NC Justice Center secures major benefits for North Carolina consumers in settlement of class action against debt-buyer Portfolio Recovery Associates

RALEIGH (July 18, 2024) – In June, the North Carolina Justice Center received final court approval for a proposed $5.75 million settlement of a class action brought against one of the nation’s largest debt buyers, Portfolio Recovery Associations (PRA). The suit, filed in 2016, alleged that PRA violated North Carolina debt collection law by obtaining default judgments against North Carolina debtors without filing sufficient evidence to substantiate the debts claimed to be owed. The settlement requires PRA to pay $5.75 million into a settlement fund for the benefit of more than 18,000 class members, stop all efforts to collect on the debts, and file cancellations of default judgments constituting approximately $35 million of judgment debt against class members. 

On June 12, NC Justice Center attorneys Jason Pikler and Carlene McNulty appeared in court to argue in favor of the settlement. Durham County Superior Court Judge Michael O’Foghludha approved the settlement, concluding that it was fair, adequate, and reasonable. In granting final approval, Judge O’Foghludha recognized the quality of the representation provided to the class by the NC Justice Center and its co-counsel.  

The approved settlement involves substantial benefits for class members and will help mitigate the financial consequences suffered by those who were victims of PRA’s unlawfully obtained default judgments and resulting collection efforts.  

“Debt buyers purchase old debts for pennies on the dollar and then seek to collect the full amount of the debt,” said Jason Pikler, Senior Attorney at the NC Justice Center. “Debt buyers then bring lawsuits to collect on these worthless debts, which commonly result in a default judgment being entered against the debtor. These default judgments are incredibly harmful to consumers, as they can result in the seizure of the debtor’s bank account or vehicle and encumber the debtor’s property.” 

The settlement also marks a major vindication of North Carolina’s consumer protections. 

“In 2009, our state legislature enacted first-in-the-nation laws that restrict the way that debt buyers can obtain default judgments and otherwise engage in collection activity in North Carolina,” said Carlene McNulty, Director of Litigation at the NC Justice Center. “We brought this lawsuit to enforce those statutes, and the resulting settlement is a testament to the importance and impact of North Carolina’s consumer protection laws.” 

For plaintiffs in the case, the settlement is especially impactful.  

“We not only achieved a favorable outcome but also regained a sense of hope and justice,” said Iris Pounds, a plaintiff. “This victory means so much to me and will significantly improve my life and the lives of countless others affected by PRA’s predatory actions.” 

In addition to McNulty and Pikler, attorneys Jerry Hartzell, Travis Collum, and Adrian Lapas supported the case. 

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