"When a consumer defaults on a debt, a third-party debt collector often collects the debt obligation
rather than the lender to whom the debt is originally owed. The debt collection market helps
lenders recoup their losses when a consumer defaults, generally making consumer credit and
other related markets more efficient. When lenders can effectively recoup their losses, they may
be more willing to lend to consumers at lower initial loan costs, leading to more access to credit
for consumers.
The U.S. debt collection market is large, and the debt collection process impacts many American consumers. As of 2019,
there are over 7,000 collection agencies in the United States, and the industry’s annual revenue is about $12.7 billion.
According to a Consumer Financial Protection Bureau (CFPB) survey, approximately one-third of consumers with a credit
bureau file reported being contacted by at least one creditor or debt collector trying to collect on one or more debts in the
previous year.
Lenders make contracts with debt collectors to collect their debts, and consumers may not choose the debt collector with
whom they engage. Therefore, consumers cannot take their business elsewhere if abuses occur. For this reason, consumer
protection laws and regulations may be particularly consequential. According to the CFPB, debt collection is the consumer
finance market with the second most complaints, accounting for 21% of the total complaints the agency received in 2019.
Consumers’ most common debt collector complaints assert that a debt collector attempted to collect a debt the consumer did
not believe was owed (45%), or a consumer received insufficient written notification about a debt (18%)..."
Debt collection
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