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Financial Services Law Insights and Observations

Debt buyer will pay $12 million following allegations of unfair, deceptive practices

State Issues State Attorney General Enforcement Debt Collection Consumer Finance

State Issues

On September 20, the Massachusetts attorney general announced that a California-based debt collection company and its subsidiaries agreed to pay $12 million, including restitution and debt relief, for allegedly engaging in unfair and deceptive debt buying practices. According to the assurance of discontinuance, the debt collector allegedly violated state law by, among other things, (i) purchasing debts without obtaining all relevant documentation from the seller to ensure the debts were valid and accurate; (ii) exceeding the number of calls permitted when attempting to collect a debt and placing harassing debt collection calls; (iii) failing to prevent its collection law firm from using falsified or otherwise incorrect information about the existence of lawsuits and judgments; and (iv) attempting to collect debts that were beyond the statute of limitations or time-barred. The debt collector also allegedly “represented that certain vulnerable consumers were required to make good faith payments or enter an agreement for judgment with payment on a debt when the consumer had only exempt sources of income like social security disability benefits and pensions,” the AG said in the announcement. While the debt collector expressly denied the allegations, it agreed to pay $4.5 million and will reform its debt collection practices and cease to collect on more than 4,200 debts placed with the collection law firm for which a judgment could not be verified. These debts total approximately $7.5 million.

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