Are You Due a Refund From 2 Major Debt Collectors?

We recently reported on the Consumer Financial Protection Bureau action filed against two of the nation’s biggest debt collectors, Encore Capital Group and Portfolio Recovery Associates, and the nearly $60 million in refunds the firms owe to consumers.

As a result, we’ve been getting a lot of questions from readers wondering how this might affect them. Here are the answers to some of the common questions we’ve received.

Am I eligible?

Only consumers who wrongly paid certain kinds of debts declared invalid by this consent order will receive “redress,” or refunds. Not everyone who had a dispute with Portfolio or Encore is eligible. There are a few specific categories of “restitution eligible consumers” who will get relief:

Encore

12,000 consumers who paid a “time-barred debt,” meaning the debt was so old that the statute of limitations had run out. They are eligible for part of a $5.3 million fund, or an average of $442 each.
35,600 consumers who paid and were sued and had a “dispute affidavit” filed against them indicating the debt was valid because the consumer failed to dispute it. This group is eligible for part of a $36 million fund, or an average of $1,011 each.

Portfolio

38,000 consumers who paid and received a call from a Portfolio representative claiming to be from the “litigation department” when the firm allegedly hadn’t initiated legal action — are eligible for part of an $18.2 million fund. That’s an average of $479 per person.
837 consumers who paid a time-barred debt are eligible for part of an $861,000 fund, averaging $1,029 per consumer.

Only consumers in these categories will be contacted by Encore or Portfolio and receive monetary compensation. Another set of consumers who were victims of these categories of actions by the two firms, but did not pay, will see the two firms cease collection activities on those alleged debts – impacting thousands of consumers who allegedly owed another $128 million. In addition, the disputed debts should be removed from the consumers’ credit reports.

It’s important to note that consumers who believe they have been mistreated by Encore and Portfolio, but will not receive redress from this order, retain the right to hire their own attorney and sue under the Fair Debt Collection Practices Act or the Fair Credit Reporting Act.

How will I be notified?

Consumers who are eligible will be notified by U.S. mail, but the specifics aren’t known yet. Both Portfolio and Encore must file what’s called a “redress plan” with the CFPB’s enforcement director. (Portfolio has 30 days; Encore has 60 days; both have additional time to satisfy any changes required by the CFPB). That plan must include details about how consumers will be notified, including what the envelope will look like, what the enclosed letter will say, etc.

How can I check to see if I am eligible?

Unfortunately, you can’t do anything. You must wait for notification from Encore or Portfolio via U.S. Mail.

What if I have moved?

This is tricky. Both firms are required to make reasonable efforts to contact you if a first letter is returned to sender, but that’s no guarantee. “Reasonable effort” is defined as: “Using the National Change of Address System, and (the firms must) promptly re-mail all returned letters and restitution checks to current addresses.” What if that doesn’t work? Consumers have 360 days to claim their check by providing proof of identity to the sender. After that, the money goes to the U.S. Treasury. So if you haven’t heard from them in about 90 days, and you are pretty sure you fit one of the categories above, you’ll have to call the debt collector yourself.

Does this mean the debt will come off my credit reports?

Yes, but only those debts involving the specific issues explained above. Both consumers who are eligible for redress – because they paid – and consumers who did not pay but were contacted about debt items as described above should contact Encore or Portfolio to request that the credit reporting agencies “amend, delete or suppress” information. That doesn’t guarantee it will happen, however. Consumers should check their credit reports and make sure the changes actually occur.

Here’s how consumers can get their free annual credit reports, and dispute errors on their reports. Consumers can also view their free credit report summary on Credit.com, updated every 14 days, to watch for important changes.

I have a Portfolio Recovery or Encore debt on my credit reports. Can I get it removed?

See above. This consent order covers only specific kinds of collection incidents / disputes.

How soon will I get a check?

We won’t know until both firms file their redress plans and they are approved. That won’t happen for a couple of months, so don’t expect to see it in the mailbox next week.

I have another problem with Portfolio or Encore. Will this help?

It depends. If you are one of the consumers impacted by this consent order, yes. If not, the order still might help you, because both firms had to agree to a stronger set of processes and consumer protections going forward. The firms cannot attempt to collect debts without a “reasonable basis” for the amount owed, for example.

If you feel like reading the details yourself, the orders are here: Encore and Portfolio.