Consumer Finance Insights
July 9, 2015

Bank Settles Debt Collection Action Brought by CFPB and Claims of 47 State Attorneys General

​On July 8, 2015, the Consumer Financial Protection Bureau (“CFPB”) announced that claims concerning a bank’s alleged debt collection practices in violation of the Consumer Financial Protection Act (“CFPA”) had been settled for over $200 million.  According to the consent order, the bank “sold to debt buyers certain accounts that were inaccurate, settled, discharged in bankruptcy, not owed by the customer, or otherwise uncollectable,” which the debt buyers then sought to collect.  The bank also allegedly “filed lawsuits and obtained judgments against consumers using deceptive affidavits and other documents that were prepared without following procedures” including improper “robo-signing.”  These actions allegedly “affect[ed] consumers’ ability to obtain credit” and “misled consumers and courts and caused consumers to pay false or incorrect debt and incur legal expenses and court fees to defend against invalid or excessive claims.”  The order requires the bank to (i) cease collection on 528,000 consumer accounts; (ii) include contractual terms with debt buyers that prohibit them from reselling debt purchased from the bank; (iii) notify consumers if their debt is sold and disclose the purchaser; (iv) not sell debts in certain categories, such as accounts in litigation or without proper documentation; (v) withdraw, dismiss, or terminate all pre-judgment collections litigation; (vi) stop robo-signing affidavits; and (vii) verify debts when filing a lawsuit.  In addition, the bank must pay a $30 million civil penalty paid to the CFPB, a $30 million civil penalty paid to the OCC on the related matter, and $106 million in payments to states, including at least $50 million in refunds.  The bank consented to the issuance of the CFPB order “without admitting or denying any of the findings of fact or conclusions of law.”