The Federal Trade Commission said Thursday that Consumer Portfolio Services will pay more than $5.5 million to settle charges that the subprime auto finance company used “illegal tactics” to service and collect consumers’ loans, including collecting money consumers did not owe, harassing consumers and third parties, and disclosing debts to friends, family and employers.

According to regulators, CPS agreed to refund or adjust 128,000 consumers’ accounts constituting more than $3.5 million and forebear collections on an additional 35,000 accounts to settle charges the company violated the FTC Act.

The FTC also indicated CPS will pay another $2 million in civil penalties to settle FTC charges that the company violated the Fair Debt Collection Practices Act (FDCPA) and the Fair Credit Reporting Act (FCRA)’s Furnisher Rule.

CPS president and chief executive officer Brad Bradley issued a statement after the final settlement with the FTC was announced.

“We are pleased to have resolved the matter with the FTC,” Bradley said. “We cooperated fully with the FTC during their inquiry and made several system and procedural changes related to their comments. Furthermore, we are pleased that the final settlement is consistent with our expectations.

“Accordingly, the amounts we’ve agreed to pay for customer refunds and the civil penalty are covered entirely by the legal provision expenses we’ve previously recognized,” he continued.

The order settling the charges requires CPS to change its business practices to comply with the requirements of the appropriate laws. In addition, the company is required to establish and maintain a comprehensive data integrity program to ensure the accuracy, integrity and completeness of its loan servicing processes, and the data and other information it services, collects or sells.

CPS must also provide the FTC with periodic independent assessments of its data integrity program for 10 years.

According to the FTC’s complaint, CPS’ loan-servicing violations included:

—Misrepresenting fees consumers owed in collection calls, monthly statements, pay-off notices, and bankruptcy filings

—Making unsubstantiated claims about the amounts consumers owed

—Improperly assessing and collecting fees or other amounts

—Unilaterally modifying contracts by, for example, increasing principal balances

—Failing to disclose financial effects of loan extensions

—Misrepresenting that consumers must use particular payment methods requiring service fees

—Misrepresenting that the company audits verified consumer accounts balances

The FTC said the company’s collection violations also included:

—Disclosing the existence of debts to third parties

—Calling consumers at work when not permitted or inconvenient

—Calling third parties repeatedly with intent to harass

—Making unauthorized debits from consumer bank accounts

—Falsely threatening vehicle repossession

—Deceptively manipulating caller ID.

Because for many of its accounts CPS is a creditor, regulators explained the complaint charges these practices violated Section 5 of the FTC Act. For those accounts where CPS is a debt collector, the complaint charges these practices violated the FDCPA.

The FTC noted that CPS is also charged with failure to establish and implement reasonable written procedures and failure to reasonably investigate and respond timely to consumer disputes under the Furnisher Rule.

Under the order, the company will begin sending refunds to consumers and adjusting affected account balances within 90 days.

Consumers with questions about their eligibility for a refund or account adjustment should contact CPS directly via telephone at (888) 806-2367, email FTCsettlement@consumerportfolio.com, or visit the company’s website.

The commission vote to authorize the staff to refer the complaint to the Department of Justice, and to approve the proposed consent decree, was 4-0-1, with Commissioner Terrell McSweeny not participating.

The DOJ filed the complaint and proposed consent decree on behalf of the commission in the Central District of California on Wednesday. The proposed consent decree is subject to court approval.

“At the FTC, we hold loan servicers responsible for knowing their legal obligations and abiding by them,” said Jessica Rich, director, FTC’s Bureau of Consumer Protection. “The law is very clear: Loan servicers can’t charge consumers more than they owe. And they can’t threaten and harass consumers about delinquent debts.”