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Debt Collection Agency Loses Suit

A class action suit against a debt collection agency has resulted in a $350,000 class action award. The U.S. District Court, Southern District of New York ruled against Portfolio Recovery Associates, for violations of the Fair Debt Collection Practices Act (FDCPA). This is the largest reported judgment in a Fair Debt Collection class action case to date.

Apparently, Portfolio Recovery Associates violated the FDCPA by sending 990 people debt collection correspondence that simulated legal process. The court’s decision affected the class that consisted of “All consumers to whom [Portfolio Recovery Associates] sent…a demand for payment letter on Portfolio Recovery Associates, LLC letterhead – signed by Catherin M. Hedgeman, Esq. – and enclosing a draft summons and complaint in a form materially identical or substantially similar to the ‘Pre-Suit Package’ sent to Jason P. Zimmerman.” Zimmerman was the class representative.

The court considered several things in determining the size of the award: the frequency and persistence of noncompliance by the debt collector, the nature of such noncompliance, the resources of the debt collector, the number of people adversely affected, and the extent to which the debt collector’s noncompliance was intentional all affected the decision. Portfolio Recovery Associates’ “use of the Pre-Suit Package falls squarely within the ‘unscrupulous’ behavior that the FDCPA seeks to prevent,” and the company’s net worth exceeds $50 million, so, the court decided that “the sanction imposed must be sufficient to deter PRA from engaging in abusive practices in the future.”

Each class member who filed a claim will receive $500, that the lead plaintiff, Mr. Zimmerman, will receive $1,500; any remaining monies will be awarded “to a non-profit organization working to curb abusive debt collection practices or to increase consumer awareness of such practices.”

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