A federal judge in California has approved a $1.1 million settlement in a class-action lawsuit in which a debt collector was accused of violating the Fair Debt Collection Practices Act by using false threats of imprisonment to coerce individuals into making payments.
A copy of the order approving the settlement in the case of Solberg, Morin & Bonakdar v. Victim Services, Inc., can be accessed by clicking here.
The defendant was accused of sending letters using the letterheads of prosecutors to create the false impression that consumers may be prosecuted for writing bad checks, but the district attorneys never determined if prosecution was likely. In order to avoid prosecution, the individuals were told they had to cover the amount of the bad check and enroll in a financial education class for an additional fee. Along with being sued, the defendants also entered into a settlement back in 2015 with the Consumer Financial Protection Bureau for its alleged misdeeds. The defendants paid a fine of $50,000 and were prohibited from making threats of imprisonment or using district attorney’s letterheads when communicating with consumers.
The $1.1 million settlement will be paid by the defendants’ insurers. Class members will receive about $535,000 of that amount. Plaintiffs had been seeking $4.55 million in damages.
The judge had previously rejected arguments from the defendants that their settlement with the CFPB should merit having this lawsuit dismissed or at least not certified as a class action.
But Judge Vince Chhabira of the District Court for the Northern District of California ruled that the terms of the settlement were “fundamentally fair, adequate, and reasonable based on the relative strengths and weaknesses of the Classes’ claims and risks to the Classes of continuing through trial.”