CFPB, NY Reach $4M Settlement with Debt Collection Operation
On May 23, the CFPB and the New York Attorney General’s office filed a proposed stipulated judgment in federal district court against a debt collection operation, including several companies and individuals, to resolve allegations that the operation engaged in deceptive tactics to induce consumer payments. The complaint, filed in 2020, alleged that the defendants violated the CFPA, FDCPA, and various New York laws to induce consumer payments by (i) falsely claiming arrest and imprisonment for failure to pay, (ii) falsely threatening legal action, (iii) inflating debt amounts owed, (iv) harassing debt collection victims by contacting family members, coworkers, employers, and friends, (v) placing harassing phone calls to debtors, and (vi) failing to provide statutorily required notices.
The proposed stipulated judgment requires that the companies, as well as their owners and senior managers, exit the debt collection industry. The defendants also must pay a $2 million penalty to the CFPB and a $2 million penalty to the NY AG. If the defendants fail to make timely payments, however, each penalty would increase to $2.5 million.
Putting It Into Practice: As this lawsuit has progressed through the court, the CFPB and the NY AG have steeled their resolve in pursuing allegations of predatory debt collection practices. In light of recent settlements and court victories, it appears likely that state and federal regulators will continue to tag-team to mete out hefty punishments and fines to perceived bad actors.