Lowball Restitution Order With Collector Leads Senate Dems To Call For Investigation into CFPB

Using a recent settlement with a debt collector as an example of how the Consumer Financial Protection Bureau has created a “perverse incentive for companies to violate the law,” a group of 15 Senators to call for an investigation into the CFPB’s restitution penalties levied against companies found to have engaged in illegal activities.

The Senators, led by Sen. Catherine Cortez Masto [D-Nev.] and Sen. Sherrod Brown [D-Ohio], the ranking member of the Senate Banking Committee, also included Sen. Elizabeth Warren [D-Mass.], Sen. Bernie Sanders [I-Ver.], Sen. Ed Markey [D-Mass.], Sen. Dick Durbin [D-Ill.], Sen. Tammy Duckworth [D-Ill.], and Sen. Cory Booker [D-N.J.]. The letter was sent to Mark Bialek, the inspector general of the Federal Reserve Board.

“Under Director Kathleen Kraninger, the Bureau appears to be ignoring existing legal authority for calculating restitution in order to reduce the amount of restitution returned to harmed consumers or undercount the consumers who should receive restitution,” the Senators wrote. “The Bureau’s approach to restitution under Director Kraninger also creates a perverse incentive for companies to violate the law by allowing allow them to retain all or nearly all of the funds they illegally obtain from consumers.”

To illustrate their point, the Senators used a recent settlement with Asset Recovery Associates, a debt collector that was accused of using illegal tactics such as threatening to sue or arrest individuals who did not pay their debts and misrepresenting that employees were attorneys. The settlement required the company to pay $36,800 in restitution to consumers and a civil money penalty of $200,000.

Despite finding that the company had been engaging in this activity dating back to 2015, the CFPB “limited restitution to only those consumers who affirmatively ‘complained about a false threat or misrepresentation’ ” by the company, the Senators wrote. “The result is that consumers whom ARA subjected to illegal threats and misrepresentations in order to induce them to make payments but did not complain received no restitution. It also means that ARA gets to retain all by $36,800 of the amount it illegally collected from consumers over a more than four-year period.”

The letter includes several other examples of settlements in which consumers were provided with no restitution. It calls on Bialek to open an investigation into how the CFPB determines restitution awards in its enforcement actions and specifically seeks to find out how many people may have been excluded from the ARA settlement because they did not affirmatively complain about the agency’s behavior.

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