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Debt-Buying Giant Settles Illegal Collection Charges
A.G. Schneiderman Obtains Settlement With Fourth Debt Buyer Vacating $1.7m In Improperly Obtained Debt-Collection Actions
Asta Funding, Inc. to Vacate Over 300 Judgments Totaling Over $1.7 Million; Reform Practices; Pay $100,000 in Penalties and Costs
Schneiderman: My Office Will Hold Debt Collectors That Prey Upon New York Consumers Accountable
NEW YORK – Attorney General Eric T. Schneiderman today announced that his office has obtained a settlement from debt buyer Asta Funding, Inc. (“Asta”) for bringing improper debt collection actions against hundreds of New York consumers. For years, Asta sued New York consumers and obtained uncontested default judgments against consumers who failed to respond to the lawsuits, even though the underlying claims were untimely under New York law. Under the settlement, Asta will move to vacate more than 300 improperly obtained judgments totaling more than $1.7 million. Asta will also reform its debt collection practices and pay civil penalties and costs in the amount of $100,000.
“Filing lawsuits on debts that have surpassed the statute of limitations is an abuse of the court system and hurts New Yorkers,” said Attorney General Schneiderman. “My office will continue to hold debt collectors and lenders accountable, so that New Yorkers can keep more of their hard-earned money where it belongs – in their pockets.”
Asta is a debt buyer that purchases unpaid consumer debts such as credit card debts from the original creditor or from other debt buyers at deeply discounted prices. Asta’s subsidiaries, which include Palisades Collection, LLC and Palisades Acquisition XVI, LLC, then attempt to collect on the debt.
It is unlawful for a debt collector to bring suit against a consumer when the claims are outside of the applicable statute of limitations. Under New York law, for an action to be timely filed it must be commenced not only within New York’s statute of limitations, but also within the statute of limitations of the state where the cause of action accrued, if other than New York. In debt collection actions, a cause of action accrues where the original creditor resides. For example, while New York’s statute of limitations to collect on a debt is generally six years, if the original creditor was located in Delaware, which has a three-year statute of limitations, the shorter statute of limitations would govern the action.
The Attorney General’s investigation found that despite the clear requirements of New York law, Asta brought debt collection actions that were untimely under the statutes of limitations where the causes of action accrued. Because most consumers fail to respond when they are sued by a debt collector, Asta obtained default judgments in its favor based on these time-barred claims.
In addition to seeking to vacate more than 300 improperly obtained judgments and paying $100,000 in civil penalties and costs, Asta has agreed to several important reforms of its current practices in New York. These include:
- Disclosing in written or oral communications that a debt is outside the statute of limitations and that the company will not sue to collect on the debt.
- Disclosing in written or oral communications that a debt is outside the date for reporting the debt provided for by the federal Fair Credit Reporting Act and that because of the age of the debt the company will not report the debt to any credit reporting agency.
- Alleging certain information relevant to the statute of limitations in any debt collection complaint, such as the name of the original creditor, and the date of the consumer’s last payment on the debt.
In addition to filing time-barred debt collection actions, from 2006 through 2012, contrary to New York law, Asta permitted its employees to sign affidavits outside the presence of a notary and then deliver them to an employee who would notarize the affidavits in bulk. The settlement requires Asta to ensure that affidavits are notarized in a manner consistent with the requirements of New York law, including that the affidavit or other sworn statement is signed in the presence of a licensed notary.
This settlement is a part of the Attorney General’s continuing efforts to combat unlawful and abusive debt collection activity. In May 2014 and January 2015, Attorney General Schneiderman obtained settlements from three major debt buyers, Portfolio Recovery Associates, Sherman Financial Group, and Encore Capital Group, who filed time-barred debt collection cases. Those settlements resulted in the vacature of more than 7,500 improperly obtained judgments estimated at more than $34 million. More information on those settlements is available here and here.
In addition, in September 2014, New York’s Court System adopted a comprehensive set of reforms related to consumer debt collection actions that incorporate many of the recommendations of the Attorney General’s Office. More information on those reforms is available here.
Consumers facing default judgments arising from debt collection actions brought by Asta or its subsidiaries who believe that the default judgment was improperly obtained because the claim was time-barred should contact the Attorney General’s Office within 60 days. Such judgments may be eligible for vacature pursuant to the settlement.
This case was handled by Assistant Attorney General Melissa O’Neill and Bureau Chief Jane M. Azia, both in the Consumer Frauds and Protection Bureau, and Executive Deputy Attorney General of Economic Justice Karla G. Sanchez.