BOSTON – One of the largest debt collection companies in the country has agreed to a $4 million settlement that will be used to pay back thousands of consumers who were subject to the company’s deceptive and unfair debt collection practices.
The assurance of discontinuance filed in Suffolk Superior Court alleges that Portfolio Recovery Associates LLC (Portfolio) – a Virginia-based company that purchases defaulted loans, credit card accounts, car loans and other debts from creditors at a deep discount – aggressively collected the full value of those debts from consumers using a network of in-house collectors that pursued consumers with repeated letters and phone calls, and used law firms to take financially destitute consumers to court. As a result of the AG’s settlement, the company has agreed to stop collecting certain debts and significantly change its business practices.
“This major national debt buyer systematically and repeatedly broke our laws, lied to vulnerable consumers with exempt income, and collected debts they couldn’t even prove were owed,” said AG Healey. “This significant settlement will allow us to put money back into the pockets of thousands of Massachusetts families who were subject to this company’s illegal practices.”
The AG’s Office began investigating Portfolio after receiving hundreds of complaints from consumers. The investigation showed that Portfolio engaged in deceptive practices that were particularly harmful to low-income, elderly, and disabled consumers, and routinely pursued consumers with only exempt sources of income such as social security, social security disability, and supplemental security income. Consumers who told the Portfolio that they relied only on exempt income were pressured by the company to pay money they should have been entitled to keep.
The AG’s settlement claims that Portfolio violated the state’s consumer protection law and debt collection regulations by demanding consumers pay debts that the company could not substantiate; misleading consumers about protections for exempt sources of income; and routinely failing to verify the accuracy of consumer information it reported to credit reporting agencies.
The AG’s investigation found that Portfolio often lacked proof that consumers actually owed the debts it collected, which resulted in the company pursuing the wrong consumer or wrong amount. The company also pursued debts that had already been paid or were so old they were beyond the statute of limitations and legally unenforceable. Portfolio also failed to notify consumers of their rights to request proof of a debt and to provide proof of a debt when requested by consumers.
In addition to the $4 million payment, Portfolio will undertake significant changes to its business practices. The company will cease collecting from consumers who only have exempt income and will proactively inform consumers of protections for exempt income, obtain documentation that proves a debt is valid before attempting to collect from a consumer, inform consumers when their debts are too old to legally collect, and refrain from calling consumers more than twice in a seven-day period. Portfolio will also refrain from reporting a debt to a credit reporting agency that it cannot substantiate and will investigate when consumers dispute the accuracy of information it reports to credit reporting agencies.
Consumers who are eligible for repayment from this settlement will be contacted by the AG’s Office through the mail.
The AG’s Office regularly receives consumer complaints about debt collection abuses and has prioritized taking legal action against a number of debt collectors in recent years. In 2017, the Office sued Lustig, Glaser & Wilson, P.C., a Massachusetts law firm used by Portfolio for filing tens of thousands of debt collection lawsuits based largely on unsubstantiated and inaccurate debts owned by national debt buyers. The AG’s Office also sued a Lowell debt collection attorney and obtained an injunction barring him from threatening consumers with arrest or imprisonment for not paying small debts. In September 2016, Ditech Financial LLC, a national mortgage servicer, paid $1.4 million and agreed to strengthen its policies after the AG’s Office alleged abusive debt collection practices that affected more than 5,000 borrowers in Massachusetts.
The AG’s Office encourages anyone with questions or concerns about debt collection practices to learn more about fair debt collection, call the AG’s consumer hotline at 617-727-8400 or file a complaint online.
This matter was handled by Assistant Attorneys General Peter Downing and Sarah Petrie, with assistance from Division Chief Max Weinstein, all of the AG’s Consumer Protection Division, as well as Consumer Specialist Cornelio Lozada of the AG’s Consumer Advocacy & Response Division, and Investigator Anthony Crespi of the AG’s Civil Investigations Division.