Missouri Attorney General Blindsides Two Debt Collection Firms with Lawsuits

Missouri Attorney General Chris Koster announced Tuesday that he has filed lawsuits against two accounts receivable management companies working accounts in his state that he claimed were “operating scams.” But the two companies tell insideARM that they had no idea the suits were coming and were totally blindsided by the announcement.

Koster’s office issued a press release Tuesday announcing a lawsuit against Portfolio Recovery Associates (PRA), the publicly traded debt buyer located in Norfolk, Va., and collection agency Professional Debt Management (PDM), based in Kansas City. The two companies are not related and the suits are separate.

The Attorney General said in his release that the companies “are operating scams to collect debts from citizens who do not owe the money.”

He alleges that both companies attempted to collect on debts that were paid off or discharged in bankruptcy. Koster also accused the firms of using illegal collection tactics, such as threatening to garnish Social Security wages or scaring debtors into calling back by claiming there is an emergency.

Judy Scott, EVP and General Counsel at Portfolio Recovery, told insideARM that her company found out about the lawsuit from reporters. “We were quite surprised to hear from reporters that we were the subject of a lawsuit,” said Scott. “We were not served and given no advance notice.”

Scott noted that she thought PRA enjoyed a “fairly positive relationship” with the Missouri Attorney General. She could not comment directly on the lawsuit, as the company had not yet had a chance to read it. But she did say that the statements made in Koster’s press release did not reflect PRA’s business practices and that the company believes it complies fully with Missouri law.

When contacted by insideARM, PDM told a very similar story. A person speaking on the condition of anonymity said that the company likewise had not been served and had not read the lawsuit. The person was “shocked and disturbed” to learn that the company was the subject of a lawsuit.

Koster’s announcement was very short on specific allegations and investigation findings. The announcement said that the office was “asking that the court impose monetary penalties and require the companies to pay all court costs,” but did not indicate how many consumers were impacted.

Nanci Gonder, press secretary in the AG’s office, told insideARM that their office received 37 consumer complaints against PRA and 21 against PDM, and that "these complaints would have prompted our investigation and eventual suit."