Debt Collector and its Former CEO to Pay Up to $3 Million Each to Settle CFPB UDAAP and FDCPA Claims

The CFPB recently entered into a consent order with a debt collector and its former CEO and part owner that requires each to pay up to $3 million in civil money penalties to settle charges that they violated the Consumer Financial Protection Act and the Fair Debt Collection Practices Act (FDCPA).

The consent order alleges that the debt collector used a network of debt collection companies that engaged in unlawful debt collection practices to collect consumer debts on the debt collector’s behalf.  These practices included representing to consumers that they owed more than they were legally obligated to pay and threatening consumers and their family members with legal actions, including lawsuits and arrests, that the parties did not have the intention or legal authority to take.

The debt collector and its former CEO also allegedly sold over $700 million in consumer debt to one of the companies with knowledge or reckless disregard of the company’s illegal consumer debt collection practices, and continued to place accounts with the companies after the debt collector’s compliance personnel had recommended terminating the companies because of their illegal collection acts and practices.  The CFPB found these practices to be unfair and deceptive in violation of its UDAAP standards and the FDCPA, both directly and under the theory that the debt collector and former CEO knowingly or recklessly provided substantial assistance to the unlawful practices of the companies in its collection network.

Under the terms of the consent order, the debt collector is restrained from engaging in certain collection practices and its former CEO is barred from working in any business that collects, buys, or sells consumer debts.  The order also imposes civil money penalties of $3 million each against the debt collector and its former CEO; however, full payment of those amounts is suspended subject to the debt collector paying a $500,000 civil money penalty and the former CEO paying a $300,000 civil money penalty.  The suspension of full payment may be terminated if the parties fail to meet certain other conditions as described in the consent order.

The consent order can be found here, and the CFPB’s press release is available here.