The Consumer Financial Protection Bureau filed a lawsuit in the United Stated District Court for the District of Maryland against FCO Holding, Inc. and its subsidiaries, as well as Michael E. Sobota, the chief executive officer and 100% owner of FCO Holding, Inc. The Maryland debt collector entities operate collectively under the name Fair Collections & Outsourcing (“FCO”).

The CFPB alleges that FCO violated the Fair Credit Reporting Act, Regulation V, the Consumer Financial Protection Act, and the Fair Debt Collection Practices Act by failing to conduct reasonable investigations into indirect credit disputes from the credit reporting bureaus and falsely representing that it has a reasonable basis to assert that consumers owe certain debts. Specifically, the CFPB alleges that FCO provided limited written guidance to its employees who respond to indirect credit disputes, and never instructed its employees to conduct an inquiry into the substance of a credit dispute. For example, in credit disputes regarding identity theft complaints, employees were merely instructed to verify the information as accurate as long as the Social Security number and name matches its files, even in cases where consumers provided identify theft police reports.

The CFPB also alleges that FCO failed to incorporate appropriate guidelines such as Appendix E of Regulation V, the implementing regulation for the FCRA, in its policies and procedures regarding the handling of indirect disputes. Additionally, it alleges that FCO failed to update its indirect dispute handling policies and procedures for at least seven years between November 2010 and December 2017 and thus failed to update the policies and procedures in response to two significant changes with E-Oscar in 2013 and 2016. Further, the CFPB alleges that FCO continued to represent that it has a reasonable basis to assert that consumers owe certain debts when, in fact, it does not have a reasonable basis based on past dealings with specific portfolios of debt.

The CFPB seeks a permanent injunction as well as damages, restitution, disgorgement for unjust enrichment, and civil money penalties.