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CFPB Sues Collector For FCRA, FDCPA Violations Related to Disputes

The Consumer Financial Protection Bureau has filed suit against a collection agency that specializes in collecting in debts on behalf of apartment complexes for violating the Fair Credit Reporting Act and the Fair Debt Collection Practices Act for collecting debts “without a reasonable basis to assert” the debts were valid.

A copy of the CFPB’s complaint, filed in the District Court for the District of Maryland, can be accessed by clicking here.

The suit was filed against Fair Collections & Outsourcing, a number of its affiliates, and Michael Sobota, the company’s chief executive and owner.

The company is accused of not providing any training to the employees it assigned to investigate indirect disputes that were submitted to the agency via E-Oscar. Those employees, on average, resolved 17 disputes per hour, according to the complaint. Among the allegations made against the company are, “For disputes relating to an account that a consumer alleges is the result of identity theft or fraud, or that the consumer otherwise alleges does not belong to him or her, the Manual instructs employees to verify the disputed information as accurate if the disputing consumer’s Social Security number and name match the information in FCO’s account database. The Manual does not instruct employees to conduct a further inquiry that considers the substantive information provided in a consumer’s dispute.”

The CFPB also alleged that the defendant did not update its E-Oscar Manual between 2010 and 2017, ignoring two major updates to E-Oscar related to how disputes were processed and turning a “blind eye” because it knew that indirect disputes were not being investigated appropriately, according to the complaint.

The complaint lays out a number of scenarios in which the defendant did not appropriately investigate disputes filed by individuals, either alleging the debt had been paid or the individual was a victim of identity theft, according to the complaint.

The defendant was also accused of continuing to collect on debts even when the disputes rates for certain portfolios were higher than usual and when the defendant asked the client for additional information to help verify the validity of the debts only to be told that such information was not available.

“When collecting on certain portfolios of debt that contained warning signs as discussed above, 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 CFPB alleged in its complaint.

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