On April 6, the Consumer Financial Protection Bureau (CFPB) issued a consent order against California-based debt collector Yorba Capital Management LLC and its sole owner Daniel Portilla, Jr. for violating the Consumer Financial Protection Act and the Fair Debt Collection Practices Act. The consent order permanently bans Yorba and Portilla from the debt collection business and orders restitution and penalties to resolve the findings of the CFPB.

The consent order states Yorba and Portilla allegedly harassed consumers from January 2017 until April 2020 by threatening legal action. Specifically, it states Yorba attempted to collect debts through mailing letters titled “LITIGATION NOTICE” that contained a case number and caption, giving the incorrect impression that Yorba had already filed a lawsuit. The letters stated: “You are hereby notified that a recommendation to file a lawsuit to collect this debt may be the next step resulting in a judgment entered against you,” and “to avoid any further legal action, you need to contact our office within 10 days of this notice; otherwise, we will assume you do not intend to pay this debt and litigation will be commenced immediately.” The letters further warned that Yorba had “several methods to collect a judgment” once a judgment was entered, including wage garnishment, levy on bank accounts, placement of liens on real or personal property, and suspension of the consumer’s driver’s license. If consumers contacted Yorba, they were provided scarce information regarding their debts before being verbally threatened with a lawsuit unless the debt was paid.

Contrary to the verbal and written warnings, the consent order states Yorba and Portilla did not actually file lawsuits against those consumers or even hire attorneys. The CFPB thus determined the letters misled and falsely threatened legal action against consumers in violation of the CFPA, 15 U.S.C. §§ 5531(a) and 5536(a)(1)(B), and the FDCPA, 15 U.S.C. §§ 1692e(5) and 1692e(10).

Yorba and Portilla are now permanently banned from the debt collection business. The consent order includes an $860,000 suspended judgment for consumer redress, which is currently suspended due to their inability to pay. They must also pay an additional $2,200 civil money penalty to the CFPB. Yorba and Portilla agreed to the settlement without admitting or denying the CFPB’s findings in the consent order.

The CFPB’s most recent similar action against collectors using false threats to collect debts was in 2019. The CFPB partnered with the New York attorney general to file a consent order that barred Douglas MacKinnon, Mark Gray, and their companies Northern Resolution Group LLC and Delray Capital LLC from the debt collection business. That consent order stated those businesses and individuals falsely threatened consumers with legal action that they had no intention of taking, falsely accusing consumers of committing crimes, and falsely claiming consumers would be arrested, all in an effort to pressure consumers to pay debts.

The consent order against Yorba and Portilla is the first administrative settlement finalized under CFPB Acting Director David Uejio. We will continue to monitor and report on any development related to this case.