CompuCredit and its Collection Agency Settle FTC-FDIC Case for $114 million

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Credit card issuer CompuCredit, and its wholly-owned debt collection agency, will repay consumers up to $114 million to settle charges brought by the Federal Trade Commission and the Federal Deposit Insurance Corp. that it engaged in deceptive practices when marketing and collecting on cards to consumers in the subprime market.

The FTC and FDIC announced this past summer that they had filed a lawsuit against Atlanta-based CompuCredit (Nasdaq: CCRT) and its debt collection business Jefferson Capital Services. At the time, the regulators said the restitution paid in the case could reach $200 million (“Feds Name CompuCredit and Collector Jefferson Capital in $200 Million Suit,” June 11).

At issue was the manner in which CompuCredit sold its credit cards to consumers with poor or no credit history. The company would offer an unsecured card with a credit limit of $300 to subprime customers. CompuCredit would then charge the consumers fees of up to $185 without disclosing the fees, effectively dropping the available credit down as low as $115. The FTC claimed this would often lead to additional charges as customers exceeded their credit limit in the first month.

The FTC also said that CompuCredit’s collection agency, Jefferson Capital Services, violated the Fair Debt Collection Practices Act (FDCPA) by “misrepresenting a debt collection program as a credit card offer and using abusive collection tactics such as making debt collection calls to individual consumers more than 20 times per day, including before 8 a.m. and after 9 p.m., and on Sundays.”

The vast majority of the settlement restitution will be paid in the form of credits to consumer credit card accounts. Eligible consumers whose current balances are less than the amount of credits to be applied will receive an estimated $3.7 million in cash refunds. In addition, CompuCredit has agreed to a civil money penalty of $2.4 million as part of its settlement with the FDIC.

Jefferson Capital will be prohibited from engaging in abusive practices while collecting debts going forward.

CompuCredit said in a statement that the settlement involves marketing practices used in 2005 and earlier, and would not require changes to current company practices. Additionally the settlement will not affect the company’s financial condition, CompuCredit said.

Continuing the Discussion

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  • avatar Logan Kessel says:

    Jefferson Capital will be prohibited from engaging in abusive practices while collecting debts going forward.

    Does that mean that the rest of us are allowed until we are caught?

  • avatar Gayle Carter says:

    I am not surprised about the action.

    I have an Aspire card with them. The limit was over $1500.00 I was never late. Paid off my balance every month. Never charged more than I could pay each month.

    I thought I was being responsible and doing the right thing.

    And last month my limit was cut to $100.00 for no reason. I can’t get anyone ot listen to me. I keep getting passed around.

    What is really going on?

  • avatar Mario Albornoz says:

    Since when is not okay to call on Sundays?

  • avatar Rich mansfield says:

    Since when is it not legal to call on Sundays. It must be an individual State prohibition.

  • avatar Joe Turner/Smith says:

    can somebody comment on this? can a collection agency garnish or sue you for a debt you cannot pay quick enough for them?

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