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Debt collectors ordered to repay millions to consumers

The two largest debt collectors in the country are reimbursing millions of dollars to clients following allegations that they used deceptive practices to collect bad debts.

The Consumer Financial Protection Bureau accused that Encore Capital Group and Portfolio Recovery Associates purchased potentially inaccurate debts, attempted to collect unverified debts, and used illegal court practices to collect debts.

“Encore and Portfolio Recovery Associates threatened and deceived consumers into collecting debts that they should have known were inaccurate or had other problems,” CFPB Director Richard Cordray said in a statement. Wednesday.

Companies buy up unpaid debts from creditors at deeply discounted rates and then attempt to collect them. According to the CFPB, the companies have purchased the rights to collect more than $200 billion in various overdue consumer debts.

Related: The Secret World of Government Debt Collection

Encore Capital Group will pay up to $42 million in repayments and stop collection of $125 million in debt, as part of the settlement. He will also pay a $10 million fine to the bureau’s Civil Penalty Fund.

Portfolio Recovery Associates, which is a subsidiary of PRA Group, must pay $19 million in refunds, stop collecting $3 million in debt and pay $8 million into the fund.

Encore Capital, which is based in San Diego, said in a declaration the refund is based on “two isolated points that are not in common use and were changed some time ago” and that he disagrees with the CFPB.

“While we do not agree with the positions of the CFPB on these two issues, we have chosen to accept a settlement so that we can move forward,” said Kenneth Vecchione, president and chief executive officer of ‘Again, in a statement.

The CFPB claimed that companies sometimes sue consumers in an effort to collect debts, but did not always intend to prove the debts. “Instead, the companies have relied on consumers not filing defenses and winning the lawsuit by default,” the CFPB said.

According to consent orderEncore gave more than 100,000 accounts to a law firm with 16 attorneys.

Related: Threatening letters from a government debt collector

The CFPB also claimed that Encore sent thousands of letters from July 2011 to March 2013 to consumers with a debt settlement offer that was actually too old for litigation. PRA allegedly sent our similar letters from early 2009 to March 2012.

Both companies were accused of making inaccurate statements to consumers. PRA was accused of telling its clients that a lawsuit against them was coming. “In reality, in many cases, an attorney has not reviewed the account and the company has not decided to pursue legal action,” the statement said.

ARP noted the action will have no impact on its operations.

“It was time to end this drawn-out process and remove the threat of litigation, so that we can focus with renewed vigor on serving our customers and growing our business,” said Steve Fredrickson, President. -CEO of PRA Group in a press release.

The application of the CFPB also includes operational changes in the companies. Both have no right to collect or sue for unverified debts and must provide certain information to consumers, including the name of the creditor and the charge balance.

CNN Money (New York) First published September 9, 2015: 5:19 p.m. ET