On July 8, the CFPB along with 47 state attorneys general and DC announced an agreement with a major bank to resolve allegations that it sold faulty credit card “zombie debts” to third-party debt buyers, which included accounts with unlawfully obtained judgments, inaccurate or paid-off balances, and debts owed by deceased borrowers. The federal and state investigators also claimed that the bank filed deceptive debt-collection lawsuits against borrowers using robo-signed or illegally sworn affidavits to obtain false or inaccurate judgments for unverified debts. Under terms of the consent order, the bank agreed to, among other things, pay (i) $106 million to 47 state attorneys general, (ii) a $30 million civil money penalty to the CFPB, and (iii) provide at least $50 million in restitution to affected borrowers. The bank also agreed to cease collections on more than 528,000 accounts, and require that third-party debt buyers be prohibited from reselling debts purchased from the bank, unless they are sold back to the bank.
In a related announcement, the OCC imposed a $30 million civil money penalty over allegedly illegal non-home debt collection litigation practices and Servicemembers Civil Relief Act (SCRA) compliance practices. The OCC’s action stems from the bank’s practices related to the preparation and notarization of sworn documents used in debt litigation proceedings, and inadequate policies and procedures to ensure compliance with the SCRA.