A proposed class-action lawsuit filed Wednesday accusing debt-buying giant Portfolio Recovery Associates of abusing U.S. courts by filing collection lawsuits against tens of thousands of consumers based on false affidavits.
The lawsuit against the nation’s second-largest debt collector states that the company collected approximately $371 million from U.S. consumers in 2014 alone, often through judgments and wage garnishments won in court with little evidence that the consumer owed anything. PRA officials were not immediately available for comment.
The case surfaces a month after the Consumer Financial Protection Bureau imposed up to $79 million in penalties and refunds in enforcement actions against both Norfolk, Va.-based Portfolio Recovery Associates and San Diego-based Encore Capital Group after finding the companies allegedly bought debts that were potentially inaccurate or lacked documentation.
The companies, without verifying debts, allegedly collected payments by pressuring consumers with false statements and churning out lawsuits using robo-signed court documents.
The CFPB found that Portfolio Recovery Associates and Encore filed lawsuits against consumers without having the intent to prove many of the debts, winning the vast majority of the lawsuits by default when consumers failed to defend themselves. The alleged practices violated the Fair Debt Collection Practices Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act. The companies also allegedly attempted to collect debts that they knew, or should have known, were inaccurate or could not legally be enforced based on contractual disclaimers, past practices of debt sellers or consumer disputes.
The consent order with Portfolio Recovery Associates required the company to pay $19 million in consumer refunds and an $8 million penalty, and to stop collections on more than $3 million worth of debts. The consent order with Encore required the firm to pay up to $42 million in consumer refunds and a $10 million penalty, and to stop collections on more than $125 million worth of debts.At the time of the CFPB’s action, Steve Fredrickson, chairman and CEO of PRA Group, said, "It was time to end this drawn out process and eliminate the threat of litigation, so we can focus with renewed vigor on serving our customers and growing our business. Given the circumstances, we went the extra mile to achieve closure, despite our objection to the CFPB's characterization of PRA's business practices. We remain confident that our business practices serve as a model for the industry, frequently going above and beyond applicable legal requirements."
During the course of its negotiations with the CFPB's enforcement unit, PRA - according to company officials - worked with the CFPB's rulemaking division to provide input on potential areas for industry-wide reform. "We take great pride in the fact that we have helped lift up this entire industry by adopting stringent protocols for our employees and working with regulators to raise industry standards," Fredrickson said. "We believe the new rules we have agreed to as a part of this settlement will create more confidence among regulators and our clients that people who have debts are treated fairly and with respect. That said, we intend to continue to work with the CFPB going forward to bring about meaningful industry-wide reforms."