The Worst States and Companies for Invalid Debt Collection Activities

RewardExpert analyzed consumer complaint data to determine which states experience the most attempts to collect invalid debts, and which companies are most responsible for the epidemic of illegal debt collection practices sweeping the nation. Dealing with debt collectors is almost never a pleasant experience. Even though they are exempt from regulation under the Fair Debt Collection Practices Act of 1977, first-party creditors have an incentive to maintain a constructive relationship with their customers, even those with outstanding past-due debts, and are thus less likely to engage in illegal or abusive collection practices. This is not the case with third-party debt collectors, who purchase and profit on the right to collect debts that have been charged-off and written off as a loss by the original creditor. In recent years the debt buying industry has expanded dramatically, and attempts to collect “zombie debts,” — attempts to collect debts not owed, debts that were already paid or discharged, debts owed by someone else, or due to identity theft — have reached epidemic scale. RewardExpert analyzed data extracted from the Consumer Finance Protection Bureau Consumer Complaint Database, which consists of 82,285 complaints about illegal collection practices filed with the CFPB since 2011. In this report, RewardExpert will identify the states where this epidemic is most likely to affect you, and which companies are engaging in the most shady collections practices, and conclude with some tips and advice on what to do if and when you have to deal with them.

Top 10 States Where Illegal Debt Collection Attempts Are Most Common

1. Delaware

44.72 Complaints Per 100,000, Top Offender: Synchrony Financial, Runner-Up: ERC Delaware leads the nation when it comes to the likelihood of having to deal with a collection agency trying to collect a debt you don’t owe. With a total of 422 complaints in the Consumer Complaint Database, Delaware has a per-capita rate of 44.72 complaints per 100,000 residents. Although it ranks tenth nationally, Synchrony Financial leads second-place ERC in terms of the number of complaints per capita, 25.4 per million to 16.9 million. Synchrony Financial was recently featured in RewardExpert’s recent report ranking the best and worst financial institutions, and given their known discriminatory and deceptive practices, it is no surprise that the Wilmington area is most plagued by zombie debt collection attempts.

2. Florida

42.43 Complaints Per 100,000, Top Offender: Encore Capital Group, Runner-Up: Portfolio Recovery Associates Hard-hit by the mortgage crisis and the collapse of the housing bubble, Florida is naturally one of the “usual suspects,” and indeed, it comes in at number two with 42.43 complaints per 100,000 residents (a total of 8,314 complaints in all). As with other states, and in accordance with the national pattern, we see significantly higher per-capita rates of reports of attempts to collect out-of-statute, paid, or unverifiable debts, in the younger and more diverse large metro areas, such as Miami, Jacksonville, and Tampa, where we see rates upward of 56 per 100,000. Both top offender Encore Capital, and second-place Portfolio Recovery Associates have been sued and sanctioned by federal and state regulators for improper collection practices, and have settled these suits for millions of dollars in damages.

3. Georgia

42.41 Complaints Per 100,000, Top Offender: Encore Capital Group, Runner-Up: ERC Third-place Georgia trails Florida by two hundredths in its per capita incidence rate of reports of zombie debt collection attempts, with 4,258 complaints registered and a population of almost exactly 10 million residents. The geographical disparity in Georgia is more pronounced than in Florida (which is relatively hard-hit statewide), with 75 complaints per 100,000 in the core urban area of Atlanta, 60 per 100,000 in the metropolitan area, while the complaint rate falls to as low as 11 per 100,000 in adjacent rural regions.

4. Nevada

39.99 Complaints Per 100,000, Top Offender: Encore Capital Group, Runner-Up: ERC Like Florida, all areas of Nevada (with the exception of Carson City) have incidence rates of illegal debt collection attempts well above the national average of 25.84 per 100,000. The cities of Las Vegas and Reno and their environs face significantly elevated rates – and since the population of Nevada is highly concentrated in these two areas, their incidence rates of 42 and 46 per 100,000 elevate the state’s already high rate of illegal debt collection complaints.

5. Maryland

38.65 Complaints Per 100,000, Top Offender: Encore Capital Group, Runner-Up: ERC Number five, Maryland, closely trails Nevada, with 38.65 complaints per 100,000 residents. Like most of the states in our top ten, the companies responsible for the most reported illegal attempts to collect debts that are no longer valid, or never were valid, are the same as those atop the national “hall of shame” list, Encore Capital Group and ERC. Here we can infer on empirical grounds an element of racial bias independent of confounding economic factors, such as income and residence in an urban area. The affluent, suburban, and majority-black Prince George’s County has an incidence rate of 66.6 per 100,000 residents, while neighboring Montgomery County’s incidence rate is a much lower 39.1 per 100,000.

6. Texas

32.12 Complaints Per 100,000, Top Offender: Encore Capital Group, Runner-Up: ERC In Texas, once again we see a pattern similar to that which we have already observed: cities and their surrounding metropolitan areas report an elevated rate of illegal collection attempts. Even in cities such as Amarillo, Lubbock, Abilene, and El Paso, which have complaint rates lower than the national average (between 10.4 for Amarillo, to 19.9 in Abilene) are significantly higher than in the areas around them (with rates as low as 3.4 per 100,000).

7. New Jersey

30.46 Complaints Per 100,000, Top Offender: Encore Capital Group, Runner-Up: Pressler & Pressler, LLP Interestingly, in New Jersey the pattern we have noted in the geographical distribution of complaint rates partially breaks down: the cities of Camden, Trenton, and Atlantic City experience fewer illegal collection attempts than the national average (23 per 100,000 vs 25.8). This is perhaps due to stronger than average state regulation and enforcement activity (New Jersey is one of many states with its own Fair Debt Collection Practices Act). The runner-up for the company with the most complaints per capita, Pressler & Pressler, was fined $1 million to $1.5 million in 2016 by the CFPB for illegal practices, including filing lawsuits en masse, indiscriminately, and often without supporting documentation, and winning the majority of cases by default.

8. California

30.37 Complaints Per 100,000, Top Offender: Encore Capital Group, Runner-Up: ERC Coming in at number eight, California barely falls short of New Jersey in terms of illegal collection attempts per capita. Again we see hot spots in and around the major cities in California, such as San Francisco and Los Angeles, although the disparity is less marked than elsewhere, while the city of San Diego barely edges out the national average (26.05 per 100,000 to 25.8). The affluent Bay Area likewise displays lower rates than would be expected in such a densely populated region.

9. Arizona

29.43 Complaints Per 100,000, Top Offender: Encore Capital Group, Runner-Up: ERC Complaints of illegal debt collection attempts in Arizona are highly concentrated in the Phoenix metropolitan area. The rest of the state is highly divided: the western and southern parts of Arizona have average to high rates of debt collection complaints, ranging from 22.3 in Tucson to 32.5 in and around Yuma, whereas the northeastern quadrant of the state, consisting of Navajo and Apache Counties, encompassing the Navajo Nation and other reservations, reports extraordinarily low rates, with the lowest at 5.4 per 100,000.

10. Virginia

28.87 Complaints Per 100,000, Top Offender: Encore Capital Group, Runner-Up: Portfolio Recovery Associates Rounding out our list, at number ten, is Virginia. Here we can see clearly the reason why the geographical distribution of the zombie debt epidemic diverges from a simple urban-rural divide: the affluent suburban and exurban regions of Northern Virginia have incidence rates that rival or exceed those of major cities statewide, which reflects the tactics of entities attempting to collect on such debts, namely, targeting affluent individuals whose finances have improved. In support of this argument, we have the higher-than-average incidence rates of wealthy Fairfax and Prince William Counties (ranging from 33 to 56 per 100,000 residents).

The 10 Worst Debt Collection Offenders

1. Encore Capital Group – 12.55 Complaints Per Million National Average 2. ERC 9.24 Complaints Per Million National Average 3. Portfolio Recovery Associates – 8.59 Complaints Per Million National Average 4. Convergent Resources – 5.27 Complaints Per Million National Average 5. Transworld Systems – 4.56 Complaints Per Million National Average 6. Diversified Consultants – 4.22 Complaints Per Million National Average 7. AFNI 4.18 – Complaints Per Million National Average 8. Citibank, N.A. – 4.06 Complaints Per Million National Average 9. Resurgent Capital Services – 3.84 Complaints Per Million National Average 10. Synchrony Financial – 3.73 Complaints Per Million National Average Our debt collection hall of shame includes the ten companies with the most complaints filed against them with the CFPB per capita nationwide. Numbers one and three, Encore Capital Group and Portfolio Recovery Associates, the two largest publicly traded debt buyers in the country were recently fined by the CFPB. Encore was ordered to pay $42 million to repay customers, plus a $10 million penalty, and to stop collections on $125 million worth of debt. That others have not (yet) been subject to enforcement action says little in their favor.

Tips for Dealing With Debt Collectors

If you are ever contacted by these companies, or any other for that matter, about a debt that you do not recognize, or that you believe you do not owe, knowledge is your best weapon. We have compiled a list of useful tips to help you deal with this situation, should it befall you. Do not acknowledge that you owe the debt. Even if you think there’s a chance that the debt might be valid, do not state this to the agency. Debt collectors will badger you to get you to do this. Don’t do it, because it will reset the clock on the applicable statute of limitations, potentially turning zombie debts into real, live debts. Immediately request the agency’s contact info. Ask for the name and mailing address of the agency contacting you. Send written notice disputing the debt and demanding verification within 30 days. The agency is required by law under the FDCPA to provide verification on all debts it attempts to collect. Beware of multiple agencies collecting the same debt. Uncollectable debts are bought and sold frequently, so beware of another company attempting to collect a debt you have successfully disputed. Check for discrepancies. If the agency provides verification, you should first check the document provided for any discrepancies that might invalidate the debt (i.e. incorrect identifying information). Otherwise, demand that they provide you with copies of the original, signed contract, and documentation of the chain of ownership. Don’t bail out, or you’ll automatically lose out. If you find out that you are being sued by a debt collector, whatever you do SHOW UP or RESPOND in writing to the summons. Most cases are won by default when the customer doesn’t show up. Respond in writing – to the court – with a statement that you do not recognize or acknowledge the debt in question, and demand that documentary evidence be provided. Most of the time the debt collector will have the case dismissed – they might not have had any intention of proving the debt’s validity at all!

Methodology

RewardExpert analyzed data from the Consumer Finance Protection Bureau on consumer complaints. This data set included only complaints concerning debt collection attempts where the debt was not owned by the customer, had already been paid, had been discharged through bankruptcy, was due to identity theft, or could not be verified. We then used the states and zip codes provided with each complaint to analyze the data geographically. We calculated per-capita incidence rates, both overall and for each company involved, at the national and state level, which was used to rank the states and companies. We used 3-digit zip code areas to aggregate complaints at a local level, and at this level we calculated only incidence rates. We joined the resulting data tables to GIS shapefiles containing state and zip code boundaries and population data, and with these we generated the maps that appear in this report to visualize the data.