Debt Buyers’ Lawsuit Assembly Lines Should Be Dismantled for Lack of Appropriate Documentation of Debt

Raleigh, NC – Yesterday, the North Carolina Supreme Court heard oral arguments in the case of Townes v. Portfolio Recovery Associates (PRA), for which the Center for Responsible Lending (CRL) and several other organizations submitted an amicus brief. The brief urges North Carolina courts to enforce existing statutory protections — and interpret laws as they were written — to prevent harm to vulnerable consumers. The NC Attorney General also submitted a brief in support of Townes.

The case was brought against PRA by Pia Townes, who alleged that PRA violated North Carolina’s Consumer Economic Protection Act (CEPA) when it obtained a default judgment against her with only partial information to substantiate its claims. The NC Supreme Court could render a decision that holds debt buyers accountable for providing ample and accurate evidence of the debt owed before collecting through a lawsuit assembly line.

In the hearing, PRA argued that a charge-off balance speaks for itself and needs no further explanation. But the statute requires reasonable verification of the debt owed, including itemized accounting of fees and charges owed.

NC Justice Center attorney Jason Pikler explained that federal investigations into the debt buyer industry led to a recommendation to require more documentation from debt buyers, which led North Carolina to enshrine that requirement into law.

“The debt collection industry is a $15 billion industry in the U.S. These debt buyer Goliaths have a huge advantage when working the court system against the consumers they can sue… whether or not they have proper documentation of the debt owed,” said Nadine Chabrier, senior policy and litigation counsel at CRL. “That is why North Carolina’s Consumer Economic Protection Act is so very necessary, and it must be enforced to give consumers a fair chance. This case is about much more than interpreting a statute, it’s about protecting consumers.”

Debt buyers use the US court system to bring tens of thousands of cases against consumers, in many cases, gaining default judgments when the consumer doesn’t respond to the suit, often because they lack resources for hiring counsel or missing work, or lack the information they need to navigate the court system. So, debt buyers easily obtain default judgments without any substantive court review of the evidence or claims. Studies have shown that more than 70 percent of debt cases end in default judgments, and courts and judges enter default judgments as a matter of course.

The North Carolina Supreme Court is expected to render a decision on the case by year's end.

Oral arguments were livestreamed here: Supreme Court of North Carolina 66PA21 Townes v Portfolio Recovery Associates, LLC

For background, read this piece by Nadine Chabrier, CRL Senior Policy and Litigation Counsel: Courts Should End Debt Buyers’ Litigation Assembly Line Lawsuits That Target Unaware Consumers and Increase the Racial Wealth Gap

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Press Contact: Carol Parish carol.parish@responsiblelending.org