The Consumer Financial Protection Bureau yesterday announced it had entered into a consent order with a debt collector and its owner for falsely threatening to take legal action against individuals and that the company and the owner have been permanently banned from the industry and ordered to pay $860,000 in redress to its victims, which has been suspended due to an inability to pay.
A copy of the consent order entered against Yorba Capital Management and Daniel Portilla, Jr., can be accessed by clicking here.
Yorba and Portilla were accused of violating the Consumer Financial Protection Act by engaging in deceptive acts or practices and the Fair Debt Collection Practices Act by threatening to take action that cannot be legally taken and using false or deceptive means to collect or attempt to collect on a debt. The CFPB said that Yorba and Portilla would mail letters to consumers that had “Litigation Notice” written at the top along with a case number. The notice threatened the recipients of the letters with a lawsuit if the debt was not repaid. The letters specifically said “You are hereby notified that a recommendation to file a lawsuit to collect this debt may be the next step resulting in a judgment entered against you.” The letters told the individuals that they had 10 days to respond before legal action was taken and what could happen if a judgment was obtained.
As you might be already able to guess, the collection company did not employ law firms or lawyers and did not file lawsuits against consumers to seek repayment of the debts. Because no lawsuits were filed, no judgments could be obtained or acted upon.
When consumers did contact the company, they were provided little information and were verbally threatened with a lawsuit unless they paid the debt, according to the consent order.
Along with being banned and the suspended repayment of $860,000, the respondents were also ordered to pay a civil money penalty of $2,200.
“Debt collectors often run afoul of consumer law when they coerce consumers to pay them by exaggerating the consequences of not paying,” said CFPB Acting Director David Uejio, in a statement. “Today’s action is a reminder that debt collectors must stick to the truth when communicating with consumers.”
