I formerly worked for a somewhat-older mainstream consumer VPN provider for a few years, to the extent that you can take my word for it, this is not industry-standard practice at least as far as the provider is able to control it.

Commercial VPNs typically run on rental servers -- usually a mix of the major cloud providers and smaller hosting providers -- and in my former company's case, using dedicated hosting (bare metal where available). Steps were taken to restrict access for physical actors, but ultimately, the mantra's always that physical access basically guarantees data access on a long enough timeline if you assume there's a bad actor in the mix.

That said, to the best of my memory, there were no indications of this kind of data siphoning happening without our knowledge, and we absolutely didn't take part in it ourselves knowingly. Occasional requests would come in from various international law enforcement orgs, and every time they'd be replied to with a message about how we don't store user records (which was a truthful reply AFAIK).

The biggest challenge for us was competing with some of the newer actors in the space, taking advantage of deceptive marketing and engaging in (IMO) unethical business practices for the sector:

- Claims of "no logging," even backed up by audits, are only ever point-in-time measurements, and may not reflect reality if the VPN provider approaches the auditors in bad faith (say, with a sanitized code base); a good auditor in my experience will refuse to make this claim in the report

- Claims about having the corporate HQ in one country making it immune from the laws of countries they operate servers in (this is deceptive marketing; failure to comply with laws will get you shut down, and at my old employer we'd make calls about whether to just drop our server presence in a country entirely in response to local laws and political happenings)

- Commercial resale of user data is (allegedly) rampant among many of the newer providers you see constantly plugged on Youtube. This isn't helped by the massive consolidation of the VPN market under just 2 or 3 holding companies.

I won't name names for the companies I mentioned above, but my recommendation is to adjust your threat model from "nation-state level surveillance" to "commercial data resale just like every other web service."

As far as data collection went for my old company: we collected system metrics like resource usage over time, and kept minimal sanitized logs to help diagnose any production issues that'd come up -- basically the absolute minimum amount of data we needed to keep the service operating smoothly. I have every reason to believe this is an industry norm, since otherwise development and troubleshooting would be nearly impossible.

Anyway, there's also the looming "threat" (lol) of HTTPS and encrypted DNS proliferation and improvement making the core use case for commercial VPNs obsolete. I think anyone who's spent a bit of time in that industry realizes that the business model isn't long for this earth as a result, so I suspect many are trying to milk the industry for all it's worth. Personally, I'm all for HTTPS and encrypted DNS proliferation, and I'm also hoping more and more commercial public networks start using virtual private subnets and other device isolation features to make it even harder to abuse coffee shop Wi-Fi.