New York AG reaches settlements with two consumer debt buyers

NEW YORK (Legal Newsline) - New York Attorney General Eric Schneiderman reached settlements with two major consumer debt collectors on Thursday to resolve allegations they improperly brought debt collection actions against New York consumers.

Portfolio Recovery Associates LLC and Sherman Financial Group LLC allegedly sued New York consumers and obtained uncontested default judgments against the individuals who failed to respond to the lawsuits, even though the underlying claims were untimely under state law. The companies allegedly brought close to 3,000 improper judgments totaling approximately $16 million.

It is illegal in New York for a debt collector to bring suit against a consumer when the claims are outside of the applicable statute of limitations. Schneiderman alleged that Portfolio Recovery Associates and Sherman Financial Group failed to comply with the requirements of New York state's borrowing statute.

"Debt collectors must follow the same rules the rest of us do when bringing lawsuits-in this case, suing for debts that were not enforceable in the first place," Schneiderman. "When these kinds of practices occur on such a large scale, hard-working New Yorkers feel the pain, to the massive tune of $16 million across nearly 3,000 people. In this case and others, my office will continue to pursue debt collectors and lenders who improperly take advantage of New Yorkers in tough times."

Under the terms of the settlements, Portfolio Recovery Associates and Sherman Financial Group must vacate the judgments and immediately cease any further collection efforts on the judgments. The two companies also agreed to several changes in their current practices to safeguard consumers against any further potentially deceptive or confusing debt collection practices.

Portfolio Recovery Associates was assessed $300,000 in civil penalties and costs. Sherman Financial Group will pay $175,000 in civil penalties and costs.