LVNV: Maryland settlement wipes out $ 10 million in debt for 3,500 consumers, pays them a total of $ 7 million
About 3,500 people will have about $ 10 million in personal debt written off by a collection agency, thanks to a settlement reached Friday by a federal court that resolved a lawsuit over the agency’s right to sue debtors in Maryland.
As part of the settlement in US District Court in Baltimore, an average debt of $ 2,800 will be written off for all 3,500 plaintiffs. Each of the two principal applicants will also receive a payment of $ 2,000.
The settlement was reached between two Frederick men who led the class action lawsuit – Jason Hauk and Freddy Velazquez – and LVNV Funding LLC, a Greenville, SC-based company that buys consumer debt from businesses and sues often debtors to collect payment.
The case was based on LVNV’s right to sue debtors in state court, even though the company had not been licensed in Maryland as a collection agent. LVNV obtained its license after initiating numerous lawsuits against individuals.
The lawsuit accused LVNV of “systematic, intentional and predatory debt collection activities” against its debtors in Maryland.
LVNV did not admit any wrongdoing in the settlement.
The thousands of plaintiffs “think this is an exceptional result,” said Phillip Robinson, an attorney representing them. “I think it’s a good result for the accused as well.”
Hauk, who owed more than $ 7,600, and Velazquez, who owed more than $ 1,000, could not be reached for comment.
LVNV attorney Ronald S. Canter said that although the company “feels that its interpretation of the law, which is in line with the licensing agency’s original guidelines, is reasonable, it has decided to settle this matter. with plaintiffs rather than facing litigation the outcome of which is unknown.
The settlement follows a similar settlement in March, in which 10,000 debt collection cases were abandoned in Maryland by another agency.
Typically, collection agencies buy consumer debt – called “accounts receivable” – for pennies on the dollar. Agencies use a variety of techniques to get consumers to pay off debt, and a portion of those payments are shared with the original creditor.
Court activity between debtors and collection agencies has accelerated in recent years, with consumers battling allegedly predatory collection practices. Some debtors have filed lawsuits and complaints with the government, often requiring agencies to show proof that they are owed the debt.
As part of the settlement, LVNV will not pursue debts it attempted to collect in state court against the 3,500 people while it was unlicensed. The agency also cannot sell these debt accounts to other collection companies.
And LVNV must remove the information it provided to major credit bureaus for each of those debtors, a move designed to help improve their credit rating, according to the regulation.
The lawyers representing the class action plaintiffs were to receive $ 150,000 from LVNV to cover their fees.
The debt collection industry is large and employs over 200,000 people nationwide. Industry analysis by Price Waterhouse Cooper found that debt collected in 2007 by collection agencies was $ 58 billion, with more than $ 40 billion returned to original creditors.
http://twitter.com/gussentAn earlier version of this article incorrectly described the settlement of a class action lawsuit against LVNV Funding LLC. Only the two main plaintiffs in the case will receive a payment of $ 2,000 each under the agreement reached Friday in US District Court in Baltimore. The remainder of the approximately 3,500 group members will not receive any payment. The Baltimore Sun regrets the mistake.