Consumer Finance Insights
December 4, 2018

Major Debt Buyer Reaches Settlement With 42 States and the District of Columbia

On December 4, 2018, one of the nation’s largest debt buyers and its subsidiaries reached a settlement with 42 states and the District of Columbia (see, e.g., announcements here and here).  The settlement closes the states’ multi-year investigation into the company’s collection and litigation practices, including alleged violations of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692, et seq., and the Fair Credit Reporting Act, 15 U.S.C. § 1681, et seq.  The states’ chief allegation was that the company engaged in the practice of filing “robo-signed” affidavits in court without verifying the underlying information about the debt.  The debt buyer reached a settlement with the Consumer Financial Protection Bureau resolving similar allegations ​​in September 2015.

Under the settlement, the debt buyer agreed to pay costs of $6,000,000 to be divided among the states, and to set aside $25,000 per state to reimburse consumers who paid judgments that they did not owe.  The company must also credit the outstanding judgment balances of certain customers, reducing or eliminating entirely their debt balances, which will likely total tens of millions of dollars in consumer relief.  For example, the Virginia Attorney General announced that, as a result of the settlement, 689 Virginian residents would receive debt relief totaling nearly $900,000.  The debt buyer also agreed to implement compliance measures to avoid a recurrence of the alleged practices.

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