CFPB, NY reaches $4 million settlement with debt collection transaction

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On May 23, the CFPB and the New York Attorney General’s Office filed a motion for stipulated judgment in federal district court against a debt collection operation, involving multiple businesses and individuals, to resolve allegations that the operation allegedly used deceptive tactics to induce consumers to pay. The complaint, filed in 2020, alleged that the defendants violated the CFPA, FDCPA and various New York laws to induce consumers to pay by (i) falsely claiming to be arrested and imprisoned for non-payment, (ii) threatening wrongfully suing, (iii) inflating debt amounts owed, (iv) harassing debt collection victims by contacting family members, co-workers, employers, and friends, (v) making phone calls harassing telephone calls to debtors and (vi) failing to provide notices required by law.

The proposed stipulated judgment demands that companies, along with their owners and senior executives, exit the debt collection industry. Defendants must also pay a $2 million fine to the CFPB and a $2 million fine to the NY AG. If the defendants fail to make the payments in a timely manner, each penalty would increase to $2.5 million.

put into practice: As this lawsuit progressed through the court, the CFPB and the NY AG have strengthened their resolve to pursue allegations of predatory debt collection practices. In light of recent settlements and court victories, it seems likely that state and federal regulators will continue to team up to impose heavy penalties and fines on perceived bad actors.


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