Portfolio Recovery Associates Violate the FDCPA

On May 9, 2016, the District Court for the Northern District of Illinois granted summary Judgment in favor of the plaintiffs in a Fair Debt Collection Practices Act lawsuit involving time-barred debts. The lawsuit against Portfolio Recovery Associates, a debt buyer has been ongoing since March 6, 2012. The case was brought by plaintiffs Nacola Magee and James Peterson in a class action lawsuit for alleged violations of the Fair Debt Collection Practices Act including “sending consumers collection letters that contain offers on time-barred debts without disclosure of the fact that the debt is time barred.” Plaintiffs also alleged that the nondisclosure and the settlement offers implied an obligation to pay and were misleading to consumers.

Portfolio Recovery Associates is a business that engages in the buying of defaulted debts originally owed to others and incurred for personal, family, or household purposes. On October 3, 2011, Portfolio Recovery Associates sent Magee a collection letter for a debt originally owed to Capital One Bank which was allegedly incurred in 2004. Peterson was sent a collection letter in regards to two debts originally owed to Capital One Bank allegedly incurred in 2005.

The plaintiffs contend that Portfolio Recovery Associates engaged in unfair and deceptive acts and practices in violation of Sections 1692e, 1692e(5), 1692e(10, and 1692f of the Fair Debt Collection Practices Act by failing to disclose to the plaintiffs that the statute of limitation had expired. Additionally, plaintiffs contend that Portfolio Recovery Associated did not disclose to that because of this expiration the debts could not be collected through a court action. The settlement offers in the collection letters were alleged to be misleading because they implied that a time-barred debt was legitimately enforceable. Plaintiffs also alleged that Portfolio Recovery Associates violated the Fair Debt Collection Practice Act by referring to credit reporting on debts so old that they could not be reported on an ordinary credit report.

According to Section 1692e of the Fair Debt Collection Practices Act. “A debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt.” Section 1692f prohibits debt collectors from using “unfair or unconscionable means to collect or attempt to collect any debt.” A representation is considered misleading if a person of modest education and limited commercial knowledge would be likely to be deceived by the representation in question.

The court held that the defendants, Portfolio Recovery Associates, failed to include language in the collection letters that indicated that the debt was time barred and that plaintiffs could no longer be sued on that debt. The court found that the defendant’s failure to include this language was “deceptive on its face” because partial payment of the proposed settlement offers would reset the expired statute of limitations. According to the opinion, the settlement language in both letters offer significant savings and encourage the consumers to act fact to take advantage of such savings. This language was held to be influential and material and the court granted summary judgment as to these allegations. Additionally, the court held that misleading a consumer to believe that a debt is legally reportable and will improve his credit score is deceptive because it has the potential to influence the decisions of a consumer. Therefore, the statement made regarding the consumers’ credit reports were misleading and materially false and summary judgment was granted for these allegations as well.


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