CFPB Takes Action Against Encore Capital Group and Portfolio Recovery Associates

The Consumer Financial Protection Bureau (CFPB) announced on September 9, 2015 that it has taken action against Encore Capital Group (ECG) and Portfolio Recovery Associates (PRA), two prominent debt buying companies. Their investigation shows that both companies have committed unethical business practices in attempting to collect debts from consumers, including misrepresentation, threats, and disreputable litigation practices.

How Does Debt Buying Work?

Debt buying companies like ECG and PRA operate by purchasing debts from creditors who cannot collect them for a number of reasons, including:

  • The debt is too old to collect
  • The debt has been charged-off (meaning the original creditor has taken a financial loss to remove the debt from its books)
  • The debt has been discharged in bankruptcy

According to the CFPB’s findings, ECG and PRA are guilty of purchasing inadequately documented or unenforceable debts, and then pressuring consumers into paying them with “false statements” and by “churning out lawsuits using robo-signed court documents.” CFPB has ordered both companies to change their deceptive practices and cease reselling debts to third parties.

Allegations and Penalties

According to their press release, CFPB confirmed that ECG and PRA engaged in the following deceptive practices:

  • PRA associates falsely claimed to consumers that lawsuits against them were imminent: Collectors working for the company, claiming they were a part of the “Litigation Department,” informed consumers that lawsuits against them were planned or in progress unless they paid their debt. In many cases, this was a complete fabrication; files had not been reviewed by an attorney, nor had PRA decided whether to actually file the suit.
  • ECG falsely led consumers to believe that they held the burden of proof: Sworn affidavits reveal that ECG tricked consumers and courts into believing that a particular debt should be assumed valid because it had not disputed by the consumer within a certain period. In reality, the burden of proving that the debt was accurate and still owed belongs to ECG and must occur before the consumer has to challenge it.
  • Both companies misrepresented their intention to prove debts they sued consumers over: ECG and PRA attempted to collect debts by filing lawsuits against consumers in state courts nationwide. In many of these cases, it has been shown that neither company ever intended to prove the legitimacy of these debts, relying on winning cases by default when consumers did not file a defense.

As punishment for these actions, PRA is responsible for paying $19 million in consumer refunds and an $8 million penalty, and must cease collection actions for $3 million worth of debts. ECG has been ordered to pay $42 million in consumer refunds and a $10 million penalty, and must cease collections on $125 million worth of debts.

To view the full CFPB press release, please click here.

Representation for Victims of Creditor Harassment in Chicago

Have you experienced harassment from PRA, ECG, or any other creditor or debt buyer? You may be able to take legal action under the Fair Debt Collection Practices Act. Consult with a Chicago consumer lawyer from Atlas Consumer Law to learn more about your options and ensure that your rights are protected.

For a free consultation, please contact our office today.

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