The Consumer Financial Protection Bureau has come down on 2 of the nation's largest debt buyers for deceptive and illegal debt collection practices.
Why should I care?
Both enforcement actions involve a significant amount of restitution.
As a result of the settlements, Encore Capital Group must pay up to $42 million in consumer refunds along with a $10 million penalty. It must also cease collection on more than $125 million worth of debts. Portfolio Recovery Associates must pay $19 million in consumer refunds as well as an $8 million penalty. It must cease collection on more than $3 million worth of debts.
What does the CFPB allege?
According to the consumer watchdog agency, both companies illegally attempted to collect debt that they knew, or should have known, was likely inaccurate or unenforceable. They also allegedly misrepresented their intent to prove debts they sued over, relied on misleading, robo-signed court filings to sue and sued or threatened to sue past the statute of limitations.
The CFPB says San Diego-based Encore specifically failed to properly investigate consumer disputes and made harassing phone calls. Portfolio, headquartered in Norfolk, Virginia, allegedly misled consumers into agreeing to receive auto-dialed cellphone calls.
The rest of the story
Both companies maintain their practices were in accordance with the law.
"After rigorously and thoroughly scrutinizing seemingly countless aspects of our business for more than a year, the CFPB ultimately identified only 2 key issues warranting consumer refunds," Kenneth Vecchione, president of Encore, said in a written statement. "While we disagree with the CFPB's positions on these 2 issues, we chose to agree to a settlement so we can move forward."
"It was time to end this drawn-out process and eliminate the threat of litigation, so we can focus with renewed vigor on serving our customers and growing our business," Steve Fredrickson, CEO of PRA Group, Inc., of which Portfolio Recovery Associates is a subsidiary, said in a written statement.
An eye on debt collection
Encore and Portfolio are not the only 2 companies to come under the CFPB's fire over debt collection practices. This summer, JPMorgan Chase settled with the agency over selling bad credit card debt and illegally robo-signing court documents.
New rules pertaining to the debt collection industry are in the works, CFPB Director Richard Cordray said during prepared remarks. He also urged current industry members to review recent consent orders.
"Regardless of whether you are a debt seller or a debt buyer, all players in the collections market need to do their part and invest the resources to ensure they are collecting the right amount from the right consumer," Cordray said.
Consumers who are being contacted about a debt should familiarize themselves with their rights. Federal law prohibits debt collectors from using abusive language, harassing you with repeat phone calls, calling before 8 a.m. or after 9 p.m. unless you agree and calling you at work once asked to stop.
You can find more tips for dealing with debt collectors in this Bankrate article.
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