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Debt Collectors Ordered to Refund Consumers

Exterior of the Consumer Financial Protection Bureau, Washington, DC USA Image Credit: https://www.flickr.com/photos/taedc/12140572964

Once again, debt collectors are in trouble. They just can’t seem to follow the law and stop illegal collection practices. While we agree that you should ALWAYS pay your debts, that doesn’t give debt collectors the right to harass and lie to you.

This time, the companies are Encore Capital Group and Portfolio Recovery Associates. According to the Consumer Financial Protection Bureau (CFPB):

“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. “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.

These companies buy outstanding debts from creditors at a fraction of the value of the debt (often paying just pennies on the dollar). Then they attempt to collect the full amount of the debt and pocket the gain. According to the CFPB, these two companies bought debts that were potentially inaccurate, lacking documentation, or unenforceable.

Without verifying the debt, they sometimes sued consumers, trying to collect on the debts, but didn’t always prove the debts were legally owed. Usually the consumers wouldn’t defend themselves, thus the companies would win the lawsuits by default.

Encore Capital Group, along with its subsidiaries, form the nation’s largest debt buyer and collector. They agreed to a settlement with CFPB which requires them to pay $42 million in refunds, stop collection on $125 million in debt and pay a $10 million penalty.

Portfolio Recovery Associates is the the nation’s second largest deby buyer and collector. They will pay $19 million in refunds, stop collection on $3 million in debt, and pay an $8 million penalty.

Here are some of the things they were charged with doing, in addition to suing with no intent to prove the debts:

  • Attempted to collect on unsubstantiated or inaccurate debt: They gave incorrect balances, interest rates, and payment due dates. They purchased debt that sellers claimed were “approximate”, not showing the correct amount. Some companies selling them the debt even told them documentation was not available for some accounts or that recent payments had not been deducted from the balance, but they continued to purchase from those sellers and attempted to collect on the debt without any effort to determine the accuracy.
  • Sued or threatened to sue consumers past the statue of limitations
  • Gave inaccurate statements to consumers: For example, PRA told customers that they were going to be sued when, in reality, an attorney hadn’t reviewed the account and they had not decided whether to actually sue them. Encore told consumers the burden of proof was on them to disprove the debt.
  • Engaged in Other Illegal Collection Practices: Such as Encore making harassing collection calls and not investigating disputes. Portfolio Recovery Associates misled consumers into consenting to receive auto-dialed cell phone calls.

Both companies were forced to make operational changes, such as providing consumers with information about the debt including the name of the creditor and the amount of debt owed. They must also offer to provide consumers with original documents about the debt before they can file a lawsuit or even threaten to sue.

Know your rights when dealing with debt collectors. Here are some Q&A’s from the Federal Trade Commission and here are the top 10 debt collection rights for consumers in a quicker to read format. And here is where you can complain if a debt collector isn’t following the law.

But, remember, to avoid debt collectors, pay your debts! Or don’t get into debt in the first place. But  if you do have debt collectors contacting you, never let them intimidate or harass you. Know your rights and get them off your back as quickly as possible.

For full information on the enforcement action taken against these two debt collectors, click here.

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Written by BankScoop

BankScoop editors provide insightful commentary on important topics and stories of interest. Wherever possible, we attribute linked materials to their sources. If you would like to contribute content to BankScoop, contact us at admin@bankscoop.com.

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