Debt Collectors Must Pay Millions to Consumers

Millions of dollars are now coming back to consumers after two of the largest debt collectors in America must now refund Americans money over allegations that the debt collectors used deceptive practices in order to try to collect the bad debts.

Raining Money

The Consumer Financial Protection Bureau said that both Portfolio Recovery Associates and Encore Capital Group bought the potentially inaccurate debts, and then attempted to collect the unverified debts while at the same time, using illegal litigation practices to try to collect those debts. Consumer Financial Protection Bureau Director, Richard Cordray, said in a statement that Encore and Portfolio Recovery Associates were threatening and deceived the consumers in order to collect the debts that they should have already known had problems or were inaccurate. Both of these companies buy the outstanding debts from the creditors at basically pennies on the dollar, and then try to collect on them. The companies purchased the rights to more than $200 billion in various debts that had been defaulted on by the consumer. Encore Capital Group is going to pay $42 million in refunds and will stop collection on more than $125 million in debts as part of the new settlement. $10 million is also going to be paid out in penalties to the Civil Penalties Fund, which is part of the Consumer Protection Financial Bureau. Portfolio Recovery Associates, which is a subsidiary of PRA Group, will end up paying $19 million in refunds to consumers, will stop trying to collect $3 million in debts, and also has to pay out $8 million in the Civil Penalty Fund.

Encore Capital is based in San Diego, California, and the business said that in a statement there were “two isolated issues” that were not practiced currently, and that it was changed quite a long time ago. Of course, Encore Capital says it disagrees with the position alleged in the case and the outcome of the case, but agreed to the settlement just because it was easier to settle in order to move forward, according to Kennth Vecchione, the president and CEO of Encore Capital.

According to the Consumer Financial Protection Bureau, a lot of these companies end up suing the consumers to try to collect the debts, but that neither of the companies intended to prove the debts. The companies would rely on the consumers not filing a defense for the motion, and therefore the companies will win those lawsuits by default, even though they are often wrong. The consent order stated that Encore Capital gave more than 100,000 account to a law firm that has 16 different attorneys. The Consumer Financial Protection Bureau also said that Encore Capital sent out thousands of letters to consumers from July 2011 through March 2013, and sent an offer letter to settle the debt, which was too old for litigation anyways. From 2009 through March 2012, PRA also sent out letters of a similar type, so both companies tried to get consumers to pay debts that were way too old for litigation in the first place, which is technically illegal, and these companies often use intimidation to get unaware consumers to pay these old debts.

Both companies were charged with giving inaccurate statements to the consumers, and PRA was accused of telling the consumers that the litigation against them was going to be coming, even though in reality, attorneys had not reviewed the accounts and it was not decided on whether or not to file a lawsuit. PRA said that the settlement and actions against the company will not affect the operational aspect of their company. Steve Fredrickson, the chairman and chief executive officer of PRA Group said in a statement that it was time to eliminate the threat of litigation and end the drawn out process to get back to a renewed vigor, and to grow the business while continuing to serve consumers. When it comes to debt collectors, there are a lot of intimidation and other threatening techniques that are used against the consumers in order to try to get them to pay their debts, even when the debt itself it wrong or inaccurate in terms of the amounts, and consumers need to know they have rights when it comes to dealing with a debt collector, which is in part, what the Consumer Financial Protection Bureau tries to do and alert consumers nationwide about these illegal practices.

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Jeanne Rose
Jeanne Rose lives in Cincinnati, Ohio, and has been a freelance writer since 2010. She took Allied Health in vocational school where she earned her CNA/PCA, and worked in a hospital for 3 years. Jeanne enjoys writing about science, health, politics, business, and other topics as well.