New York Attorney General Eric Schneiderman announced today that two of the biggest consumer debt buyers in the US has reached an agreement with the state to drop around $16 million in judgement collections. The agreement was reportedly reached by Norfolk, Virginia-based Portfolio Recovery Associates (PRAA) and Sherman Financial Group LLC in order to settle allegations that the firms have violated a state law in pursuing debtors, Bloomberg explained. The two are also expected to pay penalties amounting to $475,000 in total, Schneiderman added.
The state of New York has accused both PRAA and Sherman Financial for attempting to collect debt that was too old. The firms purchase unpaid credit card debt mostly from other creditors at cheaper prices.
"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 said in a statement.
Revealing the results of a probe by Schneiderman's office, it was said that the niche industry purposefully fail to ensure claims were filed within the appropriate time limits for years. Under the state law, Bloomberg said New York requires actions should be brought within the six-year limit or the limit in which the origina creditor resides, whichever of the two is shorter. According to the website Bankrate.com, the longest time limit of a US state is 15 years, while some states have a three-year limit.
Bloomberg said that the debt-collection business will regulated soon as the Consumer Financial Protection Bureau is reportedly drafting the first rules under a federal law that governs the industry and probes for alleged violations. The bureau, which has been established under the 2010 Dodd-Frank Act, has been authorized to right rules under the Fair Debt Collection Practices Act of 1977.
PRAA spokesman Rick Goulart and the office of Sherman Financial has yet to return calls by Bloomberg requesting for comment.
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