SAINT PAUL, Minn. (Legal Newsline) - Minnesota Attorney General Lori Swanson filed a lawsuit on Wednesday against a debt buyer that allegedly charged people 21.75 percent interest they did not owe on old bank accounts.
Bradstreet & Associates LLC allegedly got Minnesota courts to enter default judgments for the unlawfully high interest after representing to the courts that the interest was owed. Interest of 21.75 percent is more than three times higher than the six percent statutory interest rate allowed by state law.
"Companies have the right to collect legitimate debt, but they shouldn't charge people for interest that isn't owed, nor should they get courts to award judgments against unrepresented people for interest that isn't owed," Swanson said.
Bradstreet bought old overdrawn demand deposit account debt from a debt buyer, which bought the debt from US Bank and Wells Fargo. The two national banks charged their customers fees, but not interest, on the overdrawn checking accounts. Bradstreet allegedly charged consumers interest of up to 21.75 percent from the date the accounts were charged off by the bank despite having no contractual right to do so.
In some instances, the allegedly unlawful interest increased a consumer's debt by thousands of dollars. In one alleged instance, a consumer's debt of $1,886.20 increased to $4,033.72 after Bradstreet charged the unlawful interest for close to five years.
Swanson's lawsuit seeks restitution and injunctive relief for consumers.
Last year, the Minnesota legislature enacted a law to require debt buyers seeking default judgments to substantiate their claims through admissible interest.
"We will watch to see if the new law deters debt buyers from asking courts to award default judgments against unrepresented people with scant, incorrect, or manufactured evidence," Swanson said.