NY Federal Court Denies Motion to Dismiss CFPB Lawsuit Against Debt Buyer Companies And Their Owners/Officers For Unlawful Debt Collection Practices Based On Third-Party Conduct

A New York federal district court has denied a motion to dismiss the lawsuit filed in January 2022 by the CFPB against three companies that purchase portfolios of defaulted debts (Corporate Defendants) and three individuals who are owners and/or officers of the Corporate Defendants (Individual Defendants). 

The lawsuit alleges that the Corporate Defendants contracted with debt collectors to collect consumer debts on their behalf either directly or through other debt collectors or sold consumer debts to debt collectors, some of whom were contractually required to make ongoing payments to the Corporate Defendants.  The CFPB alleges that both debt collectors who collected debts on the Corporate Defendants’ behalf and debt collectors to whom the Corporate Defendants sold debts used deceptive collection tactics, including false threats of lawsuits, arrest, and jail, and false statements about credit reporting.  

The CFPB also alleges that the Corporate Defendants received complaints from consumers about the debt collectors’ unlawful practices but took no meaningful action to prevent or preclude it.  The CFPB’s claims against the Corporate and Individual Defendants consist of claims for Consumer Financial Protection Act (CFPA) and Fair Debt Collection Practices Act (FDCPA) violations based on vicarious liability for the debt collectors’ CFPA and FDCPA violations and claims for substantially assisting CFPA and FDCPA violations by the debt collectors.