Two of the Nation’s Largest Debt Collectors Will Refund $60 Million to Consumers
In September the Consumer Financial Protection Bureau ordered Portfolio Recovery Associates and Encore Capital Group to refund nearly $60 million to consumers along with orders to cease trying to collect on another $128 million in debts.
More than $200 billion in unpaid consumer debt on credit cards, phone bills and other accounts was purchased by the two firms and their affiliates, according to the CFPB. Debt buyers purchase the debt for pennies on the dollar, then attempt to collect the original amount from consumers.
San Diego-based Encore Capital Group and its subsidiaries, Midland Funding LLC, Midland Credit Management, and Asset Acceptance Capital Corp along with Virginia-based Portfolio Recovery Associates are accused of the following:
- Attempted to collect on unsubstantiated or inaccurate debt.
- Misrepresented their intention to prove debts they sued consumers over.
- Relied on misleading, robo-signed court filings to churn out lawsuits, had no documentation to back-up the debt and relied on consumers not filing a defense to win the lawsuits by default.
- Sued or threatened to sue consumers past the statute of limitations.
- Pressured consumers to make payments using misrepresentations.
- Encore falsely told consumers the burden of proof was on them to disprove the debt.
- Portfolio Recovery Associates falsely claimed an attorney had reviewed the file and a lawsuit was imminent.
- Encore disregarded or failed to adequately investigate consumers’ disputes. Encore is also accused of telling consumers the burden of proof was on them to show a debt claim was invalid.
- Encore farmed out disputed debts to law firms without forwarding required information.
- Encore made harassing collection calls to consumers.
- Encore’s subsidiary, Asset Acceptance, made thousands of calls to consumers before 8 a.m. or after 9 p.m. and called hundreds of consumers more than 20 times in a two-day period.
- Portfolio Recovery Associates misled consumers into consenting to receive auto-dialed cell phone calls.
Who is Eligible?
Only consumers who wrongly paid certain kinds of debts declared invalid by the consent order will receive refunds. Not everyone who had a dispute with Portfolio or Encore is eligible. Here are the criteria you must meet to be eligible for a refund:
- 12,000 consumers who paid debts that were past the statute of limitations or “time-barred debt” – are eligible for part of a $5.3 million fund, or an average of $442 each.
- 35,600 consumers who paid and were sued and had a “dispute affidavit” filed against them indicating the debt was valid because the consumer failed to dispute it. This group is eligible for part of a $36 million fund, or an average of $1,011 each.
- 38,000 consumers who paid and received a call from a Portfolio representative claiming to be from the “litigation department” when the firm allegedly hadn’t initiated legal action — are eligible for part of an $18.2 million fund. That’s an average of $479 per person.
- 837 consumers who paid a time-barred debt are eligible for part of an $861,000 fund, averaging $1,029 per consumer.
Cease collections on millions of dollars of debt
- Encore must stop collecting on $125 million of debt: The company must release or move to vacate all judgments and dismiss all lawsuits where it misrepresented that a debt was assumed valid, and stop any attempts to enforce or collect on these judgments. The face value of this debt is estimated at over $125 million.
- Portfolio Recovery Associates must stop collecting on $3 million of debt: The company must release or move to vacate all judgments and dismiss all pending lawsuits it filed past the statute of limitations and stop any attempts to enforce or collect on those judgments, estimated to have a face value of $3.4 million.
Consumers in these categories will be contacted by Encore or Portfolio to receive monetary compensation. Another set of consumers who were victims of these categories of actions by the two firms, but did not pay, will see the two firms cease collection activities on those alleged debts – impacting thousands of consumers who allegedly owed another $128 million. In addition, the disputed debts should be removed from the consumers’ credit reports.
It’s important to note that consumers who believe they have been mistreated by Encore and Portfolio, but will not receive redress from this order, retain the right to hire their own attorney and sue under the Fair Debt Collection Practices Act or the Fair Credit Reporting Act.
How will I be notified?
Consumers who are eligible will be notified by U.S. mail. Both Portfolio and Encore must file a plan with the CFPB that includes details about how consumers will be notified. Both firms are required to make reasonable efforts to contact you if a first letter is returned to sender.
How can I check to see if I am eligible?
Unfortunately, you can’t do anything. You must wait for notification from Encore or Portfolio via U.S. Mail.
Will the debts be deleted from credit reports?
Yes, but only those debts involving the specific issues listed above. The consent order covers only specific kinds of collection incidents. Both consumers who are eligible for compensation due to the fact they paid and consumers who did not pay but were contacted about debt items as described above should contact Encore or Portfolio to request that the credit bureaus delete whatever negative item that was placed by Encore or Portfolio.
How long will it take to get compensated?
Consumers impacted by Encore and Portfolio must wait until the CFPB approves their plan to compensate affected consumers. It will be several months before the plan is approved.
Going forward Encore and Portfolio agreed to a stronger set of procedures and consumer protections. Both debt collectors cannot attempt to collect debts without a “reasonable basis” for the amount owed.