CFPB Calls Fowl on 2 Biggest U.S. Debt Collectors

The Consumer Financial Protection Bureau recently ordered the nation's two biggest debt collectors, Encore Capital Group and Portfolio Recovery Associates, to stop using deceptive tactics to collect bad debts. The order sends millions of dollars back to the nation's citizens and gives a clear warning to other debt collectors.

On September 9, 2015, the Consumer Financial Protection Bureau (CFPB) took action against the country's two largest debt collectors. Finding a host of consumer protections violations, the agency issued orders that the companies immediately stop their illegal debt collections practices. In a statement, CFPB Director Richard Cordray said:

“Encore and Portfolio Recovery Associates threatened and deceived consumers to collect on debts they should have known were inaccurate or had other problems. . . . 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.”

Collecting Unverified Debts 

The two debt collections companies buy past-due debts from other businesses, sometimes for pennies on the dollar. But they often haven't verified the debt by reviewing the accounts to make sure they are accurate. That means they are often seeking payments for debts that have already been paid (at least partially) or that the consumer has disputed.

Filing Unwinnable Lawsuits

In filing a debt collections case, Encore and Portfolio are telling the court they can prove the debt existed and has not been paid. In reality, debt collection companies often don't have the documents they would need to prove their case. They rely on debtors not showing up to court so that they can get a judgment by "default" rather than by proof.

Collecting Old Debts

If a creditor waits too long to collect a debt it can lose its right to do so. But Encore and Portfolio often ignore the "statute of limitations", threatening to file lawsuits to collect debts that are too old, counting on the fact that consumers won't know the difference.

Pressuring Consumers with Misrepresentations

CFPB also found Encore and Portfolio had been pushing consumers to settle debts by making false legal statement. They often claim debtors will have to disprove their debt, or that a lawsuit is imminent before an attorney ever sees the file.

The Consequences

To put a stop to these consumer protection violations, CFPB has ordered each company to stop reselling debts they purchased and cease their disreputable practices. Together, the companies will have to pay back $61 million in falsely collected debts and another $18 million in civil penalties.

Encore and Portfolio are the largest debt buyers, so their actions affect the most consumers, but these tactics are used by all the debt collections companies. Dani K. Liblang has been filing cases against them for violating the Fair Debt Collection Practice Act for over 30 years, often on these same grounds. If you have questions about how your debt has been handled, contact The Liblang Law Firm, P.C., for a free consultation.