On August 16, the Consumer Financial Protection Bureau (CFPB) filed a proposed settlement to resolve a lawsuit against a debt collection firm, Fair Collections & Outsourcing (FCO), and its owner, Michael Sobota, stemming from FCO’s alleged failure to implement proper policies and procedures, in addition to related Fair Credit Reporting Act (FCRA) and Fair Debt Collections Practices Act (FDCPA) violations. If approved by the court, FCO and Sobota will be ordered to pay a $850,000 civil money penalty and to establish reasonable procedures to prevent future violations.


In September 2019, the CFPB filed its complaint against FCO and Sobota in the U.S. District Court for the District of Maryland. According to the complaint, “FCO and Sobota operate the largest debt collection company in the multiunit housing industry, and they collect debt on behalf of large apartment complexes, including student and military housing, and assisted-living facilities.” The CFPB alleged that FCO regularly furnishes information to consumer reporting agencies (CRAs) regarding approximately 500,000 consumer accounts.

The CFPB alleged FCO violated the FCRA by:

  1. Failing to maintain reasonable policies and procedures regarding the accuracy and integrity of the furnished information, including the handling of consumer disputes. The complaint alleged, for example, that FCO provided limited to no affirmative training or written guidance to its employees about conducting reasonable investigations, and failed to regularly revise its employee policies and procedures to address known shortcomings in information verification processes;
  1. Failing to conduct reasonable investigations of certain consumer disputes. For instance, the CFPB alleged that FCO employees failed to investigate the substance of a dispute before verifying the disputed information as accurate, and in other instances of disputes alleging identity theft, only checked the disputing consumer’s Social Security number and name before verifying the disputed information as accurate; and
  1. Failing to cease furnishing information that was allegedly the result of identity theft before FCO determined whether or not the information was accurate.

The CFPB also alleged that FCO violated the FDCPA by collecting debt without providing a valid reason for its collection. “FCO has not obtained or reviewed additional information that would provide a reasonable basis to continue to assert that the active debts in the portfolio are owed,” the complaint stated.

The Bureau brought the complaint against both FCO and Sobota, alleging that Sobota owned 100% of FCO and that, as a result, was responsible for “determining, implementing, and ensuring” FCO’s policies and procedures, while receiving personal financial gain for the alleged illegal practices.

After the complaint was filed, the parties litigated the case for almost two years.

Proposed Settlement

On August 16, the CFPB filed a joint motion with the court to approve the parties’ proposed settlement. Under the settlement, FCO and Sobota must pay a civil money penalty of $850,000 and implement a series of changes focused primarily on FCO’s policies and procedures. Specifically, the proposed settlement directs FCO to modify or update existing written policies and procedures, or establish new written policies regarding:

  1. The accuracy and integrity of the information FCO furnishes to consumer reporting agencies. Those policies and procedures must, at a minimum, “set forth detailed instructions for conducting investigations of all consumer disputes,” “require a documented description of the steps taken to investigate each dispute,” and “require retention of supporting documentation that accompanies disputes.”
  1. A system of internal controls regarding the accuracy and integrity of the information FCO furnishes to consumer reporting agencies. Those internal controls must assess whether FCO’s furnishing of information and responses to disputes comply with the FCRA. FCO must also “take prompt corrective action to address any failures to comply with the FCRA.”
  1. Establishing a new identity theft report review program to review identity theft reports FCO receives, to confirm that the handling of those reports complies with the FCRA.


In the press release announcing the proposed settlement, CFPB Acting Director Dave Uejio commented: “As we recover from the economic devastation caused by COVID-19, credit reports play a huge role in consumers’ financial lives. Inaccurate information, such as information related to tenant debt, can be devastating for someone who’s applying for a loan, seeking a new place to live, or trying to get a new job.” Uejio continued: “We will not tolerate companies that put inaccurate data on consumers’ credit reports or fail to investigate consumers’ disputes.”

The FCO settlement and Uejio’s comments make clear that furnishers must have written policies and procedures to safeguard against the furnishing of inaccurate information and to ensure the proper handling of consumer disputes. Otherwise, those furnishers should prepare for CFPB scrutiny.