A debt buyer and collector has taken the unusual step of suing a creditor for allegedly selling hundreds of millions of dollars in accounts that it knew had issues that made the debts uncollectible.
The suit was filed earlier this week in a Georgia state court by Turtle Creek Assets against Aaron’s, a rent-to-own retail giant.
Among the allegations made by TCA are that Aaron’s sold accounts even though it knew that the customers were victims of identity theft, had filed for bankruptcy protection, or where the accounts had already been settled or the merchandise returned.
Aaron’s has previously disclosed it was being investigated by the Federal Trade Commission for possible issues related to its sales of delinquent or defaulted customer accounts and had made changes to how it sold portfolios going forward, and was waiting on the FTC to approve the agreement, according to a published report.
Gordon Engle, the owner of TCA, said his company has purchased more than $500 million of receivables from Aaron’s between 2010 and 2017. Engle had been re-selling the accounts to other collectors until Aaron’s changed the terms of their agreements to prohibit the accounts from being re-sold. Engle said TCA began collecting on the accounts itself, which is when it started noticing problems with some of the accounts.
“During the past 10 years, TCA has bought hundreds of millions of dollars face amount of accounts from Aaron’s relating to hundreds of thousands of customers of Aaron’s,” said Gordon Engle, president and CEO of Turtle Creek Assets, Ltd., in a statement. “We bought these accounts with the express understanding that these were valid accounts with true amounts owing, and that they represented only instances in which the customer had not settled his account and the merchandise had not been returned.”
“As our staff began client actions on accounts, we were distressed to learn that many of the individuals had previously settled with Aaron’s, returned the merchandise, had never signed lease agreements with Aaron’s or were not even Aaron’s customers. In fact, there were numerous instances where no valid paperwork existed or perhaps never had. The breadth of the tainted accounts is so pervasive that it threatens to render the entire portfolio uncollectible.”
Aaron’s allegedly initiated criminal proceedings in more than 20,000 of the accounts that it sold to TCA, Engle said in a press release
