The North Carolina Court of Appeals has affirmed a pair of lower court decisions that denied a defendant’s motion to compel arbitration after it was sued for allegedly violating a state law during the process of suing individuals with unpaid debts.
A copy of the ruling in the case of Pounds et al v. Portfolio Recovery Associates can be accessed by clicking here, and a copy of the ruling in the case of Spector v. Portfolio Recovery Associates can be accessed by clicking here.
Ultimately, the Appeals Court ruled that the defendant could not enforce the original creditor’s arbitration provisions because that right was not explicitly spelled out when the debt was sold by the original creditor to the defendant.
The defendant purchased a portfolio of unpaid debts, filed lawsuits against the individuals associated with those debts, and obtained default judgments. The plaintiffs filed suit, alleging the defendant violated North Carolina’s Consumer Economic Protection Act because it did not comply with certain statutory requirements under the law. After some legal wrangling, the defendant sought to compel arbitration, using the underlying agreement between the plaintiffs and the original creditor. A trial court judge in North Carolina denied the arbitration motion, ruling that the defendant was not specifically assigned that right when it purchased the accounts from the original creditor.
The defendant appealed the decision to the North Carolina Court of Appeals, arguing, in part that it was assigned “all rights and obligations” when it purchased the debts from the original creditor. But the Appeals Court ruled that the provision was not specific enough.
“Consequently, we conclude, as did the trial court, without any showing of the additional intent by the original creditors to assign to PRA, at the very least, ‘all of the rights and obligations’ of the original agreements, the right to arbitrate was not assigned in the sale and assignment of the Plaintiffs’ Accounts and Receivables as set forth in the Bills of Sale,” the Appeals Court wrote. “The trial court correctly concluded PRA has not met its burden of showing a valid arbitration agreement between each Plaintiff and PRA and did not err when it denied PRA’s Motion to Compel Arbitration.”
