Debt Collector Can’t Nix Class Over License Issue

CHICAGO (CN) - A federal judge certified a class action against a collection agency that allegedly operated in Illinois without a license.

Rocio Galvan and Joseph Hawthorne sued NCO Portfolio Management and NCO Financial Systems for collecting debts in Illinois without a license. They claim that NCO Financial is "one of the largest collection agencies in the world."

NCO Portfolio purchases debts owed by individuals, and then NCO Financial collects the funds. Specifically, NCO Financial collected a debt Galvan owed to AT&T Universal, and a debt Hawthorne owed to Citibank.

NCO Financial allegedly filed more than 1,000 consumer debt-collection lawsuits between 2007 and 2008 in Cook County Court alone.

But the plaintiffs claim that NCO Portfolio was not licensed as a debt collector in Illinois, and therefore has no legal rights to the payments it collected.

U.S. District Judge Matthew Kennelly found that the case hinged on a common question, and certified a class of Illinois residents from whom NCO collected a debt between June 2006 and June 2011.

"NCO Portfolio, which was unlicensed, purchased debts and obtained payments on those debts through NCO Financial or by filing its own suits to collect on the debts," he wrote. "The crux of the case involves a determination of whether this was legal or illegal under the ICAA [Illinois Collection Agency Act]. This is the epitome of a common question, the answer to which will enable determination of the case."

Before the Illinois Collection Agency Act was amended in 2008, the statute did not expressly state whether a debt buyer was a collection agency that had to be licensed.

"Though there is no question that this is a legal issue that the Court will have to determine, it involves a binary choice - either the pre-amendment ICAA applied to debt buyers like NCO Portfolio, or it didn't," Kennelly wrote.

"In short, this is a common issue, not an individual one," he added.

Finding that many of the debts in question are too old to be collected under the statute of limitations, Kennelly also disagreed that the lawsuit cannot help those who owe a debt to the original creditor.

"There is a very good chance that plaintiffs are right on their argument about staleness, and if so, the possibility of debt resurrection likely would apply only to a very small number of class members," Kennelly wrote.

"In any event, the possibility of future litigation by non-parties (creditors or other debt collectors) against some class members has nothing to do with the superiority of a class action for resolving the parties' current dispute," he added (parenthesis in original).

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