Largest Debt Buyers Must Refund Millions in CFPB Action

Two of the nation’s largest debt buyers were sued in an action brought by the CFPB due to the companies’ use of deceptive tactics to collect bad debts. Encore Capital Group and Portfolio Recovery Associates were found to have bought debts that were inaccurate, lacked documentation, or were unenforceable. Without verification of the debt, the companies proceeded to collect payments from consumers through false statements and law suits using robo-signed court documents. As a result of these violations, the CFPB has ordered the companies to “overhaul their debt collection and litigation practices and to stop reselling debts to third parties.” Additionally, Encore has been ordered to pay $42 million in consumer refunds and $10 million in penalties. Portfolio Recovery Associates has been ordered to pay $19 million in consumer refunds and $8 million in penalties. The companies must stop collection on $125 million and $3 million worth of debt, respectively.

Encore and Portfolio purchase “delinquent or charged-off accounts for a fraction of the value of the debt.” These companies pay pennies on the dollar for the debt and together the two companies have purchased the rights to collect over $200 billion. The CFPB found that Encore and Portfolio attempted to collect on unsubstantiated or inaccurate debt which include incorrect balance, interest rates, and payment dates. Additionally, the illegal litigation practices that the two companies engaged in include:

  • misrepresenting their intention to prove debts they sued consumers over
  • relying on misleading, robo-signed court filings to create new lawsuits
  • suing or threatening to sue consumers after statute of limitations has lapsed
  • pressuring consumers to make payments using misrepresentations regarding burden of proof and imminent nature of lawsuits

The illegal practices that Encore and Portfolio engaged in include several other violations as well. Encore was found to have disregarded or failed to adequately investigate consumers’ dispute and made harassing calls to consumers before 8 a.m. and after 9 p.m. Portfolio was found to have misled consumers into consenting to receive auto-dialed cell phone calls as a condition to prevent receiving collection calls before 9.a.m. The action against the two companies was brought pursuant to the Dodd-Frank Act, which gives the CFPB the authority “to take action against institutions or individuals engaging in unfair, deceptive, or abusive acts or practices or that otherwise violate federal consumer financial laws.”