A proposed settlement has been reached between the Consumer Financial Protection Bureau and a debt collector it sued back in 2019 that will see the collector and its owner pay a fine of $850,000, update its policies and procedures with respect to reporting debts to credit bureaus, and ensure the accuracy of accounts on which it collects while also hiring an independent consultant to review all of the collector’s furnishing and collection activities.
A copy of the proposed settlement in the case of Bureau of Consumer Financial Protection v. Fair Collections & Outsourcing can be accessed by clicking here.
The collector and its owner were sued for allegedly violating the Fair Credit Reporting Act and the Fair Debt Collection Practices Act. Specifically, the company was accused of not properly investigating indirect disputes filed by consumers about information that was furnished to credit reporting agencies and not having the proper policies and procedures in place regarding the accuracy and integrity of information that was furnished.
Under the terms of the settlement, the defendant neither admitted nor denied any of the allegations.
“As we recover from the economic devastation caused by COVID-19, credit reports play a huge role in consumers’ financial lives. Inaccurate information, such as information related to tenant debt, can be devastating for someone who’s applying for a loan, seeking a new place to live, or trying to get a new job,” said CFPB Acting Director Dave Uejio in a statement. “We will not tolerate companies that put inaccurate data on consumers’ credit reports or fail to investigate consumers’ disputes.”
Along with paying the fine, the defendants will gave to also do the following, if the settlement is approved by a federal judge:
- Implement reasonable policies and procedures in connection with furnishing: FCO would be required to establish, modify, update and implement policies and procedures regarding the accuracy and integrity of information furnished to consumer reporting agencies and to establish internal controls to identify practices or activities that could compromise the accuracy or integrity of information it furnishes and to evaluate the effectiveness of its furnishing policies and procedures.
- Properly review identity theft reports: FCO would be required to establish an identity theft report review program to identify instances in which FCO received identity theft reports from consumers and take steps to ensure that they handle those reports as required by the FCRA.
- Evaluate reliability on accounts for which FCO collects: FCO and Sobota would be required to have written intake policies and procedures designed to evaluate the quality, completeness, accuracy, and integrity of account information before FCO commences collections and policies and procedures to monitor, evaluate, and address trends in disputes and other indicia of unreliability on accounts for which FCO collects.
- Retain an independent consultant: FCO would be required to retain an independent consultant with specialized experience in consumer-information furnishing and debt collection, approved by the CFPB, to conduct an independent review of FCO’s furnishing and debt collection activities and to make recommendations on policies and procedures, among other things.
The defendant attempted to have the lawsuit dismissed, but that motion was denied last December.
The company was 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 CFPB’s 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 laid 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.