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From Banking and Finance Law Daily, December 7, 2015

Massachusetts debt collector pays $2.5M for failing to verify bad debts

By Lisa M. Goolik, J.D.

The Consumer Financial Protection Bureau has ordered a Massachusetts debt collection firm, EOS CCA, to refund approximately $743,000 to consumers, and pay a $1.85 million civil money penalty for allegedly violating the Fair Debt Collection Practices Act, the Fair Credit Reporting Act, and the Dodd-Frank Act. According to the consent order, EOS failed to verify a portfolio of cellphone accounts prior to reporting and collecting on the accounts. The debt collector also provided inaccurate information to credit reporting companies about the debt and failed to correct reported information that it had determined was inaccurate.

“After buying a portfolio of debt, EOS soon learned of several red flags that raised doubts about the debt’s validity. Even so, EOS still proceeded to collect certain disputed and unverified debts,” said CFPB Director Richard Cordray. “It is unacceptable that consumers were harmed by these practices and that the company supplied inaccurate information to the credit reporting companies, so today we are taking action to stop it.”

Red flags. The CFPB alleged that in 2012, EOS purchased a portfolio of more than three million cellphone accounts with a total face value of $2.3 billion from AT&T. Just a few months after acquiring the accounts, EOS discovered that, contrary to the sales agreement with AT&T, the portfolio contained fraudulent, already paid, or already settled debts.

However, an investigation by the CFPB found that EOS continued to collect and report on the debts, without verifying that those debts remained outstanding. When consumers disputed the debts, EOS had difficulty getting AT&T to provide sufficient, and in some cases, any documentation to verify the debts.

In addition, shortly after it started collecting on the portfolio, EOS reported to the credit reporting companies that all three million of the debts were disputed by consumers, when EOS knew not all of the accounts had been disputed. EOS removed the dispute flags, only to reinsert the dispute flags a month later.

As a result, consumers paid debts they did not owe or had no obligation to pay—EOS collected approximately $743,000 on more than 2,000 accounts that consumers disputed and that EOS did not verify. The consent order requires EOS to provide a full refund to those consumers.

Consent order. In addition to paying the civil money penalty and refund, EOS must cease collecting and reporting on disputed AT&T debt. For the next five years, the consent order requires also that EOS review original account-level documents verifying a debt before collecting on it. During that time, EOS is also prohibited from reselling the debts it buys to other debt collectors.

Companies: AT&T; EOS CCA

MainStory: TopStory CFPB ConsumerCredit DebtCollection DoddFrankAct EnforcementActions FairCreditReporting MarylandNews

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