A court agreed with AARP’s brief that collectors seeking judgments on time-barred debts cannot manipulate the legal process to avoid the consequences.
The collection industry is booming. One in ten people face collection for old, sometimes time-barred debts, and for debts they don’t owe. Because few people show up at court to contest collection lawsuits (often because they are not notified), many collectors file cases they are not actually prepared to litigate because they are based on insufficient or no evidence to support the claims. Those lawsuits are based on the collectors’ hopes that an overburdened judicial system will simply grant them default judgments.
For over a decade consumer complaints about abusive debt collection practices have exceeded complaints about any other industry. Federal and state laws protect consumers from unfair and deceptive debt collection practices, but debt collection abuses have been increasing significantly over the years.
NCO Portfolio Management, which brags that it is ranked among the top ten debt purchasers, sued Christopher 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, removed the counterclaims to federal district court, and offered to settle the case with Hrivnak. The offer did not provide for injunctive relief and did not compensate members of the class. NCO Portfolio sought to dismiss the entire case arguing that the settlement offer made the entire case moot.
AARP Foundation Litigation attorneys filed AARP’s friend-of-the-court brief detailing industry abuses, the vulnerability of older and low income people, and citing numerous studies documenting debt buyers’ use of courts to extract money from alleged debtors despite inadequate evidence. If the debt collectors are able to obtain the dismissal of class claims by buying off the named plaintiffs but not changing their practices, consumers would never be able to challenge the illegal practices of debt collectors.
An appeals court denied NCO’s motion to dismiss the case as moot, finding that NCO’s settlement offer did not provide full relief. “To moot a case or controversy between opposing parties, an offer of judgment must give the plaintiff everything he has asked for as an individual…An offer limited to the relief the defendant believes is appropriate does not suffice,” ruled the court (emphasis in original). Because the company did not offer everything Hrivnak requested, Hrivnak’s class action challenge to the abusive debt collection practices can proceed in court.
What’s at Stake
Debt collection lawsuits have increased across the country, corresponding to the growth of the debt buyer industry, which purchases huge portfolios of essentially worthless and largely invalid debt for pennies on the dollar, then seeks to collects on the debt at full value. Older people are often coerced into paying debts--even those they don’t owe—because they believe they will go to jail or lose their homes if they don’t pay.
Hrivnak v. NCO Portfolio Management was decided by the U.S. Court of Appeals for the Sixth Circuit.