Debt buyer Asta Funding agreed Wednesday to settle charges brought by New York regulators for allegedly pursuing improper debt collection tactics against hundreds of consumers in the state.
The company will vacate more than 300 judgments totaling more than $1.7 million as part of the settlement with New York Attorney General Eric T. Schneidermans office. It also agreed to reform its collection practices and pay civil penalties and costs totaling $100,000.
According to New York regulators, Asta Funding for several years has sued consumers in the state and obtained uncontested default judgments against people who failed to respond to the lawsuits, even though the underlying claims were untimely under New York law.
Among the practices Englewood Cliffs, N.J.-based Asta Funding agreed to change:
Disclosing in written or oral communications that a debt is outside the statute of limitations and that the company will not sue to collect on the debt.
Disclosing in written or oral communications that a debt is outside the date for reporting the debt provided for by the federal Fair Credit Reporting Act and that because of the age of the debt the company will not report the debt to any credit reporting agency.
- Alleging certain information relevant to the statute of limitations in any debt collection complaint, such as the name of the original creditor, and the date of the consumers last payment on the debt.
Asta Funding buys unpaid consumer debts such as credit card debts from original creditors and other debt buyers. The company's subsidiaries, which include Palisades Collection LLC and Palisades Acquisition XVI LLC, then attempt to collect on the debt.
Schneidermans office alleged that in addition to filing time-barred collection actions, from 2006 through 2012, Asta Funding allowed employees to illegally sign affidavits outside the presence of a notary and then deliver them to an employee who would notarize the affidavits in bulk. The settlement requires the company to ensure affidavits or other sworn statements are signed in the presence of a licensed notary.The state's investigation specifically found that Asta Funding unlawfully brought collection actions that were outside the statutes of limitations. Because most consumers fail to respond when they are sued by a debt collector, Asta Funding obtained default judgments in its favor based on these time-barred claims.
Asta Funding officials were not immediately available for comment. The company at press time also had not issued a formal statement.
It's illegal for collection agencies to bring lawsuits against people when the claims are outside of the applicable statute of limitations. Under New York law, an action must be filed not only within New Yorks statute of limitations but also within the statute of limitations of the state where the cause of action accrued. For example, while New Yorks statute is generally six years, if the original creditor is in Delaware, which has a three-year statute, the shorter statute would apply.