The complaint for this class action alleges that Velocity Investments, LLC improperly sues consumers for loans which it does not have the right to collect on. The complaint cites the federal Fair Debt Collection Practices Act (FDCPA) and Pennsylvania’s Fair Credit Extension Uniformity Act (FCEUA) and Unfair Trade Practices and Consumer Protection Law (UTPCPL). However, very important to this case is the state’s Consumer Discount Company Act (CDCA).
In February 2018, Velocity filed a lawsuit against plaintiff Elizabeth Reiser in Allegheny County Magisterial District Court (MDJ). Velocity claimed that it had bought a loan that Reiser had taken out with OneMain Financial and it wanted to collect on it. Reiser hired an attorney to defend her.
MDJ held the hearing in March 2018 and entered a judgment for Reiser and against Velocity. Velocity appealed but did not file the necessary complaint. This left the MDJ judgment intact.
Although Reiser won, she claims she should not have been taken to court and should not have had to hire an attorney to defend her. Why? Because, she alleges, Velocity did not have the legal right to buy or collect on her loan.
According to the complaint, OneMain is a consumer discount company regulated by the CDCA. The complaint explains, “A consumer discount company is a non-bank finance company that makes, buys, or sells consumer loans of under $25,000 with combined fees, interest, charges, and other amounts that aggregate in excess of 6% per year.”
Under the CDCA, a consumer discount company must have a license before it can make, buy, or sell a CDCA loan. In fact, the complaint says, the “CDCA specifically prohibits non-licensed, non-bank entities from purchasing CDCA loans from non-bank entities licensed under the CDCA.”
Why does this matter? The complaint says that Velocity is not licensed as a consumer discount company under the CDCA and that it therefore is not allowed to buy CDCA loans—like Reiser’s—from a consumer discount company, and consumer discount companies—like OneMain—cannot lawfully sell such loans to Velocity.
If Velocity did buy such loans, the complaint says, “those purchases are void” and Velocity cannot collect on them.
Two classes have been defined for this action.