This week, the Consumer Financial Protection Bureau imposed penalties and required refunds in enforcement actions against the country’s two largest debt buyers. Encore Capital Group and Portfolio Recovery Associates were ordered to pay a total of $79 million for using deceptive tactics against consumers. The Encore consent order can be found here. The Portfolio consent order can be found here.
The CFPB alleges that the two companies attempted to collect on debts that were unsubstantiated or inaccurately recorded. The firms also filed lawsuits against consumers without having the documentation necessary to prove their allegations, according to the CFPB.
“Encore and Portfolio Recovery Associates threatened and deceived consumers to collect on debts they should have known were inaccurate or had other problems,” said CFPB Director Richard Cordray. “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.”
As debt buyers, Encore and Portfolio Recovery Associates purchase delinquent or charged-off accounts for a fraction of the value of the debt. Although they pay only pennies on the dollar for the debt, they may attempt to collect the full amount claimed by the original lender. Together, these two companies have purchased the rights to collect over $200 billion in defaulted consumer debts on credit cards, phone bills, and other accounts.
The CFPB alleges that Encore and Portfolio Recovery Associates attempted to collect debts that they knew, or should have known, were inaccurate or could not legally be enforced based on contractual disclaimers, past practices of debt sellers, or consumer disputes. The companies also filed lawsuits against consumers without having the intent to prove many of the debts, winning the vast majority of the lawsuits by default when consumers failed to defend themselves. Many lawsuits had inaccurate information or were filed after the statute of limitations had expired. Collection calls were made alleging that attorneys were at work filing lawsuits when in fact no attorneys had reviewed the files. These practices violated the Fair Debt Collection Practices Act and the Dodd-Frank Act.
Neither Encore nor Portfolio Recovery admitted wrongdoing. Encore said that it disagreed with the CFPB’s actions but that it was moving on. Portfolio Recovery said in a statement: “This outcome is not about current law or rules already on the books, but instead about the CFPB subjecting companies to its own interpretations that have never been codified or adopted.”