Townes v. Portfolio Recovery Assocs., LLC
| Decision Date | 31 December 2020 |
| Docket Number | No. COA20-78,COA20-78 |
| Citation | 854 S.E.2d 146 |
| Parties | Pia TOWNES, Plaintiff, v. PORTFOLIO RECOVERY ASSOCIATES, LLC, Defendant. |
| Court | North Carolina Court of Appeals |
J. Jerome Hartzell, Raleigh, and North Carolina Justice Center, by Jason A. Pikler, Carlene McNulty, and Emily P. Turner, for Plaintiff-Appellant/Cross-Appellee.
Ellis & Winters LLP, by Jon Berkelhammer, Joseph D. Hammond, Greensboro, and Michelle A. Liguori, Raleigh, for Defendant-Appellee/Cross-Appellant.
Center for Responsible Lending, by William R. Corbett, and Legal Aid of North Carolina, Inc., by Celia Pistolis, Raleigh, amici curiae.
Smith Debnam Narron Drake Saintsing & Myers, LLP, by Caren D. Enloe, for amicus curiae North Carolina Creditors Bar Association.
Pia Townes ("Plaintiff") appeals and Portfolio Recovery Associates, LLC, ("PRA") cross-appeals from a partial summary judgment order holding PRA liable for two violations of North Carolina's Consumer Economic Protection Act of 2009, 2009 N.C. Sess. Laws 1603, 1603, ch. 573, § 1 et seq. (the "Act"), and dismissing Plaintiff's remaining claims under the same. Both parties appeal the trial court's final judgment awarding Plaintiff $500 for each of the two violations, and PRA appeals another order denying its motion to dismiss all of Plaintiff's claims for lack of standing. We affirm in part and reverse in part the partial summary judgment order and vacate in part the final judgment. We also affirm the order denying PRA's motion to dismiss.
Resolution of the appeals in this case requires examination and interpretation of the Act's numerous statutory requirements imposed on debt buyers who seek to collect debts through litigation and the subsequent entry of default judgments. Given the specific and specialized nature of the statutes at issue, a brief overview of the pertinent provisions of the Act is beneficial.
The Act was passed in 2009 in a period of recession and amended previously existing consumer protection statutes to impose additional debt collection requirements on debt buyers. 2009 N.C. Sess. Laws at 1604-09, ch. 573, §§ 4.(a)-9. These amendments included an expansion of what constitutes an unfair practice in debt collection, id. at 1604-05, ch. 573, § 5, and required debt buyers, prior to "bringing suit ... or otherwise attempting to collect on the debt[,]" to possess "(i) valid documentation that the debt buyer is the owner of the specific debt instrument or account at issue and (ii) reasonable verification of the amount of the debt allegedly owed by the debtor." N.C. Gen. Stat. § 58-70-115(5) (2019). "Reasonable verification[,]" as statutorily defined, "shall include ... an itemized accounting of the amount claimed to be owed, including all fees and charges." Id. The amendments also newly required a debt buyer to "giv[e] the debtor written notice of the intent to file a legal action at least 30 days in advance of filing[,]" which also "shall include ... an itemized accounting of all amounts claimed to be owed." 2009 N.C. Sess. Laws at 1604-05, ch. 573, § 5; N.C. Gen. Stat. § 58-70-115(6) (2019).
In addition to these prerequisites to collection by suit, the Act imposed new protections in the form of heightened pleading standards. 2009 N.C. Sess. Laws at 1608, ch. 573, § 8. These included a requirement that debt buyers enclose with their complaint:
A copy of the assignment or other writing establishing that the plaintiff is the owner of the debt. If the debt has been assigned more than once, then each assignment or other writing evidencing transfer of ownership must be attached to establish an unbroken chain of ownership. Each assignment or other writing evidencing transfer of ownership must contain the original account number of the debt purchased and must clearly show the debtor's name associated with that account number.
N.C. Gen. Stat. § 58-70-150(2) (2019). In seeking a default judgment on such a complaint, the Act mandates debt buyers "file evidence with the court to establish the amount and nature of the debt." N.C. Gen. Stat. § 58-70-155(a) (2019). It then clarifies that:
N.C. Gen. Stat. § 58-70-155(b) (2019).
As for enforcement of the above provisions, the Act makes debt buyers civilly liable to debtors for both the actual damages incurred and "a penalty in such amount as the court may allow, which shall not be less than five hundred dollars ($500.00) for each violation nor greater than four thousand dollars ($4,000) for each violation." N.C. Gen. Stat. § 58-70-130(b) (2019). The Act establishes such violations as "unfair or deceptive acts or practices," but prohibits trebling of the civil penalty. N.C. Gen. Stat. § 58-70-130(c) (2019).
Plaintiff opened a credit card account with HSBC Bank Nevada, N.A./GM, ("HSBC Nevada") in 2006. Six years later, HSBC Holdings PLC ("HSBC"), through its wholly-owned subsidiaries and affiliates, sold its credit card business to Capital One Financial Corporation ("Capital One"). Capital One continued to use HSBC's logo and name by permission in servicing these credit card accounts.
Plaintiff stopped paying her credit card debt in June, 2012; in six months, Capital One charged-off her account. PRA later purchased a number of accounts from Capital One, N.A. and Capital One Bank (USA), N.A. in 2013. According to electronic records purportedly provided to PRA by Capital One, N.A., Plaintiff's charged-off account was among the accounts purchased by PRA at that time.
PRA sought to recover on the credit card debt owed by Plaintiff, mailing her a notice of intent to file legal action on 8 April 2014. When it received no response, PRA filed suit in District Court, Mecklenburg County, on 27 January 2015 seeking payment of the debt in the amount of $1,866.90. PRA attached to its complaint the following documents: (1) Plaintiff's original credit card application; (2) an account statement for the period of 26 April to 27 May 2012 showing Plaintiff's last partial payment on the account; (3) an account statement for the period of 26 November to 27 December 2012 showing a final balance of $1,866.90; (4) a notice of assignment and several documents from the United States Securities and Exchange Commission showing Capital One's purchase of HSBC's credit card business; (5) bills of sale for the purchase of several undisclosed accounts by PRA from Capital One, N.A., and Capital One Bank (USA), N.A.; and (6) a spreadsheet printed from electronic records provided by Capital One, N.A. to PRA stating Plaintiff's account was among the accounts sold to PRA. The spreadsheet showed that Plaintiff's account was first delinquent on 26 June 2012, was delinquent for 180 days, and was still delinquent as of 26 December 2012. It also listed a charge-off amount of $1,354.65 and final statement balance on 27 December 2012 of $1,866.90.1
Plaintiff did not answer PRA's complaint, leading PRA to seek and obtain a default judgment on 1 April 2015. Plaintiff eventually moved to have the default judgment set aside and, on 8 June 2016, the district court granted Plaintiff's motion. The court concluded that PRA failed to comply with several provisions of the Act governing attempts by debt buyers to pursue default judgments. Specifically, the court concluded that PRA's default judgment was void as a matter of law because PRA failed: (1) to introduce into evidence an itemization of the charges and fees as required by N.C. Gen. Stat. § 58-70-155(b)(4) ; and (2) to properly authenticate any account statements or other business records necessary to establish the amount and nature of the debt as required by N.C. Gen. Stat. § 58-70-155. PRA later voluntarily dismissed its collection action.
Plaintiff brought suit against PRA on 18 September 2018 under N.C. Gen. Stat. § 58-70-130(b) of the Act, which authorizes debtors to recover a statutory penalty of between $500 to $4,000 for each violation of the Act by a debt collector. Plaintiff's complaint identified several violations of the Act by PRA, including its: (1) failure as a debt buyer to reasonably verify the amount of the alleged debt with "an itemized accounting of the amount claimed to be owed, including all fees and charges," prior to attempting collection and filing suit as required by N.C. Gen. Stat. § 58-70-115(5) ; (2) failure to include "an itemized accounting of all amounts claimed to be owed" in the notice of intent to file a legal action sent to Plaintiff prior to suit as required by N.C. Gen. Stat. § 58-70-115(6) ; (3) failure to attach to its complaint adequate documentation "establish[ing] an unbroken chain of ownership" for the debt as required by N.C. Gen. Stat. § 58-70-150(2) ; and (4) failure to file the "properly authenticated business records" required by N.C. Gen. Stat. § 58-70-155 prior to entry of default judgment, namely "[a]n itemization of charges and fees claimed to be owed ... [and] [t]he amount of interest claimed and the basis for the interest charged" as required by N.C. Gen. Stat. §§ 58-70-155(b)(4) and (8).
Following discovery, Plaintiff moved for summary judgment on liability as to all claims. After a hearing on the matter, the trial court entered partial summary judgment on liability for Plaintiff on her claims under N.C. Gen. Stat. §§ 58-70-115(6) and -155 and granted summary judgment for PRA on Plaintiff's claims under N.C. Gen. Stat. §§ 58-70-115(5) and -150. PRA...
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