The Consumer Financial Protection Bureau (CFPB) took action last week against Portfolio Recovery Associates, one of the largest debt collectors in the nation, for violating a 2015 CFPB order and engaging in other violations of law. The CFPB filed a proposed order on March 23, 2023, that, if entered by the court, would require Portfolio Recovery Associates to pay more than $12 million to consumers harmed by its illegal debt collection practices, in addition to a $12 million penalty that would be deposited into the CFPB’s victims relief fund. Portfolio Recovery Associates violated the 2015 order by collecting on unsubstantiated debt, collecting on debt without providing required documentation and disclosures to consumers, suing or threatening legal action against consumers without offering or possessing required documentation, and suing to collect on debt outside the statute of limitations. Portfolio Recovery Associates also failed to properly investigate and resolve consumer disputes about the company’s credit reporting. This action is one of many actions the CFPB has recently taken to hold repeat offenders accountable.
“After getting caught red-handed in 2015, Portfolio Recovery Associates continued violating the law through intimidation, deception, and illegal debt collection tactics and lawsuits,” said CFPB Director Rohit Chopra. “CFPB orders are not suggestions, and companies cannot ignore them simply because they are large or dominant in the market.”
Portfolio Recovery Associates is a wholly-owned subsidiary of publicly traded PRA Group (NASDAQ: PRAA), and is one of the largest debt collectors in the United States. The company’s principal headquarters is in Norfolk, Virginia. PRA Group reported net income of over $183 million in 2021.
In September 2015, the CFPB ordered Portfolio Recovery Associates to pay more than $27 million in consumer refunds and penalties for deceptive debt collection tactics. In that case, the CFPB found that Portfolio Recovery Associates collected on unsubstantiated debt, filed misleading affidavits in debt-collection actions, misrepresented that it intended to prove debts if consumers contested them, and misrepresented that the company had legally enforceable claims to debts outside of the applicable statutes of limitations.
The 2015 order required Portfolio Recovery Associates to adhere to provisions including prohibitions on:
- Collecting debts without a reasonable basis,
- Selling debt,
- Threatening or filing collection lawsuits without an intent to prove the debt,
- Filing false or misleading affidavits in debt-collection actions,
- Making false or misleading representations, and
- Collecting or suing on debt that was outside the statute of limitations.
In the complaint, the CFPB charged Portfolio Recovery Associates with violating numerous requirements of the 2015 order during the five-year period the order was in effect and engaging in deceptive conduct in violation of the Fair Debt Collection Practices Act and the Consumer Financial Protection Act, including:
- Making representations about unsubstantiated debts: Portfolio Recovery Associates made at least tens of thousands of representations about unsubstantiated, disputed debts, failing to review the required documentation to support the claim.
- Threatening consumers with potential legal actions and initiating debt collection lawsuits without offering or possessing required documentation: Portfolio Recovery Associates’ lawyers sent millions of form letters to consumers notifying them of potential legal action without offering to provide all required documents. Portfolio Recovery Associates also initiated thousands of legal actions against consumers when it lacked proper documentation about the debt.
- Misrepresenting that it would provide certain documents within thirty days: The form letter notifying consumers of potential legal action stated that, upon receipt of a written request from the consumer, Portfolio Recovery Associates would provide within 30 days of request the proof of documentation mentioned in the letter. On numerous occasions, Portfolio Recovery Associates failed to timely provide these documents after receiving a consumer’s written request for them. This impeded consumers’ ability to determine whether a debt was truly owed and how they should respond to allegations of outstanding debts.
- Collecting on time-barred debt without making required disclosures: On numerous occasions, Portfolio Recovery Associates did not provide the required disclosures to consumers when collecting on debts beyond the statute of limitations. When the company purchased debt, it estimated the statute of limitations that governed the debt, and in some cases that date was later than the actual statute of limitations.
- Suing to collect on time-barred debt: Portfolio Recovery Associates initiated at least dozens of lawsuits for debt that was too old to legally enforce. In doing so, Portfolio Recovery Associates falsely represented that those consumers had legally enforceable obligations to pay those debts when in fact they did not because the debt was outside the statute of limitations.
The CFPB also alleges that Portfolio Recovery Associates committed numerous violations of the Fair Credit Reporting Act and its implementing Regulation V, which include:
- Failing to inform consumers about investigation outcomes: On numerous occasions when Portfolio Recovery Associates determined that a consumer’s dispute was frivolous or irrelevant, it failed to timely inform the consumer about what information would be necessary for Portfolio Recovery Associates to investigate the dispute.
- Failing to timely resolve disputes: On at least tens of thousands of occasions, Portfolio Recovery Associates failed to resolve disputes within the required time.
- Conducting unreasonable investigations: On numerous occasions when a consumer alleged fraud or identify theft, Portfolio Recovery Associates did not conduct a sufficient investigation that considered all necessary information.
Under the CFPA, the CFPB has the authority to take action against institutions violating consumer financial laws, including engaging in unfair, deceptive, or abusive acts or practices. The CFPB alleges that Portfolio Recovery Associates violated the 2015 order, the CFPA’s prohibition on deceptive conduct, the FDCPA, FCRA, and Regulation V.
If entered by the court, the order would require Portfolio Recovery Associates to:
- Provide redress to consumers: Portfolio Recovery Associates would pay at least $12.18 million to consumers harmed by its illegal collection practices.
- Clean up its faulty operations: The order prohibits Portfolio Recovery Associates from collecting debts unless it has access to certain documents that meet its obligation to have a reasonable basis to believe it is collecting debts that consumers actually owe.
- Fix its failures to properly respond to consumers: The order requires Portfolio Recovery Associates to improve their response when consumers report that they do not owe a debt because of fraud or identity theft. And it ensures that Portfolio Recovery Associates adequately responds to consumer disputes in a timely manner about information Portfolio Recovery Associates has furnished to consumer reporting agencies.
- Pay $12 million in penalties: Portfolio Recovery Associates would pay a $12 million penalty to the CFPB, which would be deposited into the CFPB’s victims relief fund.
Read the 2015 order against Portfolio Recovery Associates.
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