The CFPB’s focus on debt collection continues. In addition to proposing changes to debt collection rules, analyzing debt collector trade lines, and filing and participating as an amicus in debt-collection litigation, the CFPB recently announced a proposed settlement involving over $60 million in redress and penalties with debt collection companies Northern Resolution Group, LLC, Enhanced Acquisitions, and Delray Capital, and the companies’ creators, Douglas MacKinnon and Mark Gray.

The proposed settlement stems from a civil action filed in 2016 (i.e., under past CFPB director Richard Cordray’s watch) by the CFPB and the New York Attorney General. The complaint alleged that Douglas MacKinnon, Mark Gray, and their related debt collection companies purchased millions of dollars’ worth of consumer debt “for pennies on the dollar,” inflated the consumer debts, and then used illegal tactics – including, among other things, impersonating law enforcement officers, government agencies, and court officers – to extract as much money as possible from consumers. According to the allegations, the defendants also created written collection policies and procedures to falsely convince a debt seller that they operated in compliance with the FDCPA so the debt seller would continue to conduct business with them. The complaint sought damages for violations of the Consumer Financial Protection Act, the Fair Debt Collection Practices Act, and various New York consumer protection laws.

On July 25, 2019, after more than two years of litigation, the parties filed joint stipulations for entry of proposed final judgments. The stipulated final judgment for defendants MacKinnon, Northern Resolution Group, LLC, and Enhanced Acquisitions requires these defendants to pay $40 million for consumer redress, as well as a $10 million penalty to the CFPB and a $10 million penalty to the State of New York. The stipulated final judgment for defendants Gray and Delray Capital requires entry of judgment for $4 million for consumer redress, a $1 million penalty to the CFPB, and a $1 million penalty to the State of New York; however, payment of these amounts is suspended following the payment of $10,000 for consumer redress and $1 to the CFPB.

Notably, this is the CFPB’s second settlement announced this month. On July 9, 2019, the CFPB announced that it settled a lawsuit filed against Freedom Debt Relief, described as “the nation’s largest debt-settlement services provider,” for $20 million in restitution and a $5 million penalty.