Two debt-collection companies will pay a total of $1 million to Maryland to settle claims they violated federal and state laws requiring licensure and prohibiting the submission of false or misleading claims or affidavits in court.
LVNV Funding LLC and Resurgent Capital Services LP also agreed to dismiss, without prejudice, 3,564 cases pending in Maryland District Court with balances estimated at more than $7.77 million.
In addition, $3.8 million in credit will be applied to the accounts of 6,246 consumers whose cases have been adjudicated or settled, under the agreement reached with the Maryland State Collection Agency Licensing Board and announced Monday. The credits represent pre-judgment or pre-settlement interest charges and attorneys’ fees claimed by the companies.
Based in South Carolina, LVNV is in the business of acquiring consumer claims in default. Resurgent services the consumer claims owned by LVNV and similar businesses. Both are part of Sherman Financial Group LLC.
The board alleged that Resurgent had submitted affidavits for LVNV stating they were based on “personal knowledge” of the consumers’ underlying debt, when in fact the companies did not have such knowledge. The companies knowingly submitted the false affidavits with the intention of deceiving the court and consumers, the board claimed.
The two companies expressly denied any liability or wrongdoing in agreeing to the settlement with the board, a division of the Maryland Department of Labor, Licensing and Regulation.
Ensuring that debt collectors comply with state licensure and consumer protection regulations is a priority of the board, said Maryland Commissioner of Financial Regulation Mark A. Kaufman.
Claims filed by debt collectors are “part of what the board believes it needs to be aware of and monitoring,” he added.
Resurgent Executive Vice President Tom Thurmond said in a statement that the Greenville, S.C.-based company is “pleased that we have been able to reach such a positive and amicable resolution of all outstanding issues” with DLLR.
“We are committed to working proactively with all regulators in a manner that reflects our dedicated concern for consumer protection and our commitment to ethical corporate behavior,” Thurmond added.
The settlement followed Maryland Chief District Court Judge Ben C. Clyburn’s Oct. 26 order staying all pending LVNV and Resurgent claims pending resolution of the board’s claims.
If the companies choose to refile any of the 3,546 dismissed cases, they will have to comply with stricter procedural safeguards that went into effect Jan. 1 to protect consumers, according to counsel for the board.
Those rules, which the Court of Appeals approved, require companies that purchase debt to provide Maryland courts with documentation that they are legally entitled to the money they seek.
The licensing board argued for the rule, citing cases in which claims had been accepted by courts based on documents that merely stated an alleged debtor’s liability, including the amount of the claim and the interest owed.
The new, stricter rules require debt collectors to submit to the district court documentation detailing that they are the true owners of the debt and that the debt, which must be itemized, is in fact owed to the company.
“These are complex cases legally and there is a lot of work involved both from an investigative standpoint and a legal standpoint,” said Assistant Maryland Attorney General W. Thomas Lawrie, who represents the licensing board.
The settlement announced Monday follows an out-of-court settlement LVNV reached in September with a class of 3,500 Maryland residents who alleged in U.S. District Court in Baltimore that the company collected debts while it was not properly licensed in Maryland. Under the terms of that settlement, LVNV agreed to dismiss its claims against the plaintiffs with prejudice — meaning they cannot be refilled — at an average cost to the company of about $2,800 per claim.
Monday’s settlement is also similar to the $1 million out-of-court agreement the licensing board reached in December 2009 with the Midland family of debt-collection companies. Midland agreed to pay the state $1 million, get properly licensed and follow all collection laws.
Midland’s troubles led to the demise of its debt collection law firm Mann Bracken LLP.