The Consumer Financial Protection Bureau Penalizes Two Nationwide Debt Buyer

The Consumer Financial Protection Bureau Orders Two Of The Largest Debt Buyers To Refund Money and Change Collection and Litigation Practices

​The Consumer Financial Protection Bureau (‘CFPB’), an agency established by Congress to protect consumers through education and enforcement of federal consumer financial laws, ordered Encore Capital Group and Portfolio Recovery Associates to refund money to consumers and change their collection practices. The Dodd-Frank Act gives the CFPB the authority to penalize entities that engage in unfair, deceptive or abusive acts against consumers.

Encore Capital Group and Portfolio Recovery Associates are two of the nation’s largest debt buyers. These companies buy debts from other companies (such as past due credit cards) and pursue collection activities including telephone calls, letters, e-mails and/or the filing of lawsuits. The CFPB found that these entities engaged in unfair collection practices. Some of these alleged practices included:

•    Collecting debts based on inaccurate information.
•    Failure to properly investigate disputes and to notify law firms about disputes.
•    Sending settlement offers for debts that were too old to file lawsuits over.
•    Threatening litigation over debts when no attorney had not made any such determination.

In addition to these alleged unfair collection practices, the CFPB alleges that Encore Capital group and Portfolio Recovery Associates filed lawsuits without intent to prove the debt through the legal process. Rather, the CFPB alleges that the creditors intended to win lawsuits by a default judgment (when a consumer does not respond to the lawsuit). For instance, the CFPB alleges that the creditors filed lawsuits past the statute of limitations or without the proper documentation to prove up the debt.

Encore Capital Group has to issue $42,000,000 in refunds, stop collection on $125,000,000 in debt and will have to pay $10,000,000 into the CFPB’s Civil Penalty Fund.

Portfolio Recovery Associates has to issue $19,000,000 in refunds, stop collection on $3,000,000 in debts and will have to pay $8,000,000 into the CFPB’s Civil Penalty Fund.

The CFPB has also ordered these creditors to clean up their practices, including:
•    Using accurate and specific affidavits when collecting debts.
•    Only filing lawsuits when specific and accurate documents are available to prove that the debt is enforceable.
•    Stop collecting debts that they do not have original account level documents verifying the debt.

These financial punishments will hopefully result in these debt collectors cleaning up their collection and litigation practices. Even if not all the allegations and findings of the CFPB are true, creditors who wrongfully bully consumers into paying debts that consumers may not legally be required to repay need to be stopped. Creditors who file lawsuits without the proper documentation to prove the debt are wasting both judicial time and money and consumers’ time and money. As a consumer lawyer I hope that the large financial consequences imposed on the nation’s two largest debt buyers will result in other debt buyers, who are engaged in similar practices, voluntarily ending such practices.

As a litigator who represents consumers sued by these types of debt buyers, my experience has been no less troubled. I have experienced unreturned telephone calls and e-mails and sometimes an inability to get a representative of the creditor who has the authority to make legally binding decisions on the telephone. According to the CFPB, Encore Capital Group and Portfolio Recovery Associates sent tens of thousands of debts to law firms staffed by only a handful of attorneys. I suspect this business practice is followed by other debt buyers as well and may be the reason Plaintiff’s lawyers are not very responsive in some of these lawsuits. I hope that the penalties levied against Encore Capital Group and Portfolio Recovery Associates will directly result in creditors cleaning up their litigation practices so that the merits of the lawsuit can be fought by consumer lawyers. Rather, I often times find myself spending time fighting the inability to discuss the case with someone who can make legal decisions for the creditor or having to constantly follow up on promised documents or e-mails that are not timely sent.

Houston bankruptcy attorney Ryan Dove has been helping people who are experiencing financial difficulty since 2008 and regularly represents individuals in a variety of legal matters, including Chapter 7 bankruptcy, Chapter 13 bankruptcy, home loan modification, and debt settlement. 

To Contact:

Ryan Dove
Dove Law Firm, PLLC
1111 North Loop West, Suite 1115
Phone: 832-509-3400
Fax: 832-559-0770


Categories: Finance, Business Finance, Commercial Law

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