Debt buyer Portfolio Recovery Associates (PRA) is the defendant in a class-action lawsuit filed by Atlanta-based law firm Webb, Klase & Lemond LLC. The case alleges that Norfolk, Va.-based PRA improperly subjected consumers to arbitration with National Arbitration Forum Inc. (NAF), a service it knew was biased in favor of creditors.
According to the lawsuit, an unidentified consumer named as the plaintiff, fell behind on his account with credit card company MBNA Corp. PRA then bought the debt and filed an arbitration claim with NAF. The NAF arbitrator awarded PRA an amount that was much greater than the plaintiff's true debt.
The complaint alleges that PRA misrepresents to consumers that NAF is an unbiased, neutral entity that will give them a fair hearing. PRA, according to the suit, is aware that NAF is beholden to creditors and renders decisions against consumers in close to 100% of all cases.
Despite knowing this, PRA accepted NAF judgments and moved to enforce them in various courts, according to the lawsuit. According to Collections & Credit Risk, the Minnesota Attorney General recently sued NAF based on its improper practices and NAF agreed never to arbitrate consumer matters again. NAF's settlement with the AG's office, however, does not void any arbitrations that already have occurred.
The plaintiff specifically brought claims for unconscionability, breach of contract, violation of the Fair Debt Collection Practices Act, negligent misrepresentation and contravention of public policy. The case, titled Barkwell v. Portfolio Recovery Associates, was brought in the Superior Court of Muscogee County in Columbus, Ga. but moved to the U.S. District Court for the Middle District of Georgia.
PRA officials did not immediately return calls for comment on the lawsuit. According to Collections & Credit Risk's 2009 industry rankings research, PRA reported $260 million in revenue from purchased debt, making it the sixth-largest U.S. debt buyer.
