Reports

Platinum Equity-owned Transworld Systems fined $2.5 million for illegal student debt collection lawsuits, draws thousands of consumer complaints

Private equity firm Platinum Equity has recently drawn criticism for its investment in Securus, one of the largest providers of phone, email, money transfer, and electronic monitoring services to jails, prisons and immigration detention centers in the U.S.

While Platinum Equity has acknowledged this criticism and pledged to reform Securus, Platinum Equity’s investment in and governance of another portfolio company, Transworld Systems Inc., a debt collector, raises questions about the private equity firm’s management of and commitment to mitigate regulatory and headline risks at its portfolio companies.

We recently released a report, “Platinum Equity-owned Transworld Systems fined $2.5 million for illegal student debt collection lawsuits, draws thousands of consumer complaints” that looks at Platinum Equity’s investment in Transworld Systems.

The report is linked here. Key points below.

In 2017, Platinum Equity-owned Transworld Systems was fined $2.5 million by the Consumer Financial Protection Bureau (CFPB) for illegal student debt collection lawsuits, actions taken during the period it was owned by Platinum Equity. The consent order that Transworld Systems entered into with the CFPB is here (link).

Since Platinum Equity acquired Transworld Systems in November 2014, the company has drawn more than 4,600 complaints from consumers submitted to the Consumer Financial Protection Bureau.

The narratives by over 1,700 consumers accompanying their complaints against Transworld Systems are here.

The full list of consumer complaints filed against Transworld Systems since November 2014 is here.

Mary Ann Sigler, who serves as Platinum Equity’s Chief Compliance Officer, and Eva Kalawski, Platinum Equity’s former General Counsel, served on Transworld Systems’ board from at least 2015 through 2017.

Report: Platinum Equity-owned Transworld Systems fined $2.5 for illegal student debt collection lawsuits, draws thousands of consumer complaints

Key Points:

> Private equity firm Platinum Equity acquired debt collector Transworld Systems in November 2014 from business process outsourcing firm Expert Global Solutions.[i]

> Eva Kalawski and Mary Ann Sigler of Platinum Equity served on Transworld Systems’ board from at least 2015 through 2017.[ii] At acquisition, Jacob Kotzubei of Platinum Equity cited Transworld Systems’ “strong culture of compliance.”[iii]

> In September 2017, the Consumer Financial Protection Bureau (CFPB) fined Transworld Systems $2.5 million for illegal student loan debt collection lawsuits, actions taken during the period it was owned by Platinum Equity.[iv]

> Specifically, the CFPB alleged that Transworld Systems:

  • Sued consumers for debts their clients could not prove were owed
  • Filed false and misleading affidavits

> Since Platinum Equity acquired Transworld Systems in November 2014, the company has drawn more than 4,600 complaints from consumers submitted to the Consumer Financial Protection Bureau.

> In July 2013, prior to its acquisition by Platinum Equity, Transworld Systems parent Expert Global Solutions agreed to pay a $3.2 million civil penalty to settle charges by the Federal Trade Commission (FTC) that it violated consumers’ rights when attempting to collect debts.

> In its 2013 complaint, the FTC charged that the companies violated the Fair Debt Collection Practices Act and the FTC Act by using tactics such as calling consumers multiple times per day, calling even after being asked to stop, calling early in the morning or late at night, calling consumers’ workplaces despite knowing that the employers prohibited such calls, and leaving phone messages that disclosed the debtor’s name, and the existence of the debt, to third parties.[v]

> According to the FTC’s complaint, the companies also continued collection efforts without verifying the debt, even after consumers said they did not owe it.[vi]

(Full report available here)

[i]“Platinum Equity Completes Transworld Systems Acquisition,” Media release, Nov 3, 2014.

[ii] Transworld Systems Foreign Corporation Information Update, Michigan Dept of Licensing and Regulatory Affairs, 2015-2017.

[iii]“Platinum Equity Completes Transworld Systems Acquisition,” Media release, Nov 3, 2014.

[iv]“CFPB Takes Action Against National Collegiate Student Loan Trusts, Transworld Systems for Illegal Student Loan Debt Collection Lawsuits,” Media release, Sept 18, 2017.

[v]“World’s Largest Debt Collection Operation Settles FTC Charges, Will Pay $3.2 Million Penalty,” Media release, Jul 9, 2013.

[vi]“World’s Largest Debt Collection Operation Settles FTC Charges, Will Pay $3.2 Million Penalty,” Media release, Jul 9, 2013.

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