB will make changes to the way it contextualizes industry data if the industry makes a cogent argument in favor of it.

“The CFPB is not interested in making errors,” McCarthy said. “So, when the industry points out those errors, the CFPB will react.”

 insideARM Perspective

insideARM has written extensively in the past about debt collection complaints and their lack of context. In a July 2015 article, insideARM CEO Stephanie Eidelman estimated that the true percentage of complaints against actual legitimate firms was likely 30-40% of the total number reported. The following is excerpted from that post:

insideARM reported on Forbes several years ago (we also published a comprehensive Complaints Compendium for 2012) that in the first quarter of 2012 there were approximately 50,000 complaints lodged against debt collectors with the FTC. Ten thousand of those (20%) were against unknown companies. After a painstaking process of normalization, we found that thousands more were against rogue operators whose numbers were no longer in service, or did not identify themselves in the way that legitimate companies do. I estimated that the true percentage of complaints against actual legitimate firms was likely 30-40% of the total.

Unlike the FTC, the CFPB verifies (not the validity) but the subject of each complaint so that it can be forwarded to a known human being for response. Otherwise, the complaint is not counted in the CFPB’s statistics. Indeed, for the second quarter of 2015, the CFPB recorded approximately 7,300 debt collection complaints – less than 15% of the volume reported by the FTC.

Worth noting is the fact that the greatest number of collection complaints continues to be related to attempts to collect debt not owed, or an inaccurate accounting of the underlying debt — a factor typically driven by the owner of the debt rather than the 3rd party collection agency. This, among other factors, helps to explain why the most complained about firms tend to include creditors and debt buyers. It also helps to explain why the CFPB has signaled that its much anticipated Debt Collection Rulemaking will eliminate the separation of accountability between creditors collecting on their own behalf and their service providers.

It also bears noting that even in the case of the state with the most debt collection complaints per 100k population (Washington, D.C.), 122 complaints represents a 0.12% “defect” rate.