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The North Carolina Justice Center has received final court approval for a $5.75 million settlement of a class action lawsuit brought against one of the nation’s largest debt buyers, Portfolio Recovery Associations (PRA).
The lawsuit, which was filed in 2016, alleged that PRA violated North Carolina debt collection law by obtaining default judgments against debtors without filing “sufficient evidence to substantiate the debts claimed to be owed.”
Jason Pikler (Photo: NC Justice Center)
Under the agreement, PRA must pay $5.75 million into a fund to benefit the more than 18,000 members of the lawsuit and file cancellations of default judgments against class members amounting to $35 million.
“Debt buyers purchase old debts for pennies on the dollar and then seek to collect the full amount of the debt,” Jason Pikler, senior attorney at the Justice Center, said in a statement. “Debt buyers then bring lawsuits to collect on these worthless debts, which commonly result in a default judgment being entered against the debtor.”
Pikler said such default judgments are harmful to consumers because they can result in the seizure of the debtor’s bank account or vehicle and encumber the debtor’s property.
The settlement marks a major vindication of North Carolina’s consumer protections, Carlene McNulty, director of litigation at the Justice Center said in a news release.
Carlene McNulty (Photo: NC Justice Center)
“In 2009, our state legislature enacted first-in-the-nation laws that restrict the way that debt buyers can obtain default judgments and otherwise engage in collection activity in North Carolina,” McNulty said. “We brought this lawsuit to enforce those statutes, and the resulting settlement is a testament to the importance and impact of North Carolina’s consumer protection laws.”
Pikler and McNulty appeared in court to argue in favor of the settlement in Durham County Superior Court on June 12. Superior Court Judge Michael O’Foghludha approved the settlement, concluding that it was fair, adequate and reasonable.
Iris Pounds, a plaintiff in the case, said the outcome helped her and others regain a sense of “hope and justice.”
“This victory means so much to me and will significantly improve my life and the lives of countless others affected by PRA’s predatory actions,” Pounds said.
Portfolio Recovery Associates is one of the largest debt collectors in the United States. The company’s principal headquarters is in Norfolk, Virginia. It reported net income of over $183 million in 2021.
Last year, the Consumer Financial Protection Bureau (CFPB) took action against PRA for violating a 2015 CFPB order and engaging in other violations of law. The CFPB filed a proposed order that would require PRA to pay more than $12 million to consumers harmed by illegal debt collection practices, in addition to a $12 million penalty that would be deposited into the CFPB’s victims relief fund. PRA violated the 2015 order by collecting on unsubstantiated debt, collecting on debt without providing required documentation and disclosures to consumers, suing or threatening legal action against consumers without offering or possessing required documentation and suing to collect on debt outside the statute of limitations.
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