Zombie debt buyers – Encore Capital Group (Midland Funding, Asset Acceptance) and Portfolio Recovery Associates – ordered to stop using illegal actions to collect debts.
The Consumer Financial Protection Bureau (CFPB) found that Encore Capital Group (subsidiaries also named are Midland Funding LLC, Midland Credit Management, and Asset Acceptance Capital Corp) and Portfolio Recovery Associates bought debts that were or should be noncollectable and used abusive and illegal actions to collect. The companies knew many of these debts were uncollectable, lied to the consumer in attempt to collect debts, sold debts they knew to be noncollectable to other debt buyers and churned out lawsuits using robo-signed court documents (with little or no backup documentation).
The CFPB ordered the companies to overhaul their debt collection and pay consumer refunds, plus stop collection on millions $ worth of debts. 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.
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How large is this problem? These two companies have purchased the rights to collect over $200 billion (yes I said BILLION) in defaulted consumer debts on credit cards, phone bills, and other accounts.
Collecting Bad Debts. Specifically, the CFPB found that the companies:
- Attempted to collect on unsubstantiated or inaccurate debt
- Illegal Litigation Practices:
- 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.
- Pressured consumers to make payments using misrepresentations.
- 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.
- Other Illegal Collection Practices:
- 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.
Enforcement Action
Under the terms of the CFPB orders released today, Encore and Portfolio Recovery Associates are required to:
- Stop reselling debts.
- Refund millions of dollars to consumers:
- Encore must pay up to $42 million in refunds.
- Portfolio Recovery Associates must pay $19 million in refunds.
Cease collections on millions of dollars of debt: - Encore must stop collecting on $125 million of debt.
- Portfolio Recovery Associates must stop collecting on $3 million of debt.
- Stop collecting debts they can’t verify.
- Ensure accuracy when filing lawsuits.
- Provide consumers information before filing suit.
- Use accurate affidavits.
- Reform collection of older debts.
Pay civil money penalties:
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Encore must pay a penalty of $10 million to the CFPB’s Civil Penalty Fund.
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Portfolio Recovery Associates must pay a penalty of $8 million to the CFPB’s Civil Penalty Fund.
The Portfolio Recovery Associates consent order
Want a laugh – take a look at the web sites for each of these companies. They have friendly, smiling faces and offer to “help you pay your debts”. Can you say “wolves in sheep’s clothing”? When I tried opening one my Firefox browser warned me this is a dangerous site.
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