Two largest debt collectors to refund $61 million to consumers for using illegal collection practices
Encore Capital Group and Portfolio Recovery Associates bought debts that were potentially inaccurate, attempted to collect unverified debt, and used illegal court practices to collect debts, the bureau said.
It has ordered the companies to overhaul their debt collection and legal practices and to stop reselling debts to third parties.
Encore is required to 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 will pay $19 million in consumer refunds and an $8 million penalty, and stop collecting on over $3 million worth of debts.
“Encore and Portfolio Recovery Associates threatened and deceived consumers to collect on debts they should have known were inaccurate or had other problems,” said Richard Cordray, director of the bureau. “Now, the two biggest debt buyers in the market must refund millions and overhaul their practices.”
As debt buyers, Encore and Portfolio Recovery Associates purchase delinquent or charged-off accounts for a fraction of the value of the debt. Although they pay only pennies on the dollar for the debt, they may attempt to collect the full amount claimed by the original lender. Together, these two companies have purchased the rights to collect over $200 billion in defaulted consumer debts on credit cards, phone bills, and other accounts, Cordray said.
The bureau found that Encore and Portfolio Recovery Associates attempted to collect debts that they knew, or should have known, were inaccurate or couldn’t legally be enforced based on contractual disclaimers, past practices of debt sellers, or consumer disputes. The companies also filed lawsuits against consumers without having the intent to prove many of the debts, winning the vast majority of the lawsuits by default when consumers failed to defend themselves.
These practices are violations the Fair Debt Collection Practices Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act, he said.