On December 7, the CFPB announced the filing of a complaint and a proposed consent order against a Massachusetts-based debt collection firm for alleged violations of the Fair Debt Collection Practices Act (FDCPA), the Fair Credit Reporting Act (FCRA), and the Dodd-Frank Act. In 2012, the firm’s subsidiary purchased a debt portfolio from a telephone service provider containing over three million defaulted, and predominantly outdated, cellphone accounts. The firm and its subsidiary entered into a collection services agreement, with the firm agreeing to remit money collected from consumers, less fees and expenses, to its subsidiary. According to the CFPB, the firm, having prior experience in the collection of telecommunications debt, knew that the portfolio likely contained defects, including inaccurate and incomplete dispute histories and unverified documentation. Still, even after customers disputed certain debt, the firm continued to report the debt to credit reporting companies and to collect on time-barred, disputed, fraudulent, and settled or paid debts. The CFPB further alleges that the firm reported faulty information to the credit reporting companies by initially reporting that the entire debt portfolio was disputed, and then removing and subsequently reinserting the dispute flags on the entire portfolio. The firm’s purportedly deceptive practices resulted in the collection of about $743,000 on more than 2,000 disputed accounts, where the debt was not verified.
Under the proposed consent order, the firm would be required to: (i) refund to customers the payments that it received for disputed debt that was not verified; (ii) cease collecting and reporting on unverified, disputed debt, and request the removal by the credit reporting companies of such reported information from customer files; (iii) for five years, review original account-level documents to verify a debt before collecting on it; (iv) for five years, refrain from reselling its purchased debt to other debt collectors; and (v) pay a penalty of $1.85 million.