Last fall, the Consumer Financial Protection Bureau (CFPB) took a significant step in the fight against companies that prey on individuals dealing with debt. They completed an investigation that determined that Encore Capital Group and Portfolio Recovery Associates both participated in fraudulent practices designed to draw revenue from unsubstantiated or inaccurate debt and to pressure or mislead consumers into paying debt. Both companies, two of the nation’s largest in the debt buying industry, have been ordered to pay millions of dollars in penalties and halt portions of their overall collections efforts. The hope is that rulings like this will send a message to smaller companies that engage in similarly fraudulent practices, which will ultimately protect the consumer.
Below are four items of note in regards to this ruling:
So what did they do?
It was determined that both Encore Capital Group and Portfolio Recovery Associates participated in fraudulent practices that fit into three categories: collecting bad debts, illegal litigation practices, and illegal collections practices.
Both companies attempted to collect inaccurate or unsubstantiated debt. This was debt that they bought from other companies that gave approximate, instead of actual amounts of what was owed. In some cases, the debts they purchased did not reflect recent payments made by the debtor. However, both companies either investigated the debt to determine an accurate total or attempted to collect debt based on accurate totals.
Both companies filed lawsuits against consumers in order to collect debts. Neither company intended to defend the debt in any case. They simply filed suits in the hopes that the defendants would not address the case, making them the winner by default. They also filed documents that contained deceptive statements in debt collection. These statements indicated that legal action was warranted without doing the proper investigation for each case.
In terms of Encore, the company falsely told consumers the burden of proof was on them to disprove their debt. Encore also made harassing calls to consumers, often times calling them more 20 times in a two-day period.
What are the penalties?
Encore was ordered to pay up to $42 million in refunds. Portfolio Recovery Associates was ordered to pay $19 million in refunds.
Other penalties
The two companies have been barred from reselling the debts that they acquire. They must stop action on a number of debts they are currently attempting to collect. For Encore, they must give up $125 million worth of debt they were currently collecting. They must pay civil penalties to CFPB (Encore must pay $10 million and Portfolio must pay $8 million.)
In terms of consumer-facing actions, both must stop collecting debts they can’t verify. They must also ensure the accuracy of all lawsuits. They must also provide consumers with information about a debt, including the name of the creditor and charge-off balance, and offer to provide consumers with original documents relating to the account before they are can threaten or file a lawsuit to collect the debt.
Never heard of Encore Capital Group
If you haven’t heard of Encore, perhaps you’ve heard of their subsidiaries, Midland Funding LLC, Midland Credit Management, and Asset Acceptance Capital Corp. Together, they all form the nation’s largest debt buyer and collector. Portfolio Recovery Associates happens to be the nation’s second largest debt buyer and collector.
If you have fallen victim to the predatory tactics of debt collection companies, it’s time to talk to us. The bankruptcy lawyers at McIntyre Thanasides Bringgold Elliott Grimaldi & Guito, will review your case and defended your rights. Contact us today at 844-511-4800.