A little over a month after the Consumer Financial Protection Bureau (CFPB) filed a lawsuit against Encore Capital and its subsidiaries, the parties have reached a settlement. Just like that, the case is now over. On Thursday of last week, the CFPB filed a stipulated judgment that effectively extends the CFPB's prior consent order with Encore for five more years in addition to applying certain monetary penalties. The penalties include $15 million in civil penalties and $78,000 in monetary relief. The judge signed the order on Friday.
In the instant lawsuit, the CFPB alleged that Encore and its subsidiaries violated the 2015 consent order in several ways.
The 2015 consent order required Encore and its subsidiaries, prior to filing collection litigation, to provide consumers with a disclosure that the companies would provide original account-level documentation at no cost to the consumer within 30 days of a request. The complaint alleged that the defendants failed to state that the documentation would be provided at no cost in 750,000 incidents since the effective date of the consent order, and failed to state that such documentation would be provided within 30 days upon request in 25,000 incidents. The complaint also alleged that, after consumers requested the account-level documentation, the defendants failed to provide them in 250 incidents.
The 2015 consent order also prohibited the defendants from filing collection litigation on accounts that were time-barred by the applicable statute of limitations. It also required that the defendants provide a specific time-barred debt disclosure if defendants were engaging in non-legal collection efforts on such accounts. The complaint alleged that the defendants failed to do both of these. Specifically, the complaint alleges that the defendants sued on 100 time-barred debt accounts since the 2015 consent order and failed to provide the time-barred debt disclosure in 425,000 letters. Of the latter, 845 consumers made payments totaling $125,000.
Lastly, the complaint alleged that defendants began using a foreign payment processor, which resulted in consumers' banks charging the consumers international transaction fees.
Sounds like regulation by enforcement is not dead after all. This lawsuit was very conveniently timed. Despite the fact that the CFPB is set to release a rule regarding the collection of time-barred debt—a rule that went through a public comment period—the agency filed the instant lawsuit on the eve of the prior 2015 consent order's expected expiration. The 2015 order was entered on September 9, 2015, and had a 5-year duration. The instant lawsuit was filed on September 8 of this year, just a day shy of the prior order's expiration. Now, with the extension, the order lives on for 5 more years.
Did the entire consent order need to be extended? Probably not. As stated above, the CFPB already has a set of rules coming out soon on time-barred debts. On top of that, at least the section where the CFPB alleges defendants failed to provide account-level documentation after a consumer request seems like overkill. It occurred in only 250 instances, which is a ridiculously small number considering how large Encore's portfolio is, and it could very easily and reasonably be attributed to bona fide error.