Collection agency Persolve LLC settled a lawsuit brought by the Kern County (Calif.) District Attorney’s office that accused it of violating state and federal laws. The settlement means more than $600,000 in consumer debt will be forgiven. Persolve, which did not admit any wrongdoing, also must pay $50,691 in penalties.

More than 250 Kern County residents were sued by Persolve in cases where the company allegedly could not prove ownership of the underlying contracts, prosecutors said. Persolve, based in Chatsworth, Calif., buys defaulted debt and then attempts to collect by sending letters to debtors.

In court filings, prosecutors said the collection letters illegally threatened post-judgment remedies to which Persolve is not entitled, forcing "debtors to forego statutory rights and [failing] to make the full disclosures required by [California’s] Rosenthal Act and the Fair Debt Collection Practices Act.” 

Persolve then filed lawsuits if debtors failed to immediately pay the debt, according to the lawsuit.

Persolve allegedly failed to inform debtors of the amount necessary to settle the debts. Instead, the company allegedly told debtors they owed a specific amount plus an unspecified amount of interest.

The company also gave conflicting timeframes of 30 days and 10 days for the debtors to respond, prosecutors said. The agency further filed documents in Kern County Superior Court that included debtors’ unredacted Social Security numbers and other personal financial information, according to the complaint. 

"Through this settlement our office was able to obtain relief for the debtors and to assist them in clearing up their credit with the credit reporting agencies," Deputy District Attorney John Mitchell said. "That should help them receive lower interest rates the next tim that they try to get a loan for a car, or a mortgage.”

Andrew Steinheimer, the attorney representing Persolve, has declined comment on the ruling. 

The case was filed in 2010 but was delayed for years after a trial court granted a motion for summary judgment. The agency won a dismissal of the suit after invoking "litigation privilege” - arguing it was barred from legal action because the collection communication related to anticipated litigation.

California's Fifth Appellate District Court in Fresno, Calif. ruled in August 2013 that litigation privilege is "not without limit” and the lawsuit could proceed. The panel said that the district attorney's action "borrowed' banned practices from the FDCPA and Rosenthal Act, writing:

Where, as here, the "borrowed" statute is more specific than the litigation privilege and the two are irreconcilable, unfair competition law claims based on conduct specifically prohibited by the borrowed statute are excepted from the litigation privilege…Accordingly, the People’s unfair competition law claims that are based on conduct that is specifically prohibited by the [Rosenthal] Act and/or the [FDCPA] are not barred by the litigation privilege.


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