Debt Companies Ordered to Pay Millions in Refunds, Fines for Illegal Collection Practices

Debt Companies Ordered to Pay Millions in Refunds, Fines for Illegal Collection Practices
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September 9, 2015

Two of the nation's largest debt buyers and collectors have been ordered to pay hefty fines and refunds for using illegal and deceptive tactics to collect bad debts.

The Consumer Financial Protection Bureau (CFPB) found that Encore Capital Group and Portfolio Recovery Associates bought debts that were potentially inaccurate, lacking documentation, or unenforceable. Without verifying the debt, the companies collected payments by pressuring consumers with false statements and churning out lawsuits using robo-signed court documents.

Encore must pay up to $42 million in consumer refunds and a $10 million penalty and stop collection on more than $125 million worth of debts. Portfolio Recovery Associates must pay $19 million in consumer refunds and an $8 million penalty, and stop collecting on over $3 million worth of debts.

The companies have also been ordered to overhaul their debt collection and litigation practices and to stop reselling debts to third parties.

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 found 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. These practices violated the Fair Debt Collection Practices Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act.

More details about the settlements can be found on the CFPB website.