The Consumers Law team recently scored a big win for Pennsylvania consumers against collections giant NCO.  On February 17, 2010, U.S. District Judge Ronald Buckwalter granted final approval of a class action settlement that delivers over $6 million dollars in relief for 2300+ PA consumers. Cary Flitter, Ted Lorenz and Andy Milz were class counsel.

NCO sent Donna Gregory a letter stating that an alleged account it was trying to collect would be submitted to “binding arbitration” if she didn’t pay.  NCO then initiated arbitration proceedings with the now-defunct NAF – former darling of the credit and collections industry – and attained an “award” against Ms. Gregory.  BUT, under the PA Rules of Civil Procedure, a creditor in a consumer transaction may not confirm any arbitration award obtained by default unless it first applies to court to compel an arbitration proceeding (or the consumer participates or waives participation in writing.). Yet, NCO unilaterally went ahead with arbitration against Ms. Gregory and over 2300 PA consumers, obtaining bogus “awards” from NAF, larded with fees and charges.  In 42 instances, NCO even had these faulty awards entered as judgments in state court.  Gregory sued NCO under the FDCPA, claiming that NCO’s collection communication was false, deceptive and misleading and that the collection of these unenforceable arbitration awards was an unfair and unconscionable collection tactic. 15 U.S.C. § 1692e, f.  After two years of contentious litigation, the parties settled.

The settlement of this class action represents an excellent resolution for the Class, involving cash proceeds of $126,500 payable to the class, over $6 million in credits to outstanding balances, and vacatur of nearly a half-million dollars in ill-gotten Common Pleas Court judgments.  The settlement also requires Defendants to pay costs of administration, Class Counsel’s attorney’s fees and costs, and an incentive award to Ms. Gregory for her service as Class Representative.