Nation’s Top Two Debt Collectors, Encore Capital and Portfolio Recovery, Ordered to Repay Millions

cfpb-debt-collectors-culik-lawRecently, Portfolio Recovery Associates and Encore Capital Group, Inc. were forced to repay millions to consumers after using deceptive tactics to collect bad debt. The Consumer Financial Protection Bureau said that Encore, the nation’s largest debt collector, which includes its subsidiaries named Midland Funding LLC, Midland Credit Management, and Asset Acceptance Capital Group, will pay $42 million in refunds to consumers and pay a $10 million dollar penalty.

Portfolio, the Nation’s second largest debt collector, will pay back $19 million to consumers and pay a fine of $8 million. A copy of the consent order for Encore can be found here, while Portfolio’s can be found here.

While both companies publicly disagreed with how the CFPB characterized their operations, the CFPB found that the companies deceived consumers and attempted to collect debts they knew or should have known were inaccurate.

Both companies purchase delinquent debt, often for pennies on the dollar, and then attempt to collect the full amount claimed by the original lender. However, as debt collectors they are subject to a number of laws and regulations, including the Fair Debt Collection Practices Act, and may not deceive the consumers they are trying to collect from.

The CFPB said that both companies were filing lawsuits past the statute of limitation or when they lacked the paperwork to prove the debt in court. Further, both companies misrepresented their intention to prove debts they sued consumers over, and pressured consumers to make payments using misrepresentations. These included falsely stating that the consumer had the burden of proof to prove the debt was not owed, and falsely claiming an attorney had reviewed the file. A number of other violations were found, such as using robo-signed court filings, and placing harassing collection calls to consumers.

Debt collectors must be prepared to prove the ownership of the debt they are seeking to collect and be in compliance with state and federal regulation. Their failure to verify and maintain the proper paper trail of the account’s assignment, or to comply with the applicable statute of limitations, are valid defenses to collection efforts.

The CFPB also ordered that the companies overhaul their debt collection and litigation practices and stop reselling debt to third parties. The CFPB will continue to take action against “illegal and obnoxious debt collection practices.” Portfolio relayed that the settlement “will not materially impact operations” of the company.

The CFPB findings echoed an all-too-often scenario seen at Culik Law. Debt collectors are frequently unable to show the proper paperwork and rely heavily on default judgments to collect, banking on not needing to prove their case. If you’ve been contacted by Portfolio Recovery Associates, Encore Capital Group, Inc., Midland Funding, Midland Credit Management, or any other debt collector, be sure to contact Culik Law for a free case evaluation.

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CULIK LAW

CULIK LAW is a Massachusetts based law firm who believes in doing good work in our New England community to help individuals Champion Your Rights. We help clients with debt, credit reporting, mortgage, consumer protection, employment, and personal injury. If your rights are being violated or you need a new beginning, we want to hear about it and find a way to help.