Encore Enters Settlement Agreement With Consumer Financial Protection Bureau
- One-time charge of
- Removes uncertainty in the business going forward
- Earnings growth trajectory remains intact
"After rigorously and thoroughly scrutinizing seemingly countless aspects of our business for more than a year, the CFPB ultimately identified only two key issues warranting consumer refunds," said
The consumer refunds in the settlement are tied to alleged issues regarding time-barred debt and dispute language in litigation. On the issue of time-barred debt, the CFPB said that when Encore sent letters that mentioned a "settlement" opportunity for the consumer (which typically included a debt forgiveness component), specifically using the word "settlement" implied that litigation was being threatened. Encore supports the disclosure of time-barred debt even though a number of courts have found there is no requirement to do so under governing law.
In terms of dispute language in litigation, the CFPB thinks Encore should not have assumed that a consumer debt was valid if the consumer did not dispute it under the Fair Debt Collection Practices Act (FDCPA). The FDCPA provides consumers with a 30-day period in which to dispute debt. Encore exceeds this requirement by giving consumers 45 days to dispute their debt under the FDCPA.
With both issues, Encore maintains that it acted in accordance with all relevant laws. When the CFPB provided a different interpretation, Encore, in keeping with its industry leadership in consumer-centric approaches, chose voluntarily to change its practices, although not agreeing with the CFPB's position. These best practices were implemented long before they became requirements of this settlement.
"As a result of these two settlement issues, Encore expects to take a one-time, after-tax charge of
In addition to the financial impact, the agreement also sets out specific operational requirements to be followed by Encore. Substantially all of these requirements are part of Encore's current operations, and some have been in place for several years. With the few adjustments that still need to be made, it is only a matter of fine-tuning existing practices.
"This outcome does not change the way we think about our long-term growth prospects. If anything, it strengthens our competitive position in the marketplace because we believe this settlement, which we are largely compliant with, will become de facto standards for the entire sector," said Vecchione. "The fact is that the financial services and debt buyer industries operate in a challenging environment where regulators can reinterpret laws at any time. For years, we've been investing in a consumer-centric compliance program that is second-to-none in the industry. We believe this process and the settlement validates those efforts and maintains our competitive advantage. We are well positioned to continue our industry leadership, where others must elevate their compliance practices to adjust to this new regulatory environment. We also believe these conditions could lead to further industry consolidation."
The CFPB's evaluation of the debt buyer industry has been going on for some time. With this action, the bureau has indicated that it intends to drive change through enforcement rather than rulemaking. The operational requirements of this settlement appear to represent the CFPB's expectations for industry best practices, even if not currently stated in law.
"We continue to firmly believe that a fair and transparent public rulemaking process is the most appropriate method for establishing industry standards," said
Encore partners with individuals as they repay their debt obligations, helping them on the road to financial recovery and ultimately improving their economic well-being. Encore is the first and only company of its kind to operate with a Consumer Bill of Rights that provides industry-leading commitments to consumers. Headquartered in
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Katie Lilley, Hillenby Tel 703-722-3061 email@example.com