Washington AG Ferguson sues debt collection agency for deceptive collection letters on old, legally unenforceable debts
(STL.News) – Attorney General Bob Ferguson has filed a consumer protection lawsuit against national debt collection firm Convergent Outsourcing for pushing consumers to “settlements” to resolve old debts that had exceeded the statute of limitations for legal action. These “settlement” offers gave the misleading impression that Convergent could sue consumers when it couldn’t, and implied that Convergent was prepared to sue consumers if they didn’t pay.
Convergent is a Renton-based collection agency with approximately 700 employees and $ 80 million in annual revenue. Convergent collected from accounts at large corporations across the country, including Verizon and PayPal, as well as debt buyers like Palisades Collection, Galaxy Asset Purchasing, and Pinnacle Credit Services.
Ferguson’s lawsuit, filed in King County Superior Court, claims Convergent violated consumer protection law and collection agencies law when it sent out 75,466 letters of “offer to settle” misleading to consumers in Washington. In response to these letters, 3,292 Washington consumers made payments to Convergent on these old debts. In Washington, the limitation period for debt collection lawsuits is six years from the date of default or the last payment on the debt account. None of the letters disclosed that the debts had exceeded the statute of limitations.
“Collection companies cannot use deception as a way to get around the law,” Ferguson said. “I intend to hold this large, sophisticated debt collection firm accountable for its illegal conduct that puts profits above the law.”
Convergent’s Misleading Collection Letters and Implied Legal Threats
From January 2013 to February 2015, Convergent sent letters to consumers offering to “settle” old debts within a limited time frame, even if the debt had passed the statute of limitations.
Debt collectors cannot sue consumers for debts that have exceeded the statute of limitations. In Washington, the limitation period for debt collection lawsuits is six years from the date of default or the last payment on the debt account. Once a debt has passed the statute of limitations, debt collectors can still attempt to collect those debts, but they cannot take legal action.
The term “settlement” is commonly used to refer to an agreement to avoid or resolve legal action. Convergent’s letters to consumers included a detailed headline titled “Offer to Settle”, telling customers that “full settlement must be received at our office by an agreed date” and “call our office” within a set number of days in response. to the letter . The exact due date varied from letter to letter – some only gave consumers 14 days to respond.
This language carried an implicit threat that consumers could be sued if they did not pay, even if it was not legally possible for Convergent to sue for debt collection on these old debts. The letters created the misleading impression that consumers could be sued to collect debts when they couldn’t, and added a false sense of urgency for consumers to respond.
The attorney general’s office has so far obtained three of the “settlement offer” letters Convergent sent to consumers in Washington. All three letters asked consumers to pay an average “settlement” amount of $ 300.
Ferguson’s lawsuit claims these unfair and deceptive collection letters violated Washington’s consumer protection law.
Under the Washington Collection Agency Act, a collection agency in Washington cannot threaten any action that the agency cannot legally take against a debtor. Convergent violated this law by making implicit threats to sue consumers for legally unenforceable debts. These violations of the Collection Agencies Act are also violations of the Consumer Protection Act.
Ferguson’s lawsuit asks court to order Convergent to return to consumers in Washington and across the country all of the income it received on prescribed debts after sending out the “settlement offer” letters. “. The exact amount will be determined as the trial continues and may vary slightly from consumer to consumer depending on the terms of Convergent’s contracts with its collection customers, but could reach 35% of the total amount paid. by the consumer. The state estimates that Convergent has earned hundreds of thousands of dollars in collection costs on these debts prescribed in Washington. The Attorney General’s office will continue to explore options to return consumers the full amount they paid to Convergent.
In September 2016, a panel of federal judges from the United States Court of Appeals for the Fifth Circuit ruled in another case – a consumer lawsuit against Convergent – that these letters from Convergent could mislead a consumer mistaken by making him believe that he could be sued on the debt and deceive the consumer.
The judges ruling states: “While it is not automatically illegal for a debt collector to demand payment of a prescribed debt, a collection letter violates the law. [Fair Debt Collection Practices Act] when his statements could mislead an uninformed consumer into believing that his prescribed debt is legally enforceable, whether or not a dispute is threatened.
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