Asset Acceptance Capital Corp., a Warren, Mich.-based debt buyer currently under federal investigation for its collection practices, said Friday that lenders agreed to loosen some restrictions in its own credit facility and increase its borrowing limit.
The company reports its borrowing limit rose to $65.9 million from $37 million, allowing the company to meet purchasing goals for the year. The company will pay higher interest rates on some types of borrowing.
In April, Asset Acceptance learned the Federal Trade Commission has been investigating its collection practices since February 2006 and that the company was notified it may have violated the Fair Credit Reporting Act, the Fair Debt Collection Practices Act and the Federal Trade Commission Act. The FTC offered the company a chance to negotiate a settlement,
A proposed consent decree includes certain monitoring and reporting obligations and customer disclosures, as well as a civil monetary penalty. Asset Acceptance is reviewing the proposal with counsel and has begun to discuss the matter with the FTC.
The company said Friday that for purposes of the credit facility it was capping estimated costs of a settlement at $7 million, but it said it couldn't estimate the potential liability.
The announced agreement with lenders will ease the "most restrictive covenants," according to the company. Those covenants are related to fourth-quarter write-downs on purchased receivables and potential charges and losses - including potential costs to defend against the FTC investigation.
