18 counties get $9M settlement from big debt collection company

In what prosecutors believe to be the largest settlement of its kind, a Los Angeles County judge approved a $9 million settlement Tuesday in a civil suit by 18 counties against one of the world's largest third-party debt collection companies, which was accused of engaging in illegal phone-calling and debt collecting practices.

After the 10th similar law enforcement action was filed against the debt collector in a little over 10 years and numerous consumer complaints were lodged, district attorney's offices in Riverside, Los Angeles, San Diego, and Santa Clara counties jointly filed a civil complaint in 2016 seeking $10 million in damages, said Hoon Chun, assistant head deputy of the consumer protection division of the Los Angeles district attorney's office.

Fourteen other counties later joined the suit.

The complaint alleged Allied Interstate LLC and its parent company iQor Holdings Inc. violated state and federal laws, regarding debt collection phone calling practices by "excessively calling consumers, making calls at an unreasonable frequency that could constitute harassment." People v. iQor Holdins Inc. et al., BC633831 (L.A. Super. Ct. filed Sept. 14, 2016).

Judge Barbara M. Scheper ordered iQor to pay the Riverside County district attorney's office $8 million in civil penalties to be divided and distributed among other counties involved in the suit.

The Riverside County district attorney's office will receive an additional $1.6 million in penalties and $150,000 in costs as well to reimburse prosecutors for costs associated with a-year-and-half investigation that preceded the complaint.

"In a case this large (multiple corporate defendants) that involves multiple years of litigation, costs can add up quickly," said an email from Riverside County District Attorney Mike Hestrin's office. "These were imposed because the people believed it unfair for taxpayers to bear the costs of addressing these continuing violations by Allied."

"Prior state lawsuits typically did not involve the significant volume of consumer violations that were discovered in this case," the Riverside DA's office said. "However, most of those enforcement actions resulted in relatively minor penalties with the exception of the Federal Trade Commission, which imposed a $1.75 million fine in 2011."

Chun, in the LA County DA's office, said, "In this case, the primary goal was compliance. Even the $1.75 million did not seem to do an adequate job. We had to impose a penalty that would ensure compliance."

Allegedly, Allied debt-collecting agents at call centers around the world repeatedly called debtors hundreds of times, called wrong numbers even after being advised they had reached the wrong number and used robo-dialers to call consumers' cell phones without their consent, according to the complaint.

"California law protects all consumers, even those who are behind in their payments, from constant harassing phone calls," said a statement from Los Angeles County District Attorney Jackie Lacey, whose office filed the lawsuit.

The judge's order also calls for Allied to stop engaging in these illegal practices within 75 days. The company was enjoined from violating the federal Fair Debt Collection Practices Act, the state Constitution's Right to Privacy act, and the federal Telephone Consumer Protection Act, among others.

Attorneys Forest A. Hainline III and Laura A. Stoll of Goodwin Procter LLP for the defense were unavailable for comment.