Portfolio Recovery Ordered to Reimburse $19 Million to Clients – The Virginian-Pilot

NORFOLK

Some Americans who have repaid their debt to collectors working for Portfolio Recovery Associates LLC may recover some of their money.

The federal government has ordered the Norfolk-based company, the nation’s second-largest buyer and debt collector, to repay consumers $19 million and waive $8 million in penalties.

The Consumer Financial Protection Bureau took action Wednesday against Portfolio Recovery, a wholly owned subsidiary of PRA Group Inc., and San Diego-based Encore Capital Group Inc., the nation’s largest collector.

“Encore and Portfolio Recovery Associates have threatened and deceived consumers into collecting debts that they should have known were inaccurate or had other problems,” office manager Richard Cordray said in a statement.

The bureau said Portfolio Recovery and Encore purchased debt that lacked documentation or was unenforceable, according to the release. Without verifying the debt, companies pressured consumers with false claims and sued using robot-signed court documents.

Portfolio Recovery collectors, who identified themselves as part of the “litigation department”, told consumers that lawsuits against them were planned or underway, but in many cases lawyers had not reviewed the accounts. and the company had not decided whether or not to take legal action. , the office said.

In many cases, the company placed tens of thousands of debts with law firms made up of a handful of lawyers, who often made no effort to obtain the necessary documents to back up their claims, according to the office. Instead, companies relied on consumers failing to defend themselves so they could win default suits.

The Virginian-Pilot reported in 2013 that the company had been sued and lost by consumers who claimed the collector had mailed draft legal documents along with collection notices, suggesting he would sue.

A portfolio recovery statement said the company had agreed to settle with the bureau to avoid the cost of a drawn-out legal battle.

“Given the circumstances, we have gone the extra mile to achieve the closure, despite our objection to the CFPB’s characterization of PRA’s business practices,” PRA Group Chairman and CEO Steve Fredrickson said in the statement. .

The settlement will not affect the company’s operations as it has changed its practices over the past few years, wrote Michael McKeon, a spokesperson for the PRA Group, in an email to The Pilot. Many of these changes are incorporated into the regulations.

McKeon did not respond to questions asking for more details about the changes.

Portfolio Recovery must reimburse collections made when it falsely stated that a lawyer had looked into a debt or that collectors were calling on behalf of lawyers, according to the office. It must also reimburse the payments for the judgments that have become statute-barred.

The company must also stop collecting debts whose total face value is estimated at $3.4 million.

Still, the other company sanctioned on Wednesday, must repay up to $42 million in refunds, stop collecting debts worth a total of $125 million and pay a fine of $10 million.

Larry Berlin, vice president of First Analysis, a Chicago-based research firm, said Wednesday’s actions indicate the bureau intends to pursue strict regulation of the debt collection industry.

PRA Group and Encore, which Berlin covers as an analyst, will not be affected by the bureau’s sanctions, he said, because the fines imposed are small compared to the companies’ potential profits and recoveries.

The PRA Group is estimated to have $4.7 billion in debt it can collect, Berlin said, so the $3.4 million it needs to stop collecting is miniscule. Additionally, approximately 21% of the company’s collections come from Europe and are unaffected.

“The company has a good reputation and the government does what the government does,” Berlin said. “It’s not like there’s a crime or any felony charges.”

Consumers who believe they have improperly repaid their business debt can file a complaint with the Consumer Financial Protection Bureau by calling 855-411-2372 or by filing a complaint online at ConsumerFinance.gov.

Sarah Kleiner, 757-446-2318, sarah.kleiner@pilotonline.com