Washington AG Ferguson sues debt collection agency for deceptive collection letters over old, legally unenforceable debts
(STL.News) – Attorney General Bob Ferguson filed a consumer protection lawsuit against the national debt collection corporation Convergent Outsourcing for pushing consumers into “settlements” to resolve old debts that were past the statute of limitations for a collection lawsuit. These “settlement” offers created a deceptive impression that Convergent could sue consumers when it could not, and implied Convergent was prepared to sue consumers if they did not pay.
Convergent is a Renton-based collection agency with approximately 700 employees and $80 million in annual revenues. Convergent collected on accounts of major corporations around the country, including Verizon and PayPal, as well as debt buyers including Palisades Collection, Galaxy Asset Purchasing and Pinnacle Credit Services.
Ferguson’s lawsuit, filed in King County Superior Court, asserts that Convergent violated the Consumer Protection Act and the Collection Agency Act when it sent 75,466 deceptive “settlement offer” letters to Washington consumers. In response to these letters, 3,292 Washington consumers made payments to Convergent on these old debts. In Washington, the statute of limitations on debt collection lawsuits is six years after the date of default or last payment on the debt account. None of the letters disclosed that the debts were past the statute of limitations.
“Debt collection companies cannot use deception as a means to get around the law,” Ferguson said. “I intend to hold this large, sophisticated debt collection corporation accountable for its unlawful conduct putting profits above the law.”
Convergent’s deceptive 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 amount of time, even though the debt was past the statute of limitations.
Debt collectors cannot sue consumers over debt that is past the statute of limitations. In Washington, the statute of limitations on debt collection lawsuits is six years after the date of default or last payment on the debt account. Once a debt is past the statute of limitations, debt collectors can still attempt to collect on these debts, but they cannot file a collection lawsuit.
The term “settlement” is commonly used to refer to an agreement to avoid or resolve a lawsuit. Convergent’s letters to consumers included an outlined heading of “Settlement Offer,” telling customers that “the full settlement must be received in our office by an agreed upon date” and to “call our office” within a fixed number of days in response to the letter . The exact due date varied from letter to letter — some gave consumers only 14 days to respond.
This language conveyed an implied threat that consumers could be sued if they did not pay, even though it was not legally possible for Convergent to file debt collection lawsuits over these old debts. The letters created the deceptive impression that consumers could be sued to collect the debts when they could not, 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 Washington consumers. These three letters asked consumers to pay an average “settlement” amount of $300.
Ferguson’s lawsuit asserts that these unfair and deceptive collection letters violated the Washington Consumer Protection Act.
Under Washington’s Collection Agency Act, a collection agency in Washington cannot threaten any action the agency cannot legally take against a debtor. Convergent violated this law when it made implied threats to sue consumers over legally unenforceable debts. These Collection Agency Act violations are also violations of the Consumer Protection Act.
Ferguson’s lawsuit asks the court to order Convergent to return to consumers, in Washington and nationwide, all revenue it collected on time-barred debts after sending the “settlement offer” collection letters. The exact amount will be determined as the lawsuit continues, and may vary slightly from consumer to consumer depending on the terms of Convergent’s contracts with its collection clients, but could be as much as 35 percent of the total amount the consumer paid. The state estimates that Convergent made hundreds of thousands in collection fees from these time-barred debts in Washington. The Attorney General’s Office will continue to investigate options for returning to consumers the entire amount they paid to Convergent.
In September 2016, a panel of federal judges in the U.S. Court of Appeals for the Fifth Circuit ruled in another case — an individual consumer’s lawsuit against Convergent — that these letters from Convergent could mislead a consumer into believing he or she could be sued on the debt and deceive the consumer.
The judges’ ruling states, “While it is not automatically unlawful for a debt collector to seek payment of a time-barred debt, a collection letter violates the [Fair Debt Collection Practices Act] when its statements could mislead an unsophisticated consumer to believe that her time-barred debt is legally enforceable, regardless of whether litigation is threatened.”