The nation’s two largest debt-buying firms are being accused of using deceptive tactics to collect bad debts and of trying to collect debts that the consumer doesn't owe.
The Consumer Financial Protection Bureau charged 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, the CFPB charged.
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. “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, Calif. Its subsidiaries also named in today’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. 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.
Inaccurate or uncollectible
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 allegedly 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.,
Other Illegal Collection Practices
- Encore disregarded or failed to adequately investigate consumers’ disputes:,If a consumer disputed their debt more than 45 days after Encore started collecting, Encore would require the consumer to produce specific documents or other “proof” to support their dispute or it would not conduct the legally-required investigation of the issues raised by the consumer.
- Encore farmed out disputed debts to law firms without forwarding required information:,In numerous instances, Encore assigned disputed debt to law firms and third-party debt collectors without informing them that the debt was disputed. As a result, law firms evaluating Encore accounts for litigation did not know which accounts were disputed.
- Encore made harassing collection calls to consumers:,Encore called consumers repeatedly or continuously with the intent to annoy, abuse, or harass them into paying. Encore’s subsidiary, Asset Acceptance, made thousands of calls to consumers before 8 a.m. or after 9 p.m. and called hundreds of consumers more than 20 times in a two-day period.
- Portfolio Recovery Associates misled consumers into consenting to receive auto-dialed cell phone calls:,For approximately a year, and ending in August 2013, Portfolio Recovery Associates told consumers that they could only prevent collection calls to their cell phones before 9 a.m. if they consented to receive calls on their cell phones from a dialer. The company penalized representatives who failed to adhere to this policy.
Under the terms of the CFPB orders released today, Encore and Portfolio Recovery Associates are required, among other things, to:
- Stop reselling debts;
- Refund millions of dollars to consumers;
Cease collections on millions of dollars of debt;
Stop collecting debts they can’t verify;,
- Ensure accuracy when filing lawsuits;,and
- Provide consumers information before filing suit.