Earlier this week, the Consumer Financial Protection Bureau ordered the nation’s two largest debt buyers, Encore and Portfolio Recovery Associates, to refund millions of dollars and reform their debt collection practices. To make profits, these companies purchase delinquent accounts at a fraction of the value. They then try to collect payments on the full amount of debt.
The CFPB found that in collecting these payments, the companies used illegal debt collection practices. The CFPB ordered Encore to pay up to $42 million in refunds and a $10 million penalty. Portfolio Recovery Associates must pay up to $19 million in refunds and an $8 million penalty.
The kinds of unlawful activities in which Encore and Portfolio Recovery Associates engaged to collect on the purchased debts included:
- Using incorrect balances, interest rates, and payment due dates;
- Threatening to sue consumers past the statute of limitations;
- Filing lawsuits they had no intention of pursuing;
- Telling consumers it was the consumer’s responsibility to disprove the debt;
- Making harassing collection calls; and
- Pressuring consumers by falsely claiming that an attorney reviewed their file and a lawsuit was impending.
The CFPB’s order requires the two companies, among other things, to stop reselling debts, to cease collecting on millions of dollars of debt, to verify accuracy of debts before filing law suits, and to provide consumers information before filing a claim.
Legal Aid applauds the CFPB’s sweeping action to curb these abusive debt collection tactics. The CFPB’s order addresses many of the issues that Legal Aid’s Consumer Law Unit regularly encounters during its work representing vulnerable D.C. residents in abusive debt collection actions.