AARP has filed a brief in a case that challenges the practices of debt collectors rushing to obtain judgments on stale debt.
Many people increasingly find themselves in court, defending against old debts they did not realize they had or that they never actually had, but which are so old that proof of payment is hard to find.
The collection industry — fueled by debt buyers purchasing for pennies on the dollar old debts deemed uncollectible by the creditor — is booming. Debt buyers are rewarded handsomely for filing lawsuits to collect stale debt, even if the debt is too old to be collected, has already been paid or they are suing the wrong person. Because few people show up to contest the lawsuits (often because they are not notified of any lawsuit) many collectors file cases they are not actually prepared to litigate and with insufficient or no evidence to support the claims, in hopes that an overburdened judicial system will simply grant them default judgments. The collection of so-called “zombie debts” (debts that come back to life long after they are or should be dead) is an increasing problem.
Consumer complaints about abusive debt collection practices have exceeded those for any other industry for longer than 10 years, leading to enactment of federal and state laws protecting consumers from unfair and deceptive debt collection practices. But even with these laws and with targeted enforcement actions by state and federal regulators, abuses continue to cause substantial suffering and anguish.
According to its own website, NCO Portfolio Management “is ranked among the top 10 debt purchasers.” It sued Mr. Hrivnak, an alleged debtor, on a stale debt in state court in Ohio. Hrivnak filed a class action counterclaim, alleging violations of the federal Fair Debt Collections Practices Act (FDCPA). NCO then dismissed its debt collection lawsuit, and removed the counterclaims to federal district court. NCO thereafter offered to settle the case with Hrivnak and sought to have the entire case dismissed, claiming that its offer of settlement with the named plaintiff mooted the entire class action claim.
AARP Foundation Litigation attorneys have filed AARP’s friend-of-the-court brief detailing the abuses in the debt collection industry, the vulnerability of older and low income people to these abuses, and the efforts to hold collectors accountable for their actions. The brief highlights numerous studies and reports that document an industry run amok, which uses the courts to extract money from alleged debtors despite inadequate, unverified, and inaccurate evidence.
AARP urged the court not to permit the debt collectors to escape liability for its actions simply because it dismissed the initial lawsuit filed against the named plaintiff and offered to settle the named plaintiff’s individual claim for damages arising from violation of the FDCPA. If the debt collectors are able to obtain the dismissal of class claims by buying off the named plaintiffs, then consumers would never be able to successfully put a stop to the illegal practices of the debt collector.