LVNV Funding LLC, a Greenville, S.C.-based debt buyer, has settled a lawsuit in Maryland's federal court that involved the firm's license status in the state. The company agreed to erase an estimated $10 million in consumer debt for some 3,500 plaintiffs.
Jason Hauk and Freddy Velazquez, both of Frederick, Md., had filed the class-action case against LVNV Funding, an agency that buys consumer debt from companies and sues debtors to collect payment.
Hauk, who owed more than $7,600, and Velazquez, who owed more than $1,000, could not be reached for comment. The two men will receive a payment of $2,000 each under the settlement.
The lawsuit accused LVNV of "systematic, intentional, and predatory debt collection activities" against its Maryland debtors. The case hinged on the right of LVNV to sue debtors in state court.
LVNV did not admit any wrongdoing in the settlement and, in fact, believes it was properly licensed in the state. Company officials said the firm chose to settle rather than face the potential of prolonged litigation.
As part of the settlement, LVNV will not pursue the debts it tried to collect in state court against the 3,500 people while it was unlicensed. The agency also can not sell those accounts to other collection firms. LVNV also must delete information it gave to the major credit bureaus for each of those debtors, a move designed to help improve their credit ratings, according to the settlement.
Attorneys representing the plaintiffs will receive $150,000 from LVNV to cover their fees.
The settlement follows a similar one in March, in which 10,000 debt collection cases were dropped in Maryland by a different agency.
An industry analysis by Price Waterhouse Cooper found that the debt recovered in 2007 by collection agencies totaled $58 billion — with more than $40 billion returned to the original creditors.
