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Financial Services Law Insights and Observations

CFPB, New York AG settle lawsuit against debt collection network

Federal Issues CFPB State Attorney General Debt Collection FDCPA CFPA

Federal Issues

On July 25, the CFPB and New York attorney general announced (see here and here) proposed settlements with a network of New York-based debt collectors (defendants) to resolve allegations that the defendants engaged in improper debt collection tactics in violation of the Consumer Financial Protection Act, the FDCPA, and various New York laws. As previously covered by InfoBytes, the CFPB and the New York AG filed a lawsuit in 2016, alleging the defendants established and operated a network of companies that harassed and/or deceived consumers into paying inflated debts or amounts they may not have owed. Among other things, the defendants allegedly (i) “misrepresented to consumers that they owed sums they did not owe, were not obligated to pay, or that the companies did not have a legal right to collect”; (ii) deceptively threatened consumers with lawsuits that the defendants did not plan on initiating; and (iii) impersonated law enforcement officials, government agencies, and court officers. Additionally, the New York AG claimed the defendants violated state laws related to the collection of consumer debt and the placement of consumer debt for collection.

The settlements were approved by the court on August 23 and permanently ban the defendants from acting as debt collectors and enjoin all defendants from engaging in the alleged unlawful conduct in the future and from making any misrepresentation or omission connected with any consumer financial product or service. The first stipulated final judgment and order for a group of the defendants imposes a $10 million civil money penalty (CMP) to both the CFPB and the New York AG, as well as $40 million in redress to harmed consumers. Under the terms of the second stipulated final judgment and order, the other group of defendants must pay CMPs of $1 million to both the CFPB and the New York AG and $4 million in consumer redress. However, based on the second group of defendants’ inability to pay, full payment is suspended subject to the defendants paying $10,000 in consumer redress and a $1 CMP to the Bureau.

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