The Consumer Financial Protection Bureau filed a federal complaint against EOS for reporting and collecting on disputed and unverified consumer cellphone debt. EOS is a Massachusetts debt collection firm that has a wholly owned subsidiary, US Asset Management, which collects delinquent or charged-off accounts. The complaint states that EOS regularly collected defaulted consumer debt related to a consumer-financial product or service, including telecommunications debt that was owed to companies that regularly extend credit by providing cell-phone service without requiring immediate payment. It is alleged that the company provided inaccurate information to credit reporting companies about the debt and failed to correct inaccurate information. The proposed consent order filed by the CFPB would require EOS to refund approximately $743,000 to consumers and pay $1.85 million in civil penalties.
EOS purchased the debt for a low cost, usually amounting to a fraction of the amount of the value of the debt, but attempted to collect the full amount claimed by the original lender. According to the complaint, in August 2012 USAM entered into an agreement with AT&T to purchase a portfolio of over three million defaulted accounts with a total face value of $2.3 billion. These debts were purchased for $35.4 million. The documentation received from AT&T did not provide sufficient verification the debts purchased. In January 2013, a senior EOS manager warned that this portfolio likely contained a significant number of problematic debts. However, EOS continued to report and collect on the portfolio accounts.
The CFPB’s investigation revealed that EOS continued to collect and report on debts without verifying that these debt remained outstanding. Many debts contained within EOS’s portfolio were fraudulent, already paid, already settled, or so old that they could no longer be legally collected. Additionally, EOS reported every account in this portfolio twice to consumer-reporting agencies, once in August 2012 and again in October 2012. However, EOS has no reasonable cause to believe that all of these accounts had been disputed by consumers. Likewise, it had already been determined that the information was not complete and accurate.
The CFPB’s consent order would require EOS to:
- Refund full refunds of payments made on debts that were disputed but not verified by EOS. The refunds are likely to exceed $743,000.
- Stop collecting and reporting on disputed AT&T debt. If EOS is not able to substantiate debt that is disputed by a consumer, EOS would be required to contact the credit reporting companies and ask that the information be removed from the consumer’s file.
- Ensure accuracy when providing information to credit reporting companies.
- Stop reselling debt and EOS would be prohibited from reselling debts for a period of five years. This would protect consumers from the potential harm of continued sale of these inaccurate debts.
- Pay approximately $1.85 million to the CFPB’s Civil Penalty Fund.