Archive for 'Portfolio Recovery Associates'

A Peek into the Business of Debt Buying

Monday, January 7th, 2013 at 6:56 pm  
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As we’ve often discussed, there are a three primary types of debt collectors. The first consists of debt collectors who are employees of original creditors (e.g., the hospital employee who calls about a medical bill); the second consists of third-party debt collectors (e.g., the company to which the hospital outsources collections); and the third consists of debt buyers (e.g., the company that buys the hospital’s debt for pennies on the dollar when its own collectors and third party collectors have been unsuccessful).

Seeking Alpha has an interesting analysis of one of the country’s largest debt buyers, Portfolio Recovery Associates (NASDAQ: PRAA). In fact, Portfolio Recovery Associates is the third-largest debt buyer, after Sherman Financial and Encore Capital, and before Asset Acceptance. The analysis looks at the trend of consumers paying down their debt, and concludes that there may be less debt for Portfolio Recovery to buy in the future. Yet it counterbalances that by saying consumers are likely to revert to old behaviors and that smaller or newer debt buyers “flame out,” leaving companies like Portfolio Recovery holding steady.

The article also pulls the curtain back on how Portfolio Recovery is diversifying, for example by expanding into the U.K. by purchasing a debt collection agency and by moving into bankruptcy collections. Ultimately, the author predicts that Portfolio Recovery will have revenue growth of nine percent and return on equity of 20 percent.

Portfolio Recovery Associates Loses TCPA Robocall Appeal

Wednesday, October 24th, 2012 at 5:42 pm  
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The U.S. Court of Appeals for the Ninth Circuit upheld a lower court’s ruling that a consumer only consents to a debt collection robocall to his or her cell phone if the cell phone number is provided on the initial credit application. In Meyer v. Portfolio Recovery Associates, the appellate court upheld a lower court’s injunction preventing the debt buyer from calling consumers’ cell phones in violation of the Telephone Consumer Protection Act. It further ruled that the lower court was correct in provisionally certifying a class in the class action lawsuit. According to the court’s opinion, the class was limited to “all persons using a cellular telephone number that ‘(1) PRA did not obtain either from a creditor or from the Injunctive Class member; and (2) has a California area-code; or (3) where PRA’s records identify the Injunctive Class member as residing in California.’”

Portfolio Recovery argued that provisional class certification shouldn’t have been granted because some of the affected consumers might have agreed to be contacted at phone numbers obtained after the original transaction. The appellate court cited a Federal Communications Commission 2008 ruling, saying, “prior express consent is deemed granted only if the wireless telephone number was provided by the consumer to the creditor, and only if it was provided at the time of the transaction that resulted in the debt at issue. Thus, consumers who provided their cellular telephone numbers to creditors after the time of the original transaction are not deemed to have consented to be contacted at those numbers
for purposes of the TCPA.”

This decision is definitely a victory for consumers, and will help to ensure that debt collectors can’t robocall consumer cell phone numbers that they have obtained through skip-tracing tactics.

U.S. District Court Grants Class Certification in Debt Collection Case Against Portfolio Recovery

Wednesday, September 21st, 2011 at 12:17 pm  
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We reached a milestone in Zimmerman v. Portfolio Recovery Associates, namely that the U.S. District Court granted our motions for summary judgment and class certification. We issued the following press release yesterday:

SEPTEMBER 20, 2011 – STAMFORD, CT – The U.S. District Court for the Southern District of New York has granted the plaintiff’s motions for summary judgment and class certification in Zimmerman v. Portfolio Recovery Associates, LLC. According to Jason Zimmerman’s attorney, Sergei Lemberg, “We are pleased that the Court ruled in our favor, granting summary judgment in favor of 990 consumers victimized by Portfolio Recovery Associates.”

The facts of the case revolve around a debt collection “Pre-Suit Package” that was sent under Portfolio Recovery Associates “Litigation Department” letterhead and included a cover letter, as well as documents that appeared to be a “lawsuit,” including a “Summons” and a “Complaint” that referenced the District Court of the County of Nassau, First District, and listed Zimmerman as the defendant. The cover letter said, in part, “Enclosed please find a copy of the lawsuit our local counsel in your state intends to file against you related to the delinquent account referenced above.” However, a closer examination of the papers revealed that the Pre-Suit Package did not contain actual legal papers, but rather were simulated legal papers made to look real.

The Court found that Portfolio Recovery Associates violated provisions of the Fair Debt Collection Practices Act (FDCPA) relating to “[t]he use or distribution of any written communication which simulates or is falsely represented to be a document authorized, issued, or approved by any court…of the United States…, or which creates a false impression as to its source, authorization, or approval,” or which constitutes “[t]he false representation or implication that documents are legal process. ” The Court’s opinion stated, “The ‘least sophisticated consumer’ might well conclude that Defendant had initiated a lawsuit to collect the debt, given the form of the Summons and Complaint, the reference to the court and parties…and the fact that an attorney from Portfolio’s “Litigation Department” had signed the cover letter.

Lemberg said, “The law unequivocally prohibits debt collection agencies from sending official-looking documents that lead consumers to believe that they are being sued; it is quite surprising that the practice persists.” Noting that it would be cumbersome for the 990 consumers affected by Portfolio Recovery Associates’ “Pre-Suit Package” to individually pursue actions against the debt collector, Lemberg applauded the Court’s decision to grant class certification. “We look forward to obtaining money for all of the consumers who were impacted by PRA’s actions.”

This release references Zimmerman v. Portfolio Recovery Associates, LLC (U.S. District Court, Southern District of New York, 1:09-cv-04602-PGG).

Why Debt Collection Agencies Should Stop Whining

Wednesday, May 11th, 2011 at 5:00 am  
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The debt collection industry rakes in big money, yet one hears persistent whining from its trade association. The whining includes a constant stream of complaints about the ways in which the Fair Debt Collection Practices Act and resulting caselaw makes it difficult for debt collectors to do their job. Seemingly, it’s just terribly inconvenient for them to refrain from harassing and abusing consumers. Another ubiquitous strain of whining relates to consumers (and fair debt attorneys) who sue debt collection agencies that violate the FDCPA. Consumers are painted as acting in bad faith, and fair debt attorneys are portrayed as simply evil. You see, it costs so much for debt collection agencies to mount a defense against FDCPA violations. Debt collection industry publications position debt collectors as the victims of pesky government regulations and frivolous lawsuits, both of which make it hard for the poor debt collection agencies to make a buck.

Juxtapose this whining against some publicly traded debt collection agencies’ reported earnings, and a different picture emerges. For example, debt buyer Portfolio Recovery Associates (NASDAQ: PRAA) recently released its first quarter earnings. The company collected a “record” $166.7 million during the first three months of 2011, resulting in a net income of $23.1 million. The company’s collections represented a 40% increase over Q1 in 2010, and its net income a 56% increase in Q1 in 2010. During the first quarter, Portfolio Recovery Associates bought $1.49 billion (yes, billion) worth of debt for the low, low price of $107.9 million. That’s a little less than 8 cents on the dollar. Mind-boggling. Even more so its “productivity” measure, i.e.,. “a record $241 per collector hour paid…as measured by cash collections per collector hour paid. “

It’s time for the debt collection industry to stop whining. They’re clearly laughing all the way to the bank.

Wall Street Journal Sheds Light on Debt Collection Robo-Signing

Thursday, January 6th, 2011 at 2:34 pm  
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robosignLast fall, mortgage lenders came under fire for a practice called “robo-signing,” whereby employees signed thousands of affidavits attesting to the accuracy of financial documentation without truly investigating the documentation. This practice led to lenders foreclosing on people’s homes without the proper documentation – it also led to public outcry.

The Wall Street Journal recently published an article outlining the ways in robo-signing may be more prevalent in the debt collection industry than it is in the mortgage industry. As a case in point, they article highlights Portfolio Recovery Associates, one of the country’s largest debt buyers, and the use of a deceased employee’s name on affidavits that were subsequently used in court to try and win judgments against consumers. One example provided by the article was a July case in which Portfolio Recovery Associates tried to get a court judgment against a woman in Seattle based on an affidavit signed by the employee, who passed away in 1995.

All too often, consumers don’t understand the importance of debt validation, or the role that attestations can play in court cases. That’s why some state attorneys general are investigating the robo-signing practice, and why the Federal Trade Commission urged states to require debt collectors and debt buyers to disclose more information to consumers.

In a subsequent letter to the editors of the Wall Street Journal, Portfolio Recovery Associates said that the affidavits signed by the deceased employee were supplied by the company that sold PRA the debt, and were not generated by Portfolio Recovery Associates.

Portfolio Recovery Associates Rakes in Profits

Tuesday, November 23rd, 2010 at 5:00 am  
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Reuters reported that debt collection agency Portfolio Recovery Associates raked in the profits during the third quarter. The publicly traded company (PRAA), earned $18.8 million profit in the third quarter, much more than the $10.1 million reported during the same period the previous year. The company’s total revenue was $95.5 million, representing a 39 percent increase.

Litigious Debt Buyers Rake in Money from Minnesotans

Friday, August 6th, 2010 at 5:00 am  
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The Minneapolis Star Tribune recently compiled a list of the most litigious debt buyers, who raked in over $223 million in court judgments against Minnesotans from 2005 to 2009. The top ten were: Midland Funding, Dakota Bluff Financial, LVNV Funding, Asset Acceptance, Arrow Financial Services, North Star Capital, Unifund CCR, Palisades Collections, Portfolio Recovery Associates, and Credit Acceptance Corp.

We’ve often noted that taking consumers to court is a favorite tactic of debt buyers. They purchase debt for pennies on the dollar, file lawsuits against unwitting consumers, and then obtain judgments. Consumers often don’t know that they’re being sued, don’t know how to properly defend themselves, or don’t think that it matters since they don’t have any assets. The thing is, once you have a judgment against you, a debt collection agency can pop up at some point in the future and garnish your wages. It’s important to stay alert and to defend yourself if you’re sued by a debt collection agency.

Portfolio Recovery Associates Reaps Record Profits

Thursday, August 5th, 2010 at 5:00 am  
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coins1Portfolio Recovery Associates has been making news. At the end of July, the publicly traded debt collection agency (PRAA) announced its second quarter results, boasting a profit of $19.5 million, or a 67% increase over the same period last year. Portfolio Recovery collected a mind-boggling $128 million in the second quarter, but dig a little deeper, and it becomes clear that the debt collector is following (or leading) an industry trend. Portfolio Recovery’s call center collections increased only 9%, while their internal legal collections grew 167%. In other words, they’re taking consumers to court and getting judgments against them. In the debt collection agency’s operating highlights, it noted, “Internal legal collections…represent an important, emerging collections channel the Company has been developing over the past 4 years.” All too often, unfortunately, consumers aren’t aware they’re being sued by a debt collection agency, and don’t show up to defend themselves, resulting in default judgments. The New York Times and others have noted that debt collection agencies are increasingly using the taxpayer-funded legal system as a debt collection tactic.

In other news, Portfolio Recovery Associates recently hired a slew of attorneys for its Office of General Counsel. The attorneys include those working in corporate counsel, finance and risk management counsel, compliance counsel, disputes, and litigation.

Minnesota Star-Tribune Slams Debt Collection Agencies for Wasting Public Money

Wednesday, June 23rd, 2010 at 5:00 am  
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minnesota2A scathing editorial in the Minnesota Star-Tribune denounces debt collection agencies like Portfolio Recovery Associates that use taxpayer dollars to obtain judgments against consumers and then have them arrested, booked, and jailed over unpaid debts. According to the editorial, 845 arrest warrants were issued in 2009, and the number has increased 60 percent over the past four years.

The editorial calls for a reform to Minnesota laws to conserve taxpayer dollars and protect consumers. It notes that debt collection agencies make big bucks off of collections, and says Portfolio Recovery Associates “netted $44 million on revenues of $281 million last year.” It states the essence of the problem as:

When a consumer doesn’t show up in court, a judge may issue an arrest warrant for failure to appear. At that point courts and cops become debt collectors’ pawns. Law-enforcement agencies would prefer to focus on serious crime; having to serving these warrants is not the best use of officers’ time. Even more questionable is some courts’ practice of setting a debtor’s bail at precisely the amount owed; creditors can then petition for this money. In effect, public servants are doing collectors’ work for them.

Debt Buyers Prey on New Yorkers

Monday, June 7th, 2010 at 5:00 am  
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It isn’t a surprise that a recent study issued jointly by the Legal Aid Society, Neighborhood Economic Development Advocacy Project, MFY Legal Services, and Urban Justice Center found that debt buyers are abusing the legal system to prey on lower-income New Yorkers.

Debt buyers are companies that purchase debt from original creditors who have written off unpaid balances as “uncollectible.” Debt buyers buy this bad debt for pennies on the dollar, and then turn around and put the squeeze on consumers to pay the full amount.

The report explains that publicly traded companies like Asset Acceptance Capital Corp., Asta Funding, Encore Capital Group, and Portfolio Recovery Associates have to reveal more about their practices than private companies, which the study says number around 500. It notes that debt buyers often don’t have the documentation to back up their claims against consumers, saying, “Debt buyers usually receive an electronic file that includes only a person’s name and social security number, last known address, the amount allegedly owed, the charge-off date, and the date and amount of the last payment. The portfolio does not include documentation of the debt, such as the governing contracts and account statements. This information is insufficient to ensure that the debt buyers collect the correct amount from the correct person. Debt portfolios are regularly sold on an ‘as is’ basis, without consideration for whether collection of the debts in the portfolio is legal.”

In New York, debt buyers are filing an unprecedented number of lawsuits against consumers – disproportionately lower-income consumers – without ever providing people with legally mandated notifications. The result? People never know they’re being sued, so they don’t show up for court. When they don’t show up for court, the judge rules in the debt buyers’ favor and people have their wages garnished, their bank accounts cleaned out, and their credit ruined.

The study found that these “default judgments” happen over 94% of the time, and that 95% of those who have default judgments against them live in low or moderate income neighborhoods. Even more outrageous is that only 1% of consumers in New York City who are sued by debt buyers are represented by an attorney.

Reading the study will make your blood boil, but it’s a crucial first step in putting an end to these predatory practices. You can download a copy of the report at Urban Justice Center.

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