Sued by PRA?
Who is Portfolio Recovery Associates? Why am I receiving a letter, or phone call, or worse yet, a lawsuit from them? Portfolio Recovery is a company that is otherwise known as a junk debt buyer. They buy delinquent credit card accounts from creditors like Citibank, Chase, Capital One, Bank of America, HSBC. When they buy these accounts, they generally buy them for about 2 cents per dollar, and they generally buy large amounts of them, maybe 10,000 or so at a time. This is NOT a small business…Portfolio is so large that they are publicly traded on the New York Stock Exchange.
Is This Legal?
I get asked this question every day. “How is it legal for Portfolio to do this? I didn’t agree to let them buy my case and I have no contract with them.” The truth of the matter is that it is perfectly legal for a company to buy delinquent credit card accounts. A delinquent credit card account is an asset. Any asset can be bought or sold, it’s that simple. My car is an asset, I can sell it to you. My house is an asset, I can sell that to you. A delinquent credit card account is also an asset, and a bank can sell it to you. Absolutely very legal, no question about it.
Why would someone buy a delinquent credit card account? To make money, of course. When Portfolio Recovery buys these accounts, they buy very large groupings of accounts for a very small price. They might buy $100 million dollars of accounts for $2 million dollars. That’s a large investment, for sure, but imagine if they collect on 20% of those accounts… or 30%… or 40%… That is quite a profit, don’t you agree? Portfolio takes a risk every time it buys these delinquent accounts because it is literally buying “junk”. A delinquent account has almost zero value, as you can see from the sale price. After making the purchase though, Portfolio then gets to “kind of” treat the account as its own. They can start collecting by making phone calls, sending letters, or filing lawsuits. A lawsuit is a powerful weapon. It scares people into paying. Couple that with threats of bank account garnishment, sheriff sales of personal property, and PRA has alot of power when pursuing these matters.
So What Do I Do if Portfolio Contacts Me?
Well, you’re here reading this so I assume that you are smart enough to contact a consumer attorney. What you do next is based upon your individual claim. The way that I see it, you have three (3) options.
- Put your head in the sand and do absolutely nothing (Hint: This is ALWAYS the wrong choice)
- Settle, (Hint:This is USUALLY the wrong choice)
- Defend the case. (Hint:You guessed it, this is THE right choice in most circumstances)
Let’s Walk Through These Choices One At A Time
1. Put Your Head In The Sand
This choice is made by probably 50% of the people who are contacted by Portfolio. They are either too embarrassed to talk to anyone, to lazy to seek help, or they are oblivious to the concept of what a lawsuit is. If you put your head in the sand, Portfolio Recovery will obtain a judgment against you for the full amount of the claim, plus costs, and in some cases, plus attorney fees. At some point, this will end up haunting you. It might be sooner than you think if they execute on your assets or garnish your bank account. It might be later, when you try to sell your home or try to refinance, or, try to purchase a vehicle. Judgments stick around for quite a long time… something near eternity… but having said that, you are reading this so you won’t fall into this category.
2. Settle the Case
Settling is an option here in certain circumstances. Some people do not have the stomach to defend a case and that is OK. Some people need to clear their credit report very quickly, and that is also OK. Sometimes, the case is too small to make it cost effective to defend. This can happen under several circumstances, usually for cases that are under $800 or so. It can also happen if you are in a location where there are no consumer attorneys near you…. thus, requiring you to pay more for a far away consumer attorney to assist you.
In my experience, Portfolio is usually very cordial to deal with, especially when I am dealing with their in house attorneys. There is a mutual respect between my firm and the Portfolio attorneys, so we usually can work a good deal when the circumstances fit. Settling is definitely an option for some people
3. Defend the Case
Now we can talk about my passion. Defending debt buyer cases… I LOVE IT! Debt buyer lawsuits, like the ones filed by Portfolio, are always defective. What does defective mean? It means that they are lacking in the basic essentials…they simply don’t have the goods to prove a case. Their documents are lacking, insufficient, and sometimes non-existent. The courts have determined that there is a minimum amount of documentation that the Plaintiff (the one doing the suing) must provide in order to move forward on a case. This can include contracts, terms and conditions, monthly statements, assignments, bills of sale… and Portfolio often does not have the totality of the documents that they need. In this scenario, the proper response to the lawsuit is to file Preliminary Objections. These Objections are a way of telling the Court… hey, this lawsuit is defective, make them fix it! The court will almost certainly agree with this position and will force PRA to produce additional docs. If they cannot produce them, case over. If they do produce some of them, well, file the objections again. These Preliminary Objections are only applicable in cases that are filed in the Court of Common Pleas of your county. If the claim is filed at your local District Justice, then there are no written objections or motions court…. it’s simply a matter of having a consumer attorney show up and defend the case using the same principles that apply to Preliminary Objections. In other words, really make them prove every last detail regarding the case. As always, we offer a free, no obligation phone consultation on Portfolio Recovery Associates lawsuits.