Encore Capital Group, Midland Funding, Midland Credit Management, and Asset Acceptance Capital Corp.
Documents in this case
- Complaint · · 18 p.
- Stipulation · · 18 p.
Case summary
On September 8, 2020, the Consumer Financial Protection Bureau (Bureau) filed suit in federal district court in the Southern District of California against Encore Capital Group, Inc., and its subsidiaries, Midland Funding, LLC; Midland Credit Management, Inc.; and Asset Acceptance Capital Corp. The companies are headquartered in San Diego, California and together comprise the largest debt collector and debt buyer in the United States, with annual revenue exceeding $1 billion and annual net income exceeding $75 million. Encore and its subsidiaries are currently subject to a 2015 consent order with the Bureau based on the Bureau’s previous findings that they violated the Consumer Financial Protection Act (CFPA), Fair Debt Collection Practices Act (FDCPA), and the Fair Credit Reporting Act. The Bureau alleged that Encore and its subsidiaries have violated the terms of this consent order and again violated the FDCPA and CFPA. On October 16, 2020, the court entered a stipulated final judgment and order that requires Encore and its subsidiaries to pay $79,308.81 in redress to consumers and a $15 million civil money penalty. The settlement also requires Encore and its subsidiaries to make various material disclosures to consumers, refrain from the collection of time-barred debt absent certain disclosures to consumers, and abide by certain conduct provisions in the 2015 consent order for five more years.
Complaint ()
PDF of this document (18 pages)
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ZACH MASON, CA Bar # 329643 Email: [email protected] 1700 G Street, NW
Washington, DC 20552 Telephone: (212) 328-7013 Facsimile: (202) 435-7329
Attorney for Plaintiff Bureau of Consumer Financial Protection
UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA
Bureau of Consumer Financial Protection,
Plaintiff,
V.
Encore Capital Group, Inc.; Midland Funding, LLC; Midland Credit Management, Inc.; and Asset
Acceptance Capital Corp.,
Defendants.
Case No.: '200V1750 GPC KSC
COMPLAINT FOR PERMANENT INJUNCTION AND OTHER RELIEF
The Bureau of Consumer Financial Protection brings this action against Encore
Capital Group, Inc.; Midland Funding, LLC; Midland Credit Management, Inc.; and
Asset Acceptance Capital Corp., under the Consumer Financial Protection Act of 2010
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(CFPA), 12 U.S.C. §§ 5531, 5536(a), 5564, 5565; and the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. §§ 1692-1692p.
INTRODUCTION
1. This is the second enforcement action that the Bureau has brought against Defendants. In the first action, the Bureau found that Defendants had violated multiple provisions of Federal consumer financial law, including the CFPA and the FDCPA. The Bureau agreed to resolve those findings without litigation through a consent order that required Defendants to abide by certain conduct provisions. Because Defendants have violated that order and, once again, the CFPA and the FDCPA, the Bureau files this Complaint.
JURISDICTION AND VENUE
2. This Court has subject-matter jurisdiction over this action because it is brought under “Federal consumer financial law,” 12 U.S.C. § 5565(a)(1), presents a federal question, 28 U.S.C. § 1331, and is brought by an agency of the United States, 28 U.S.C. § 1345.
3. Venue is proper because Defendants are located, reside, or do business in this district. 12 U.S.C. § 5564(f).
PARTIES 4. The Bureau is an independent agency of the United States created by the
CFPA. 12 U.S.C. § 5491(a). The Bureau has independent litigating authority and may
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initiate civil actions in federal district court to secure appropriate relief for violations of “Federal consumer financial law,” 12 U.S.C. § 5564(a)-(b), including the CFPA and the FDCPA, 12 U.S.C. § 12(H), (14); see also 15 U.S.C. § 16921(b)(6).
5. Encore Capital Group, Inc. (Encore Capital) is a limited-liability company incorporated in Delaware. Its principal place of business is in San Diego, California. At all times relevant to this Complaint, Encore Capital has transacted business in this district.
6. Midland Funding, LLC (Midland) is a wholly owned subsidiary of Encore Capital with its principal place of business in San Diego, California. At all times relevant to this Complaint, Midland has transacted business in this district.
7. Midland Credit Management, Inc. (MCM) is a wholly owned subsidiary of Encore Capital with its principal place of business in San Diego, California. At all times relevant to this Complaint, MCM has transacted business in this district.
8. Midland and MCM operate in concert with one another and under the direct supervision and control of Encore Capital to purchase and collect consumer debt.
9. Asset Acceptance Capital Corp. (Asset) is a wholly owned subsidiary of Encore Capital with its principal place of business in San Diego, California. Asset operates under the direct supervision and control of Encore Capital to purchase and collect consumer debt. At all times relevant to this Complaint, Asset has transacted
business in this district.
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10. Together, Defendants (collectively, Encore) form the largest debt buyer and collector in the United States. Its annual revenue is more than $1 billion, and its annual net income is more than $75 million.
11. According to Encore Capital’s 2018 10-K, it “primarily” purchases portfolios of defaulted debt and collects the debt from consumers. Midland, MCM, and Asset have no notable business purpose aside from purchasing and collecting consumer debt at Encore Capital’s direction. Because each Defendant’s “principal purpose” is the collection of consumer debt, each Defendant is a “debt collector’ under the FDCPA. 15 U.S.C. § 1692a(6).
12. Atall times relevant to this Complaint, Encore Capital, Midland, MCM, and Asset have collected debt related to consumer-financial products or services. Each Defendant is therefore a “covered person” under the CFPA. 12 U.S.C. § 5481(6); see also 12 U.S.C. § 5481(5) & (15)(A)(x).
FACTUAL BACKGROUND
13. In 2015, the Bureau issued an administrative consent order with respect to Encore Capital, Midland, MCM, and Asset under the caption Encore Capital Group, Inc., 2015-CFPB-0022 (Sept. 9, 2015) (the Order).
14. The Order resolved claims that Encore was making false or unsubstantiated representations to consumers about consumers owing debts; misrepresenting that Encore
intended to prove debts if consumers contested them; filing affidavits that misled
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consumers about the affiants’ personal knowledge and the courts’ presumption of the debts’ validity; misrepresenting that Encore had legally enforceable claims to debts outside of the applicable statutes of limitations; misrepresenting to consumers that they had the burden of proof in litigation; making excessive and inconvenient phone calls; and failing to adequately investigate consumer-reporting disputes.
15. The Bureau found that these practices violated the CFPA, the FDCPA, and the Fair Credit Reporting Act.
16. The Order required Encore to pay at least $34 million in restitution to consumers and a $10 million civil penalty to the Bureau.
17. |The Order also imposed conduct provisions that were primarily designed to protect consumers from efforts to collect inaccurate or unsubstantiated debts, particularly through litigation or threats of litigation. But Encore has not complied with those conduct provisions.
Encore sued consumers without possessing required documentation.
18. Paragraph 131(a) of the Order prohibits Encore from suing a consumer without possessing certain Original Account-Level Documentation (OALD), a term defined in § 12 of the Order.
19. After J 131’s effective date, Encore filed at least hundreds of lawsuits
without possessing OALD, as required by § 131(a) of the Order.
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Encore engaged in Legal Collections without providing required disclosures.
20. Paragraph 131(b) of the Order restricts Encore’s use of Legal Collections, which the Order defines, in relevant part, as “any collection efforts made by any internal legal department or third-party law firm to collect a [d]ebt owed or allegedly owed to Encore.”
21. Specifically, § 131(b) prohibits Encore from engaging in Legal Collections without first providing the consumer with a “statement that Encore, or Encore’s agent, will, within 30 days of a written request, provide the [c]onsumer with copies of [certain OALD)] at no cost.”
22. In more than 750,000 instances after ¥ 131’s effective date, Encore engaged in Legal Collections after it had omitted material elements of this required disclosure.
23. Specifically, more than 750,000 disclosures omitted that the OALD would be provided at no cost.
24. More than 25,000 of the disclosures also omitted that the OALD would be provided within 30 days of a request.
25. Encore has collected more than $300 million through Legal Collections on
these accounts without providing all material aspects of the disclosure required by
4] 131(b) of the Order.
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Encore failed to provide OALD within 30 days of consumers’ requests.
26. Paragraph 131(b) of the Order states that “Encore has to provide [the abovereferenced OALD] upon request.”
27. In more than 250 instances since § 131’s effective date, Encore told consumers that it would respond to a request for OALD within 30 days of receiving a request, but Encore did not provide the OALD within 30 days of a request. In some instances, Encore filed lawsuits against consumers even though Encore had not provided the requested OALD.
28. Encore created a list of these consumers, as well as the dates of their requests and Encore’s actions in response, which it provided to the Bureau on April 22, 2019, with the title “Supplemental Appendix I.”
29. The failure to provide these consumers with the OALD that they had requested impeded the consumers’ ability to determine whether their debts were truly owed. It was likely to affect the consumers’ decision-making about whether and how to respond to allegedly outstanding debts.
Encore sued consumers on Time-Barred debts.
30. Paragraph 133(a) of the Order prohibits Encore from “collecting or attempting to collect any Time-Barred Debt through litigation or arbitration.” The Order defines “Time-Barred Debt” as debt “that is beyond an applicable statute of limitations
for a [d]ebt collection lawsuit.”
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31. After § 133’s effective date, Encore filed more than 100 lawsuits to collect consumer debts after the applicable statutes of limitations had expired.
32. Encore referred to these lawsuits in a declaration attached to a September 20, 2019 submission from its attorneys to the Bureau.
33. These lawsuits constitute representations to consumers, directly or indirectly, expressly or by implication, that the consumers had legally enforceable obligations to pay the debts.
34. The debts were beyond the applicable statutes of limitations, and so the consumers’ obligations were not legally enforceable.
35. The representations that the obligations were legally enforceable were likely to affect consumers’ choices or conduct regarding whether to pay the allegedly outstanding debts.
Encore attempted to collect Time-Barred debts without giving required disclosures.
36. Paragraph 133(b) of the Order requires that when Encore attempts to collect a Time-Barred debt, it must include the applicable version of one of the following statements:
“The law limits how long you can be sued on a debt and how long a debt can
appear on your credit report. Due to the age of this debt, we will not sue you for it
or report payment or non-payment of it to a credit bureau.”
or
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“The law limits how long you can be sued on a debt. Because of the age of your
debt, we will not sue you for it.”
37. After J 133’s effective date, Encore sent more than 425,000 letters to collect Time-Barred debts without including the disclosure required by 4 133(b) of the Order. At least 845 of these consumers made about $125,000 in payments to Encore before Encore gave them the required disclosure.
Encore failed to disclose that consumers might incur international-transaction fees.
38. Beginning in mid-2016, Encore began using a payment processor based in a foreign country to process consumers’ debit-card and credit-card payments to Encore.
39. Because the payment processor is based in a foreign country, some consumers’ banks charged international-transaction fees for these payments.
40. Although Encore knew that some consumers would incur these fees, for a period of about six months, Encore did not disclose to consumers that such a fee was possible.
41. Thousands of consumers incurred tens of thousands of dollars in these fees before Encore began disclosing that consumers may incur these fees.
42. Consumers have no control over how Encore processes payments and had no reason to believe that their payments to Encore—a domestic company—could result in
international-transaction fees.
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43. Encore accepted payment through alternative means, such as ACH transfer, which did not result in international-transaction fees.
44. Encore’s failure to disclose to consumers that they might be charged international-transaction fees on credit-card and debit-card payments effectively denied consumers the opportunity to make informed choices about their preferred payment methods.
COUNT I: VIOLATING THE CFPA BY VIOLATING THE ORDER
45. The Bureau incorporates the allegations set forth in §] 1-44 of this Complaint.
46. Under § 1036(a)(1)(A) of the CFPA, it is unlawful for covered persons, such as Encore, to “commit any act or omission in violation of a Federal consumer financial law.” 12 U.S.C. § 5536(a)(1)(A).
47. The Order is an “order prescribed by the Bureau” and is therefore part of “Federal consumer financial law.” 12 U.S.C. § 5481(14).
48. Encore has violated the Order by:
a. suing consumers without possessing OALD required by § 131(a) of the Order;
b. engaging in Legal Collections without first providing the disclosure
required by §] 131(b) of the Order;
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C. failing to provide OALD within 30 days of a consumer request, as
required by § 131(b) of the Order;
d. suing consumers on Time-Barred debts, in violation of § 133(a) of the Order; and e. collecting or attempting to collect Time-Barred debts without
providing the disclosure required by §] 133(b) of the Order.
49. By violating the Order’s requirements, Encore committed acts or omissions that violated “Federal consumer financial law.” Accordingly, Encore violated § 1036(a)(1)(A) of the CFPA. 12 U.S.C. § 5536(a)(1)(A).
CounT I: DECEPTIVE ACTS AND PRACTICES
50. The Bureau incorporates the allegations set forth in §J 1-44 of this Complaint.
51. Section 1036(a)(1)(B) of the CFPA prohibits covered persons, such as Encore, from engaging in deceptive acts or practices. 12 U.S.C. § 5536(a)(1)(B). An act or practice is deceptive if it involves a material misrepresentation or omission that is likely to mislead consumers acting reasonably under the circumstances. Information is material to consumers if it is likely to affect a consumer’s conduct regarding the product or service. Express representations are presumptively material.
52. Encore’s representations that it would provide OALD were deceptive.
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a. As described in 9] 26-29 of this Complaint, in more than 250 instances, Encore expressly represented to consumers that if consumers requested certain OALD within 30 days, Encore would provide it.
b. These representations were what Encore intended to convey, and it was reasonable under the circumstances for consumers to interpret the representations literally.
C. These representations misled or were likely to mislead consumers because they were untrue—Encore did not provide the OALD within 30 days of the consumers’ requests.
d. These representations were presumptively material because they were express. They were also material because they were likely to affect consumers’ behavior: Encore’s failure to provide OALD within the time that it said it would was likely to or did impede consumers’ ability to assess Encore’s claims that the debts were properly owed. This was likely to affect how consumers responded to Encore’s collection attempts.
53. Encore’s lawsuits on Time-Barred debts were deceptive.
a. As described in § 30-35 of this Complaint, Encore sued more than 100 consumers on Time-Barred debts.
b. These lawsuits represented implicitly or explicitly, directly or by
implication, that consumers had legally enforceable obligations to pay these debts.
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c. These representations were material because they were likely to affect consumers’ choices about whether and how to respond to the allegedly outstanding debts. A consumer, especially one with limited resources, is more likely to pay an obligation that is legally enforceable than one that is not because the consequences of failing to repay the former are more severe than for the latter.
d. These representations were likely to mislead consumers because they were untrue; as these debts had passed the applicable statutes of limitations, the consumers did not have legally enforceable obligations to pay these debts.
54. Encore therefore engaged in deceptive acts or practices that violated §§ 1031(a) and 1036(a)(1)(B) of the CFPA. 12 U.S.C. §§ 5531(a); 5536(a)(1)(B).
COUNT III: VIOLATIONS OF THE FDCPA
55. The Bureau incorporates the allegations set forth in 4 1-44 of this Complaint.
56. Section 807 of the FDCPA prohibits debt collectors, such as Encore, from using any false, deceptive, or misleading representation or means in connection with the collection of any debt. 15 U.S.C. § 1692e. Specifically, § 807(2)(A) prohibits false representations of the legal status of a debt, § 807(5) prohibits threats to take action that cannot legally be taken or that is not intended to be taken, and § 807(10) prohibits false representations or deceptive means to collect or attempt to collect any debt. 15 U.S.C.
§ 1692e(2)(A), (5), (10).
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57. | Encore’s representations that it would provide OALD were false or misleading, in violation of § 807 and 807(10) of the FDCPA.
a. As described in §] 26-29 of this Complaint, in more than 250 instances, Encore expressly represented to consumers that if consumers requested certain OALD within 30 days, Encore would provide it.
b. These express representations were made in letters or phone calls in which Encore attempted to collect debt and were therefore “in connection with the collection of any debt” within the meaning of the FDCPA. 15 U.S.C. § 1692e.
c. These representations were false or misleading because they were untrue—Encore did not provide the OALD within 30 days of the consumers’ requests.
58. Encore’s lawsuits on Time-Barred debts were false or misleading under § 807, 807(2)(A), 807(5), and 807(10) of the FDCPA.
a. As described in §[ 30-35 of this Complaint, Encore sued more than 100 consumers on Time-Barred debts.
b. Because the lawsuits were intended to collect debt, they were “in connection with the collection of any debt” within the meaning of the FDCPA. 15
U.S.C. § 1692e.
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C. The reasonable interpretation of these lawsuits, implicitly or explicitly, directly or by implication, was that consumers had legally enforceable obligations to pay these debts.
d. These representations were false or misleading because they were untrue; as these debts had passed the applicable statutes of limitations, the consumers did not have legally enforceable obligations to pay these debts.
e. Whether a debt is legally enforceable concerns the character or legal status of a debt.
59. Encore therefore used false, misleading, or deceptive representations or means in connection with the collection of debts, in violation of § 807, 807(2)(A), 807(5), and 807(10) of the FDCPA. 15 U.S.C. § 1692e, 1692e(2)(A), (5), (10).
COUNT IV: VIOLATING THE CFPA BY VIOLATING THE FDCPA 60. The Bureau incorporates the allegations set forth in § 1-44 of this
Complaint.
61. Section 1036(a)(1)(A) of the CFPA makes it unlawful for covered persons, such as Encore, to “commit any act or omission in violation of a Federal consumer financial law.” 12 U.S.C. § 5536(a)(1)(A).
62. The FDCPA is a “Federal consumer financial law.” 12 U.S.C.
§ 5481(12)(H), (14).
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63. Under § 814(c) of the FDCPA, any violation of the FDCPA is deemed to be a violation of the CFPA. 15 U.S.C. § 16921(c).
64. By violating the FDCPA as described in Count III, Encore violated the CFPA. 12 U.S.C. § 5536(a)(1)(A); 15 U.S.C. § 16921(c).
COUNT V: UNFAIR ACTS AND PRACTICES
65. The Bureau incorporates the allegations set forth in ¥ 1-44 of this Complaint.
66. Section 1036(a)(1)(B) of the CFPA prohibits covered persons, such as Encore, from engaging in unfair acts or practices. 12 U.S.C. § 5536(a)(1)(B). Under § 1031(c)(1), an act or practice is unfair if it causes or is likely to cause a substantial injury that is not reasonably avoidable by consumers and that does not provide countervailing benefits to consumers or competition. 12 U.S.C. § 5531(c)(1).
67. |Encore’s conduct surrounding its payment processing described in this Complaint caused or was likely to cause substantial injury by effectively denying consumers the opportunity to make informed choices of their preferred payment methods.
68. The injury was not reasonably avoidable because Encore did not disclose the possibility of the fees, consumers had no control over how Encore processed their payments, and consumers had no reason to believe that their payments to Encore—a
domestic company—could result in international-transaction fees.
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69. Encore’s conduct was not outweighed by countervailing benefits to consumers or to competition.
70. Encore therefore committed unfair acts or practices that violated §§ 1031(a) and 1036(a)(1)(B) of the CFPA. 12 U.S.C. §§ 5531(a), 5536(a)(1)(B).
DEMAND FOR RELIEF
Accordingly, the Bureau requests that the Court:
1. permanently enjoin Defendants from committing future violations of the CFPA, the FDCPA, or any provision of “Federal consumer financial law,” as defined by
12 U.S.C. § 5481(14);
2. grant additional injunctive relief as the Court deems just and proper; 3. award damages or other monetary relief against Defendants; 4. order Defendants to pay redress to consumers harmed by Defendants’
unlawful conduct;
5. order the disgorgement of Defendants’ ill-gotten gains; 6. impose on Defendants civil money penalties under 12 U.S.C. § 5565(c); 7. order Defendants to pay the Bureau’s costs incurred in connection with prosecuting this action; and
8. award additional relief as this Court deems just and proper.
\\ \\ \\
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Respectfully submitted,
Cara Petersen
Principal Deputy Enforcement Director Jeffrey Paul Ehrlich
Deputy Enforcement Director
Kara K. Miller
Assistant Litigation Deputy
s/ Zach Mason Zach Mason (CA Bar # 329643) Enforcement Attorney
Bureau of Consumer Financial Protection Email: [email protected]
Tel.: 212-328-7013
Fax: 202-435-7329
1700 G Street, NW
Washington, DC 20552
Stipulation ()
PDF of this document (18 pages)
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BUREAU OF CONSUMER FINANCIAL PROTECTION,
Plaintiff, V.
ENCORE CAPITAL GROUP, INC.;
MIDLAND FUNDING, LLC; MIDLAND CREDIT MANAGEMENT, INC.; and ASSET ACCEPTANCE CAPITAL CORP.,
Defendants.
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UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA
Case No.: 20-cv-1750-GPC-KSC FINAL JUDGMENT AND ORDER APPROVING JOINT MOTION FOR ENTRY OF STIPULATION
[ECF No. 5]
Plaintiff, the Bureau of Consumer Financial Protection (Bureau) commenced this civil action on September 8, 2020, to obtain injunctive and monetary relief and civil penalties from Encore Capital Group, Inc. (Encore Capital); Midland Funding, LLC (Midland); Midland Credit Management, Inc. (MCM); and Asset Acceptance Capital Corp. (Asset). The complaint alleges violations of the Consumer Financial Protection Act
of 2010 (CFPA); 12 U.S.C. §§ 5531, 5536(a), 5564, 5565; and the Fair Debt Collection
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Practices Act (FDCPA); 15 U.S.C. §§ 1692 to 1692p; in connection with Defendants’ debt-collection acts and practices.
The Bureau and Defendants agree to entry of this Final Judgment and Order (Order), without adjudication of any issue of fact or law, to settle and resolve all matters
in dispute arising from the conduct alleged in the Complaint.
Therefore, IT IS ORDERED:
FINDINGS 1. This Court has jurisdiction over the parties and the subject matter of this action.
2. Defendants neither admit nor deny the allegations in the Complaint, except
as specified in this Order. For purposes of this Order, Defendants admit the facts necessary to establish the Court’s jurisdiction over them and the subject matter of this action.
3. Defendants waive all rights to seek judicial review or otherwise challenge or contest the validity of this Order and any claim they may have under the Equal Access to Justice Act, 28 U.S.C. § 2412, concerning the prosecution of this action to the date of this Order. Each Party agrees to bear its own costs and expenses, including, without limitation, attorneys’ fees.
4. Entry of this Order is in the public interest.
DEFINITIONS
5. The following definitions apply to this Order: a. “2015 Order” means the administrative order issued to Encore Capital, Midland, MCM, and Asset, entitled Encore Capital Group, Inc., 2015-CFPB-0022 (Sept. 9, 2015).
b. “Affected Consumers” means the 14 consumers identified in Supplemental Appendix I provided to the Bureau on April 22, 2019
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///
il.
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for which Encore made collection after an applicable “OALD Request.”
“Board” means Defendants’ duly-elected and acting Board of Directors.
“Charge-off’ means the treatment of a receivable balance by a Creditor as a loss or expense because payment is unlikely. “Charge-off Balance” means the amount alleged due on an account receivable at the time of Charge-off. “Clearly and prominently” means:
as to written information, written in a type size and location sufficient for an ordinary Consumer to read and comprehend it, and disclosed in a manner that would be easily recognizable and understandable in language and syntax to an ordinary Consumer. If the information is contained in a multi-page print document, the disclosure appears on the first page and as to information presented orally, spoken and disclosed in a volume, cadence, and syntax sufficient for an ordinary Consumer to hear and comprehend.
“Consumer” means any natural person obligated or allegedly obligated to pay any Debt.
“Creditor” means any person who offers or extends credit creating a Debt or to whom a Debt is owed, but such term does not include any person to the extent that that person receives an assignment or transfer of a debt in default solely for the purpose of facilitating collection of
such Debt for another.
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il.
lil.
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“Debt” means any obligation or alleged obligation of a Consumer to pay money arising out of a transaction in which the money, property, insurance, or services that are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment. “Defendants” means Encore Capital Group, Inc.; Midland Funding, LLC; Midland Credit Management, Inc.; and Asset Acceptance Capital Corp., individually, collectively or in any combination, and any of their successors and assigns.
“Effective Date” means the date on which this Order is entered by the Court.
“Enforcement Director” means the Assistant Director of the Office of Enforcement for the Bureau of Consumer Financial Protection, or his or her delegee.
“Legal Collection” means any collection efforts made by any internal legal department or a third-party law firm to collect a Debt owed or allegedly owed to Defendants, including but not limited to sending letters on law firm letterhead and filing Debt-collection lawsuits, but does not include any post-judgment collection efforts. “Original Account-Level Documentation” or “OALD” means: any documentation that a Creditor or that Creditor's agent (such as a servicer) provided to a Consumer about a Debt; a complete transactional history of a Debt, created by a Creditor or that Creditor's agent (such as a servicer); or a copy of a judgment, awarded to a Creditor or entered on or
before the Effective Date.
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0. ‘Related Consumer Action” means a private action by or on behalf of one or more Consumers or an enforcement action by another governmental agency brought against Defendants based on substantially the same facts as described in the Complaint.
p. “Time-Barred Debt” is a debt that is beyond an applicable statute of
limitations for a Debt-collection lawsuit.
CONDUCT RELIEF I.
IT IS ORDERED that:
6. Defendants and their officers, agents, servants, employees, and attorneys,
and all other persons in active concert or participation with them who have actual notice of this Order, whether acting directly or indirectly, may not violate §§ 1031 and 1036 of the CFPA, 12 U.S.C. §§ 5531 and 5536, or § 807, 807(2)(A), 807(5), and 807(1) of the FDCPA, 15 U.S.C. § 1692e, 1692e(2)(A), (5), (10). Prohibition on Failing to Disclose Known Possible Fees
7. For 5 years after the Effective Date, Defendants and their officers, agents, servants, employees, and attorneys, and all other persons in active concert or participation with them who have actual notice of this Order, whether acting directly or indirectly, may not violate § 1036(a)(1)(B) of the CFPA, 12 U.S.C. §§ 5536(a)(1)(B), by knowingly or recklessly using a payment processor that processes Consumers’ payments in another country without disclosing to Consumers the potential that Consumers may be subject to fees as a result and that Consumers can avoid those fees by using alternative payment methods.
Extension of Certain of the 2015 Order’s Conduct Provisions
8. For 5 years after the Effective Date, Defendants and their officers, agents,
servants, employees, and attorneys, and all other persons in active concert or participation
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a.
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with them, who have actual notice of this Order, whether acting directly or indirectly, are hereby restrained and enjoined from: initiating a Legal Collection lawsuit unless in possession of the
following:
Original Account-Level Documentation reflecting, at a minimum: the Consumer’s name; the last four digits of the account number associated with the Debt at the time of Chargeoff; and the claimed amount, prior to any post Charge-off payments (unless the claimed amount is higher than the Chargeoff Balance, in which case Defendants must possess (i) Original Account-Level Documentation reflecting the Charge-off Balance and (ii) an explanation of how the claimed amount was calculated and why such increase is authorized by the agreement creating the Debt or permitted by law); if Defendants are suing under a breach of contract theory, the contractual terms and conditions applicable to the Debt; a chronological listing of the names of all prior owners of the Debt and the date of each transfer of ownership of the Debt, beginning with the name of the Creditor at the time of Chargeoff; and any one of the following:
l. a document signed by the Consumer evidencing the opening of the account forming the basis for the Debt; or 2. OALD reflecting a purchase, payment, or actual use of
the account by the Consumer.
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engaging in any Legal Collection without providing the Consumer with certain information about the Debt, unless previously provided,
including but not limited to, the following information:
the name of the Creditor at the time of Charge-off, including the name under which the Creditor did business with the Consumer;
the last four digits of the account number associated with the Debt at the time of the Consumer’s last monthly account statement, or, if not available, at the time of Charge-off;
the Charge-off Balance;
Defendants’ method of calculating any amount claimed in excess of the Charge-off Balance; and
a statement that, upon Defendants’ receipt of a written request, the Consumer will be provided with copies of the documentation referenced in Subsection (a) of this Paragraph. For any disclosure made pursuant to this provision after the Effective Date, Defendants must inform the Consumer that it will provide the requested documentation “within 30 days” of a request and “at no cost.” Provided that, Defendants have to provide such documentation only once per year and that Defendants are not required to provide such documentation in response to a request made more than one year after Defendants
have ceased collecting the Debt.
9. For 5 years after the Effective Date, Defendants and their officers, agents,
servants, employees, and attorneys, and all other persons in active concert or participation
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with them who have actual notice of this Order, whether acting directly or indirectly, are
hereby restrained and enjoined from:
collecting or attempting to collect any Time-Barred Debt through
litigation or arbitration;
collecting or attempting to collect any Time-Barred Debt through any
means, including but not limited to telephone calls and written communications, without clearly and prominently disclosing to the
Consumer:
for those Consumer accounts where the Debt is Time-Barred and generally cannot be included in a Consumer report under the provisions of the Fair Credit Reporting Act, 15 U.S.C. § 1681c(a), but can be collected through other means pursuant to applicable state law, Defendants will include the following statement: “The law limits how long you can be sued on a debt and how long a debt can appear on your credit report. Due to the age of this debt, we will not sue you for it or report payment or non-payment of it to a credit bureau”; and
for those Consumer accounts where the Debt is Time-Barred but can be collected through other means pursuant to applicable state law and may be included in a Consumer report under the provisions of the Fair Credit Reporting Act, 15 U.S.C. § 1681c(a), Defendants will include the following statement: “The law limits how long you can be sued on a debt. Because
of the age of your debt, we will not sue you for it.”
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Provided, however, that with regard to telephonic communications, Defendants are not required to make either disclosure to any individual person more than once per 30-day period; or
C. making any representation or statement, or taking any other action that interferes with, detracts from, contradicts, or otherwise undermines the disclosures required by 4 9(b).
d. Defendants will be deemed to have complied with the disclosure requirements of 4] 9(b) and (c) if they make a disclosure to Consumers using the relevant language from a model form approved by the Bureau in any final rule issued by the Bureau under the
FDCPA or a disclosure that:
1. is required by the laws or regulations of a specific jurisdiction; il. complies with those laws or regulations; and iil. is substantially similar to the disclosure required by § 9(b). II.
Role of the Board
IT IS FURTHER ORDERED that:
10. The Board must review all submissions (including plans, reports, programs, policies, and procedures) required by this Order prior to submission to the Bureau.
11. The Board will have the ultimate responsibility for proper and sound management of Defendants and for ensuring that Defendants comply with the laws that the Bureau enforces, including Federal consumer-financial laws and this Order.
12. In each instance that this Order requires the Board to ensure adherence to, or perform certain obligations of Defendants, the Board must:
a. authorize whatever actions are necessary for Defendants to fully
comply with this Order;
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b. require timely reporting by management to the Board on the status of compliance obligations; and C. require timely and appropriate corrective action to remedy any material non-compliance with any failures to comply with Board directives related to this Section.
MONETARY PROVISIONS Il.
Order to Pay Redress IT IS FURTHER ORDERED that:
13. A judgment for monetary relief is entered in favor of the Bureau and against Defendants in the amount of $78,308.81, which includes:
a. $69,377 in redress that Defendants already voluntarily provided; and
b. $8,931.81 in redress that Defendants must pay to any Affected Consumers in the amount collected from an Affected Consumer after that Affected Consumer requested OALD but before Defendants provided OALD.
14. Defendants may not condition the payment of any redress to any Affected Consumer under this Order on that Affected Consumer waiving any right.
IV.
Order to Pay Civil Money Penalty IT IS FURTHER ORDERED that:
15. Under § 1055(c) of the CFPA, 12 U.S.C. § 5565(c), by reason of the violations of law alleged in the Complaint and continuing until the Effective Date and taking into account the factors in 12 U.S.C. § 5565(c)(3), Defendants must pay a civil money penalty of $15 million to the Bureau.
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16. Within 10 days of the Effective Date, Defendants must pay the civil money penalty by wire transfer to the Bureau or to the Bureau’s agent in compliance with the Bureau’s wiring instructions.
17. The civil money penalty paid under this Order will be deposited in the Civil Penalty Fund of the Bureau as required by § 1017(d) of the CFPA, 12 U.S.C. § 5497(d).
18. Defendants must treat the civil money penalty paid under this Order as a penalty paid to the government for all purposes. Regardless of how the Bureau ultimately uses those funds, Defendants may not:
a. claim, assert, or apply for a tax deduction, tax credit, or any other tax benefit for any civil money penalty paid under this Order or
b. seek or accept, directly or indirectly, reimbursement or indemnification from any source, including but not limited to payment made under any insurance policy, with regard to any civil money penalty paid under this Order.
V.
Additional Monetary Provisions IT IS FURTHER ORDERED that:
19. Inthe event of any default on Defendants’ obligations to make payment under this Order, interest, computed under 28 U.S.C. § 1961, as amended, will accrue on any outstanding amounts not paid from the date of default to the date of payment, and will immediately become due and payable.
20. Defendants relinquish all dominion, control, and title to the funds paid under this Order to the fullest extent permitted by law, and no part of the funds may be returned to Defendants.
21. The facts alleged in the Complaint will be taken as true and be given collateral estoppel effect, without further proof, in any proceeding based on the entry of
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this Order, or in any subsequent civil litigation by or on behalf of the Bureau in a proceeding to enforce its rights to any payment or monetary judgment under this Order, such as a nondischargeability complaint in any bankruptcy case.
22. The facts alleged in the Complaint establish all elements necessary to sustain an action by the Bureau under to § 523(a)(2)(A) of the Bankruptcy Code, 11 U.S.C. § 523(a)(2)(A), and for such purposes this Order will have collateral estoppel effect against each Defendant, even in such Defendant’s capacity as debtor-in-possession.
23. Under 31 U.S.C. § 7701, Defendants, unless they already have done so, must furnish to the Bureau their taxpayer-identification numbers, which may be used for purposes of collecting and reporting on any delinquent amount arising out of this Order.
24. Within 30 days of the entry of a final judgment, order, or settlement in a Related Consumer Action under this Order, Defendants must notify the Enforcement Director of the final judgment, order, or settlement in writing. That notification must indicate the amount of redress, if any, that Defendants paid or are required to pay to Consumers and describe the Consumers or classes of Consumers to whom that redress has been or will be paid. To preserve the deterrent effect of the civil money penalty in any Related Consumer Action, Defendants may not argue that Defendants are entitled to, nor may Defendants benefit by, any offset or reduction of any monetary remedies imposed in the Related Consumer Action because of the civil money penalty paid in this action or because of any payment that the Bureau makes from the Civil Penalty Fund. If the court in any Related Consumer Action offsets or otherwise reduces the amount of compensatory monetary remedies imposed against Defendants based on the civil money penalty paid in this action or based on any payment that the Bureau makes from the Civil Penalty Fund, Defendants must, within 30 days after entry of a final order granting such
offset or reduction, notify the Bureau and pay the amount of the offset or reduction to the
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U.S. Treasury. Such a payment will not be considered an additional civil money penalty and will not change the amount of the civil money penalty imposed in this action. COMPLIANCE PROVISIONS VI.
Reporting Requirements IT IS FURTHER ORDERED that:
25. Defendants must notify the Bureau of any development that may affect compliance obligations arising under this Order, including but not limited to, a dissolution, assignment, sale, merger, or other action that would result in the emergence of a successor company; the creation or dissolution of a subsidiary, parent, or affiliate that engages in any acts or practices subject to this Order; the filing of any bankruptcy or insolvency proceeding by or against any Defendants; or a change in any Defendants’ name or address. Defendants must provide this notice, if practicable, at least 30 days before the development, but in any case no later than 14 days after the development.
26. Within 7 days of the Effective Date, each Defendant must:
a. designate to the Bureau at least one telephone number and email, physical, and postal address as points of contact, which the Bureau may use to communicate with Defendant;
b. identify to the Bureau all businesses that do business in the United States for which any Defendant is the majority owner, or that any Defendant directly or indirectly controls, by all of their names, telephone numbers, and physical, postal, email, and Internet addresses; and
C. describe to the Bureau the activities of each such business, including the products and services offered, and the means of advertising, marketing, and sales.
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27. Defendants must report to the Bureau any change in the information required to be submitted under {| 26 at least 30 days before the change or as soon as practicable after learning about the change, whichever is sooner.
28. Within 90 days of the Effective Date, again one year after the Effective Date, and annually for 4 years thereafter, Defendants must submit to the Bureau’s Enforcement Director an accurate written compliance progress report sworn to under penalty of perjury (Compliance Report) that has been approved by the Board, sworn to under the penalty of perjury, which, at a minimum:
a. lists each applicable paragraph and subparagraph of the Order and describes in detail the manner and form in which Defendants have complied with each such paragraph and subparagraph of this Order;
b. provides proof of the provision of full redress to Affected Consumers, unless previously submitted to the Bureau; and
C. attaches a copy of each Order Acknowledgment obtained under § VII, unless previously submitted to the Bureau.
Vil.
Order Distribution and Acknowledgement IT IS FURTHER ORDERED that:
29. Within 7 days of the Effective Date, each Defendant must submit to the Bureau’s Enforcement Director an acknowledgment of receipt of this Order, sworn under penalty of perjury.
30. Within 30 days of the Effective Date, Defendants must deliver a copy of this Order to each of its Board members and executive officers, as well as to any managers, employees, service providers, or other agents and representatives who have responsibilities related to the subject matter of the Order.
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31. For 5 years from the Effective Date, Defendants must deliver a copy of this Order to any business entity resulting from any change in structure referred to in § VI, any future Board members and executive officers, as well as to any managers, employees, service providers, or other agents and representatives who will have responsibilities related to the subject matter of the Order before they assume their responsibilities.
32. Defendants must secure a signed and dated statement acknowledging receipt of a copy of this Order, ensuring that any electronic signatures comply with the requirements of the E-Sign Act, 15 U.S.C. § 7001 et seq., within 45 days of delivery, from all persons receiving a copy of this Order under this Section.
33. Should any Defendant seek to transfer or assign all or part of its operations that are subject to this Order, it must, as a condition of sale, obtain the written agreement of the transferee or assignee to comply with all applicable provisions of this Order.
Vill.
Recordkeeping IT IS FURTHER ORDERED that:
34. Defendants must create, for at least 5 years from the Effective Date, the
following business records:
a. all documents and records necessary to demonstrate full compliance with each provision of this Order, including all submissions to the Bureau; and b. all documents and records pertaining to the redress described in § II above.
Defendants must retain these documents for at least 5 years after creation and make them
available to the Bureau upon the Bureau’s request.
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IX.
Notices IT IS FURTHER ORDERED that:
35. Unless otherwise directed in writing by the Bureau, Defendants must provide all submissions, requests, communications, or other documents relating to this Order in writing, with the subject line, “BCFP v. Encore Capital Group, Inc., et al.; Case No. 20-cv-1750,” and send them by overnight courier or first-class mail to the below address and contemporaneously by email to [email protected]:
Assistant Director for Enforcement Bureau of Consumer Financial Protection ATTENTION: Office of Enforcement 1700 G Street, N.W.
Washington D.C. 20552 36. Encore may seek a modification to non-material requirements of this Order (e.g., reasonable extensions of time and changes to reporting requirements) by submitting a written request to the Enforcement Director. The Enforcement Director may, in his or her discretion, modify any non-material requirements of this Order (e.g., reasonable extensions of time and changes to reporting requirements) if he or she determines good cause justifies the modification. Any such modification by the Enforcement Director must be in writing.
X.
Compliance Monitoring IT IS FURTHER ORDERED that, to monitor Defendants’ compliance with this Order: 37. Within 14 days of receipt of a written request from the Bureau, Defendants must submit additional compliance reports or other requested non-privileged information related to the requirements of this Order, which must be sworn under penalty of perjury;
provide sworn testimony related to the requirements of this Order and Defendants’
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compliance with those requirements; or produce non-privileged documents related to the requirements of this Order and Defendants’ compliance with those requirements.
38. Defendants must permit Bureau representatives to interview about the requirements of this Order and Defendants’ compliance with those requirements any employee or other person affiliated with Defendants who has agreed to such an interview. The person interviewed may have counsel present.
39. Nothing in this Order will limit the Bureau’s lawful use of civil investigative demands under 12 C.F.R. § 1080.6 or other compulsory process.
XI.
Release
40. The Bureau releases and discharges Defendants from all potential liability for violations of law that the Bureau has or might have asserted based on the practices described in the Complaint, to the extent such conduct occurred before the Effective Date and the Bureau knows about it as of the Effective Date. The Bureau may use the practices described in the Complaint in future enforcement actions against Defendants and their affiliates, including, without limitation, to establish a pattern or practice of violations or the continuation of a pattern or practice of violations or to calculate the amount of any penalty. This release does not preclude or affect any right of the Bureau to determine and
ensure compliance with this Order, or to seek penalties for any violations of this Order.
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XII.
Retention of Jurisdiction IT IS FURTHER ORDERED that:
41. The Court will retain jurisdiction of this matter for the purposes of construction, modification (including any request by any party to modify the conduct
prohibitions), and enforcement of this Order.
IT IS SO ORDERED.
Dated: October 15, 2020 (2. / 0
Hon. Gonzalo P. Curiel ~~
United States District Judge
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