A report from ProPublica will start making the rounds this morning, spotlighting the number of lawsuits being filed by debt buyers and debt collectors in the past couple months as the economy and country continue to grapple with the coronavirus pandemic.
The report claims that debt buyers are accounting for more than 25% of all debt collection lawsuits, based on a review of jurisdictions in several states. While most financial institutions and debt buyers stopped filing suits when the pandemic struck the United States in March and courthouses across the country shut down, most of those banks have chosen not to resume filing lawsuits against consumers for unpaid debts yet, unlike the debt buyers.
The report includes comments from representatives of Portfolio Recovery Associates and Encore Capital, mentioning that they are offering hardship programs and are doing their best to work with consumers who have been impact by the COVID-19 crisis.
Using comments from executives of PRA and Encore that were made during their quarterly earnings calls, the report paints a picture of an industry that has “made a fortune this year” and is now “coming for more.”
Looking at filings from some of the major debt buying companies, the report noted that the number of lawsuits filed since August, when courthouses started re-opening, have been higher than the number that were filed in January and February, before the pandemic arrived on U.S. soil.
The report also noted the opposition that companies in the industry have had to state laws seeking to exempt and protect more funds from being garnished from individuals’ wages and/or paychecks.
Much has been made of the number of individuals who used the funds they received as part of the CARES Act stimulus to pay down debt, but a business professor quoted in the article says that might not be the best financial decision for consumers to make, because those debts are not usually accruing interest. Paying down old debts, he said, lessens the safety net that people have to make it through the pandemic.
