WASHINGTON—The CFPB Wednesday took action against the nation’s two largest debt buyers and collectors for using deceptive tactics to collect bad debts.
The Bureau found that Encore Capital Group and Portfolio Recovery Associates bought debts that were potentially inaccurate, lacking documentation, or unenforceable the CFPB stated.
“Without verifying the debt, the companies collected payments by pressuring consumers with false statements and churning out lawsuits using robo-signed court documents,” the CFPB explained.
The CFPB has ordered the companies to overhaul their debt collection and litigation practices and to stop reselling debts to third parties. Encore must pay up to $42 million in consumer refunds and a $10-million penalty, and stop collection on over $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.
“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 in a release. “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.”
Encore Capital Group, Inc. is headquartered in San Diego. Its subsidiaries also named in the CFPB’s action are Midland Funding LLC, Midland Credit Management, and Asset Acceptance Capital Corp. Together, they form the nation’s largest debt buyer and collector. Portfolio Recovery Associates is the nation’s second-largest debt buyer and collector. Portfolio Recovery Associates is a Delaware for-profit corporation headquartered in Norfolk, Va., and is a wholly owned subsidiary of PRA Group, Inc.
As debt buyers, Encore and Portfolio Recovery Associates purchase delinquent or charged-off accounts for a fraction of the value of the debt, the CFPB said. “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, the CFPB stated.