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Financial Services Law Insights and Observations

CFPB, New York reach $4 million settlement with debt collection operation

Federal Issues CFPB State Issues State Attorney General Consumer Finance New York CFPA FDCPA Enforcement Settlement

Federal Issues

On May 25, the U.S. District Court for the Western District of New York entered a stipulated final judgment and order in an action taken by the CFPB, in partnership with the New York attorney general, resolving allegations that a debt collection operation based near Buffalo, New York, which includes six companies, three owners, and two managers (collectively, “defendants”), engaged in deceptive tactics to induce consumer payments. (See also CFPB press release here.) As previously covered by InfoBytes, the CFPB filed a complaint in 2020 against the defendants for allegedly violating the CFPA, FDCPA, and various New York laws by using illegal tactics to induce consumer payments, such as (i) threatening arrest and imprisonment; (ii) claiming consumers owed more debt than they actually did; (iii) threatening to contact employers about the existence of the debt; (iv) harassing consumers and third parties by using “intimidating, menacing, or belittling language”; and (v) failing to provide debt verification notices. Under the terms of the settlement, the defendants must pay a $2 million penalty to the CFPB and a $2 million penalty to the New York AG. The judgment provides that if the defendants fail to make timely payments, each penalty amount would increase to $2.5 million. The judgment also permanently bans the defendants from engaging in debt collection operations and prohibits them from engaging in deceptive practices in connection with consumer financial products or services.

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