The two firms and their affiliates purchased an enormous amount of debt resulting from unpaid bills— together, more than $200 billion in defaulted consumer debts on credit cards, phone bills and other accounts, according to the CFPB. Encore and Portfolio purchased the right to collect on the debts for pennies on the dollar, then attempt to collect the original amount from consumers.
The CFPB says both firms misled and harassed their consumers. Encore is accused of calling debtors before 8 a.m. or after 9 p.m ad Portfolio is accused of misleading consumers into consenting to receive robo-dialed calls to their cellphones.
Encore is also accused of telling consumers the burden of proof was on them to show a debt claim was invalid.
To settle the allegations, Encore must pay up to $42 million in consumer refunds and a $10 million penalty, and stop collection on over $125 million worth of debts. Portfolio must pay $19 million in consumer refunds and an $8 million penalty, and stop collecting on over $3 million worth of debts. Going forward, both firms are also barred from reselling debts to third parties.
In a statement, Encore said it disagreed with the CFPB’s findings, but agreed to the settlement to put the matter to rest.
“After rigorously and thoroughly scrutinizing seemingly countless aspects of our business for more than a year, the CFPB ultimately identified only two key issues warranting consumer refunds,” said Kenneth A. Vecchione, Encore’s President and Chief Executive Officer. “While we disagree with the CFPB’s positions on these two issues, we chose to agree to a settlement so we can move forward. We also believe the CFPB is imposing yet-to-be-adopted rules to past practices. This outcome is not about current law or rules already on the books, but instead about the CFPB subjecting companies to its own interpretations that have never been codified or adopted.”
Portfolio echoed Encore’s statement.
“It was time to end this drawn out process and eliminate the threat of litigation,” said Steve Fredrickson, chairman and chief executive officer of PRA Group, Inc., which operates Portfolio. “Given the circumstances, we went the extra mile to achieve closure, despite our objection to the CFPB’s characterization of PRA’s business practices…We remain confident that our business practices serve as a model for the industry, frequently going above and beyond applicable legal requirements.”
“These cases paint a broader picture about how (the CFPB) is working to clean up the debt collection industry,” Cordray said.