New York Attorney General Eric T. Schneiderman today announced that his office has obtained a settlement with debt buyer Encore Capital Group, Inc. (NASDAQ: ECPG) over the company’s debt collection practices in the legal collection channel.
Schneiderman said that Encore has been bringing “untimely” legal action against New York residents for years. Under the settlement, Encore will seek to vacate more than 4,500 improperly obtained judgments totaling nearly $18 million. The company also agreed to reform its debt collection practices and pay civil penalties and costs in the amount of $675,000.
“Today’s settlement ensures that thousands of New Yorkers will see millions in relief from debts that were not enforceable in the first place,” said Schneiderman. “We will continue to take action against any company that abuses the power of the court system at the expense of hardworking families.”
The Attorney General’s investigation found that, despite the requirements of New York law, Encore brought debt collection claims that were untimely under the statutes of limitations where the causes of action accrued. Because most consumers fail to respond when they are sued by a debt collector, Encore obtained default judgments in its favor based on these time-barred claims.
In addition to seeking to vacate more than 4,500 improperly obtained judgments and paying $675,000 in civil penalties and costs, Encore has agreed to several important reforms of its current practices in New York. These include:
- Disclosing in written or oral communication about a debt that is outside the statute of limitations that the company will not sue to collect on the debt.
- Disclosing in written or oral communications about a debt that is outside the date for reporting the debt provided for by the federal Fair Credit Reporting Act that, because of the age of the debt, the company will not report the debt to any credit reporting agency.
- Alleging certain information relevant to the statute of limitations in any debt collection complaint, such as the name of the original creditor and the date of the consumer’s last payment on the debt.
Schneiderman noted that Encore was also engaged in a practice that is often referred to as “robosigning”: Encore employees signed hundreds of affidavits submitted in support of debt collection actions each day without reviewing the affidavits and without possessing personal knowledge, as alleged in the affidavits, about the claimed debts and the amounts owed. The settlement requires Encore to institute reforms to ensure that “robosigning” does not occur and to ensure that all sworn statements filed in debt collection actions are reviewed prior to execution.
This settlement is a part of the Attorney General’s continuing efforts to combat unlawful and abusive debt collection activity. In May 2014, Attorney General Schneiderman obtained settlements from two major debt buyers, Portfolio Recovery Associates and Sherman Financial Group, who also filed time-barred debt collection cases. Those settlements resulted in the vacature of more than 3,000 improperly obtained judgments.