CFPB Takes Big Swing at Encore, PRA

The Consumer Financial Protection Bureau has taken a huge swipe at the collection activities of Encore Capital Group and Portfolio Recovery Associates, assessing millions of dollars in fines and forcing the two debt-buying giants to stop collections on nearly $130 million in debts that the companies purchased.

The companies stand accused of engaging in a vast number of illegal collection activities, including:

• Attempted to collect on unsubstantiated or inaccurate debts
• Misrepresented their intention to prove debts they sued consumers over
• Relied on misleading, robo-signed court filings to churn out lawsuits
• Sued or threatened to sue consumers past the statute of limitations
• Encore falsely told consumers the burden of proof was on them to disprove the debt
• Portfolio Recovery Associates falsely claimed an attorney had reviewed the file and a lawsuit was imminent
• Encore disregarded or failed to adequately investigate consumers’ disputes
• Encore farmed out disputed debts to law firms without forwarding required information
• Encore made harassing collection calls to consumers
• Portfolio Recovery Associates misled consumers into consenting to receive auto-dialed cell phone calls

As part of the settlement, Encore is ordered to refund $42 million to consumers, stop collecting on $125 million in debts, and pay $10 million in penalties. PRA will refund $19 million to consumers, stop collecting on $3 million in debt, and pay an $8 million penalty.

Also, the companies are now barred from reselling debts they buy. This is a further blow to a debt-buying market that was already facing significant supply issues.

“Industry members who sell, buy, and collect debt would be well served by carefully reviewing the terms of these orders, as well as our recent resolution with JP Morgan Chase,” said CFPB Director Richard Cordray. “Taken together, these cases paint a broader picture about how the Consumer Bureau is working to clean up the market from both ends. Regardless of whether you are a debt seller or a debt buyer, all players in the collections market need to do their part and invest the resources to ensure they are collecting the right amount from the right consumer.”