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
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 Sulaiman Law
Group, LTD to learn more about your options and ensure that your rights
For a free consultation, please contact our office today.