A class action lawsuit filed against Nebraska-based debt collector Credit Management Services has been settled out of court for $198,000. The suit was filed by Nichole and Jason Palmer and Laura Powers in 2011, and accused the debt collection agency of having violated federal law by claiming they could collect attorney’s fees and interest from consumers before receiving a judgment in court in their favor, which is exactly what the company did while trying to collect medical bill payments from clients who were in arrears.
The Fair Debt Collection Practices Act is designed to protect consumers against dishonest and seedy debt collectors from having an unfair advantage. By purposely including language that was deceptive, the judge in the case stated it was highly probable average consumers would believe the company had the right to collect such fees before taking it to court, thus intimidating them into submission for fear of ruining their credit, among other potential consequences.
Omaha, Nebraska attorney Pam Car, who represented some of the plaintiffs in the case, said, “Consumers do have rights even though they may or may not owe a debt.” Though the settlement was reached in November of this year, it was officially approved on Tuesday, November 29. According to court documents, each claimant in the case, which totals a whopping 11,552, will receive a proportional share of the $198,000; if any money remains after its distribution, it will be split between the National Association of Consumer Advocates and the National Consumer Law Center for the purpose of helping to provide representation and education regarding the legal rights of consumers.
Though Credit Management Services does not have to publicly admit to any wrongdoing, they have agreed to stop using the complaint forms that contain the confusingly misleading language. In addition to the $198,000, the company has also agreed to pay $315,000 in attorney’s fees as part of the terms of the settlement.
For those involved in the case, it is likely this comes as a relief after having been involved in the legal fight for almost six years. There’s no denying debt collectors can inspire a special kind of fear with their characteristically aggressive scare tactics when in pursuit of money owed, but there is no justification for willfully breaking federal law in an effort to scam consumers who are clearly already facing enough financial stress.