CFPB Penalizes Two Largest Debt Buyers

In a September 9, 2015, press release, the CFPB announced that it took action against the nation’s two largest debt buyers and collectors: Encore Capital Group and Portfolio Recovery Associates. Encore’s subsidiaries, also named in the action, are Midland Funding LLC, Midland Credit Management, and Asset Acceptance Capital Corp. Together, the two companies have bought over $200 billion in defaulted loans.

The Bureau found that both companies bought debts that “were potentially inaccurate, lacking documentation, or unenforceable. Without verifying the debt, the companies collected payments by pressuring consumers with false statements and churning out lawsuits using robo-signed court documents.” The all-too-familiar list of wrongdoing includes attempts to collect on debts that they knew were inaccurate or unenforceable by means of meritless lawsuits that they expected to, and often did, win by default, in violation of the FDCPA and the Dodd-Frank Wall Street Reform and Consumer Protection Act. They lied to consumers about their legal burdens and threatened litigation that was, in fact, not being considered. They harassed consumers with phone calls before 8:00 a.m. and after 9:00 p.m. and, in some instances, made collection calls to the consumer over 20 times in a two-day period.

The enforcement action consists of requiring both entities to stop reselling debts, stop collection efforts with respect to unverified debts, ensure accuracy when filing lawsuits, provide information to consumers such as the name of the creditor and charge-off balance, provide original documentation of the debt, use accurate affidavits, and cease collections efforts on time-barred debts.

Encore was ordered to pay up to $42 million in refunds and to dismiss all pending lawsuits or cease collection efforts on judgments involving misrepresentation.

Portfolio was ordered to pay $19 million in refunds where it made similar legal claims and where it collected payments on default judgments for debts that were barred by the statute of limitations.

Finally, Encore was ordered to pay $10 million and Portfolio $8 million to the CFPB;s Civil Penalty Fund.

The Encore consent order can be found at: http://files.consumerfinance.gov/f/201509_cfpb_consent-order-encore-capital-group.pdf

The Portfolio Recovery Associates consent order can be found at: http://files.consumerfinance.gov/f/201509_cfpb_consent-order-portfolio-recovery-associates-llc.pdf