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Do you have any past due bills?
Two of the nation's biggest debt collection companies are on the hook for millions of dollars as part of a settlement with U.S. consumer protection regulators over charges they used "deceptive tactics" to collect bad debts.
Let's talk about that:
The 411
The two companies are Encore Capital Group and Portfolio Recovery Associates, part of a larger company called the PRA Group. The U.S. Consumer Financial Protection Bureau announced the settlement yesterday.
How the companies work
Companies like Encore Capital Group and Portfolio Recovery Associates purchase groups of past-due accounts - often old or hard-to-collect ones - from creditors. The debt buyers bid on collections of accounts, paying an average of 4 cents for every $1 of debt face value. It's then up to the company to collect and, if they do, they keep all the money. In all, San Diego-based Encore Capital Group and Virginia-based Portfolio Recovery Associates purchased the rights to collect over $200 billion in defaulted consumer debts on credit cards, phone bills, and other accounts.
What type of debt?
Just about anything. Companies will purchase credit card debt, medical debt, automobile loan debt, personal loan debt, business debt, student loan debt and even unpaid utility and cell phone bills. Approximately 35 percent of adults with credit files - or about 77 million people - have debts in collection. The average amount is $5,200.
So what's the problem?
The CFPB said the two companies crossed the line when it comes to what's permissible in collecting on the accounts. The CFPB said the companies used "potentially inaccurate" information to purchase the debt and then hit consumers with false statements. They also tried to collect on debts by using "robo-signed" court filings to submit a barrage of lawsuits against customers. The companies, CFPB said, would file the suits without documentation backing them up in hopes consumers would not appear and the debt collectors would receive a default judgment.
Any other issues?
Yes, according to the CFPB. Both companies harassed consumers and mislead them about time limitations on debt collections. Encore also called people before 8 a.m. and after 9 p.m. and Portfolio is accused of misleading consumers into consenting to receive robo-dialed calls on their cell phones.
What's the penalty?
Encore was ordered to refund consumers up to $42 million, stop its collection efforts on $125 million in debts, and pay a $10 million penalty. PRA must refund consumers about $19 million, cease collections on $3 million in debts, and pay an $8 million penalty.
What the feds said
"Encore and Portfolio Recovery Associates threatened and deceived consumers to collect on debts they should have known were inaccurate or had other problems," said CFPB Director Richard Cordray. "Now, the two biggest debt buyers in the market must refund millions and overhaul their practices. We will continue to take action to protect consumers from illegal and obnoxious debt collection practices."
No admission of guilt
Both companies said they accepted the settlement to avoid the long process of defending their business practices. The companies were ordered to overhaul their debt collection and litigation practices and stop reselling debts to third parties, CFPB said.
Will I be getting money?
Maybe. If you've been contacted by one of these agencies, you could receive a refund. The CFPB said "tens of thousands" of consumers will receive refund checks but didn't outline the process for those payments. The companies have to submit a refund plan to the CFPB within 60 days.
For more help...
If you have questions about what a debt collector can do, visit AlabamaLegalHelp.org.