EOS CCA, a Norwell, Mass.-based collection agency, is the target of a federal complaint filed Monday by the Consumer Financial Protection Bureau. The agency is accused of reporting and collecting on old cellphone debts disputed by consumers.
The company, which buys and collects delinquent or charged-off accounts, allegedly provided wrong information to credit reporting companies about the debt and failed to correct information that it learned was inaccurate. The CFPB filed a proposed consent order that, if entered by the court, will require EOS to overhaul its collection practices, refund an estimated $743,000 to consumers and pay a $1.85 million penalty.
EOS paid AT&T $35.4 million in 2012 for a portfolio of more than three million cellphone accounts with a total face value of $2.3 billion. Many of the debts were old accounts that previously were sent to several collection agencies. The CFPB’s investigation found that EOS learned of problems in the portfolio - including fraudulent, already paid or settled debts - yet continued to collect and report on the debts.
"It is unacceptable that consumers were harmed by these practices and that the company supplied inaccurate information to the credit reporting companies, so today we are taking action to stop it,” said CFPB Director Richard Cordray.
The alleged practices violated the Fair Debt Collection Practices Act, the Fair Credit Reporting Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act. Specifically, the CFPB’s investigation found that EOS:
- Collected debts that it did not substantiate: EOS learned in January 2013 that, contrary to the sales agreement with AT&T, the portfolio it purchased contained fraudulent debts, debts that consumers had paid or settled, and debts that were so old that they could no longer be legally collected. When consumers disputed the debts, EOS had difficulty getting AT&T to provide sufficient, and in some cases, any documentation to verify the debts. Notwithstanding those issues, EOS continued to report and collect on certain disputed debts that EOS did not verify.
- Reported inaccurate dispute information to the credit reporting companies: Shortly after it started collecting on the portfolio, EOS reported to the credit reporting companies that all three million of the debts were disputed by consumers, when EOS knew not all of the accounts had been disputed. EOS flip flopped on this twice, removing the dispute flags and then reinserting the dispute flags a month later.
Pursuant to the Dodd-Frank Act, the CFPB has the authority to take action against institutions or individuals engaging in unfair, deceptive, or abusive acts or practices or that otherwise violate federal consumer financial laws. Under the terms of the proposed consent order, EOS would be required to:
- Refund at least $743,000 to consumers: EOS would be required to provide full refunds of payments made on debts that were disputed but that EOS did not verify.
- Cease collecting and reporting on disputed AT&T debt: If a consumer has disputed the debt and EOS is unable to substantiate it, EOS would be required to ask the credit reporting companies to remove any information about the debt from the consumer’s file. It would also be barred from collecting on the debt or accepting payment for it.
- Stop collecting unverified debts: EOS would not be able collect unsubstantiated debt if it has reason to believe the portfolio contains inaccurate information. Under the order, for five years the company would be required to review original account-level documents verifying a debt before collecting on it when, for example, a consumer has disputed it, the seller didn’t promise it was accurate or valid, or the debt was part of a portfolio EOS knew included unsupportable or inaccurate information.
- Ensure accuracy when providing information to credit reporting companies: EOS would only be permitted to report a debt with a credit reporting company if the debt is accurate.
- Stop reselling debts: EOS would be prohibited for five years from reselling the debts it buys to other debt collectors. This would protect consumers from the potential harm that results when debt collectors continue to sell and resell debts that may be inaccurate or lack the business records and information needed to collect them.
- Pay civil money penalties: EOS would be required to pay a penalty of $1.85 million to the CFPB’s Civil Penalty Fund.