The Consumer Financial Protection Bureau is not showing any signs of slowing down its recent string of enforcement actions. On December 7, the CFPB filed a complaint against and proposed a consent order with a debt collection company that will require the company to pay at least $2.5 million to settle claims that it reported and collected on old, unverified cell phone debts and provided inaccurate information to credit reporting agencies (“CRAs”) regarding those debts.
The CFPB filed the Complaint in a Massachusetts federal court against EOS CCA (“EOS”), a Massachusetts-based debt collection firm. The five-count complaint alleges that EOS’ inaccurate credit reporting and debt collection practices amounted to violations of the Fair Credit Reporting Act and the Fair Debt Collection Practices Act, and the alleged conduct constituted a deceptive act under the Consumer Financial Protection Act of 2010. In addition, the complaint alleges that EOS’ purported violations of the Fair Credit Reporting Act and Fair Debt Collection Practices Act amount to additional violations of the Consumer Financial Protection Act of 2010.
The allegations in the complaint stem from EOS’ 2012 purchase of a $2.3 billion debt portfolio of more than three million cell phone accounts, many of which were old accounts that had been sent to different collection agencies. According to the complaint, EOS knew that the purchased portfolio was likely to have inaccurate and incomplete dispute histories and documentation as well as other defects. The complaint further alleges that, in January 2013, a senior EOS manager warned that the portfolio contained significant numbers of time-barred, disputed, fraudulent, and settled or paid debts. Despite these reports, EOS continued to report and collect on the debts according to the CFPB.
The complaint also alleges that EOS initially reported all the debts to the CRAs as disputed by the account holder, despite knowing that consumers had not disputed each of the accounts. The CFPB claims that EOS then “flip-flopped” two more times, asking that the dispute flags be removed before ultimately having the flags put back on the accounts.
The CFPB alleges that EOS did not take corrective action until June 2014, when it began to identify the portfolio accounts that potentially had been paid or settled. The complaint states that, to date, EOS has identified over 10,000 accounts that may have been previously paid or resolved, but EOS also continues to report over 1,900 of these accounts as past due even though consumers have disputed the accounts as resolved, and EOS lacks any documentation to demonstrate otherwise. In total, EOS collected about $743,000 on over 2,000 accounts that remain disputed and unverified.
In the proposed consent order, EOS does not admit or deny the allegations in the Complaint. If the Court accepts the proposed consent order, EOS will be required to overhaul its debt collection practices, refund at least $743,000 to consumers, and pay a $1.85 million civil penalty. In a press release, CFPB Director Richard Cordray stated, “It is unacceptable that consumers were harmed by these practices and that the company supplied inaccurate information to the credit reporting companies, so today we are taking action to stop it.”