It is always nice to bring a little bit of good news into the lives of those who are struggling with a heavy debt load. That is why we have reported on several moves made by the Consumer Financial Protection Bureau (CFPB) since its inception. In a recent move, the CFPB has clamped down on two of America’s largest debt collection agencies for a variety of fraudulent debt collection policies.
The companies involved are Encore Capital Group and Portfolio Recovery Associates. Both companies are accused of making false statements and creating lawsuits with robo-signed court documents. First, a little background. Not long ago, the two companies purchased $200 billion in defaulted debt, including everything imaginable: credit cards, phone bills, medical bills, etc. The companies profit by paying pennies on the dollar for each debt, then trying to collect any amount possible of the original debt. This practice in itself is not illegal, but how these corporations went about their business is. Some of the unacceptable practices that the companies are alleged to have engaged in include (please keep in mind that these are allegations despite the companies having agreed to a settlement):
- Encore called debtors before 8 a.m. and after 9 p.m; often calling consumers repeatedly in an attempt to harass, abuse, and annoy them, calling some more than 10 times a day.
- Portfolio mislead consumers to allow them to robo-dial their cellphones.
- Encore told consumers that they had to prove they did not owe a debt, when it is the collectors burden to prove a debt is valid.
- Both companies stated incorrect balances, interest rates, and payment due dates. Each company was aware that the stated balances, etc were incorrect, but proceeded with collection anyway.
- Each company filed numerous lawsuits with the knowledge that they could not prove a debt, relying on consumers to fail to appear; thus winning an uncontested judgment.
- Both companies filed false affidavits during court proceedings.
- Both companies threatened lawsuits and filed lawsuits to collect debts past the statue of limitations for the debt.
- Customer representatives from Portfolio Recovery regularly misrepresented themselves as being from the ”Litigation Department”, threatening a lawsuit when the file had not been reviewed by an attorney.
- Results of the CFPB Action
- Obviously, both companies have denied any wrongdoing, but…
- Encore agreed to pay a maximum of $42 million in consumer refunds as well as a $10 million fine. Additionally, Encore agreed to stop attempting to collect another $125 million in debts.
- Portfolio agreed to pay $19 million in refunds and an $8 million fine. The company will forgo collections on another $3 million in debt.
- Both firms are barred from reselling debts to third parties, preventing any attempt to get around the agreement to stop collecting the debts mentioned earlier.
According to CFPB Director Richard Cordray:
”Encore and Portfolio Recovery Associates threatened and deceived consumers to collect on debts they should have known were inaccurate or had other problems. Now, the two biggest debt buyers in the market must refund millions and overhaul their practices. We will continue to take action to protect consumers from illegal and obnoxious debt collection practices.”
Cordray also asked other debt collectors to take note of the settlement and a recent action against JPMorgan, saying:
”These cases paint a broader picture about how (the CFPB) is working to clean up the debt collection industry.”
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