PRA and Post-Judgment Interest

Portfolio Recovery Associates, the second largest debt buyer in the US, issued an annual report last year containing an interesting message from CEO Steve Fredrickson:

We do not charge interest on U.S. accounts, except in rare cases in which a court mandates an interest award in a legal case. This helps give light at the end of the tunnel to consumers and permits them an opportunity to focus on paying down a fixed sum over time.

In 2014, in Stratton v. PRA, the 6th Circuit Court of Appeals held that PRA has no legal right to collect interest on a debt that it had bought. PRA’s new policy of not charging interest (without a judgment) is no a charitable gesture to America’s struggling consumers. It is more likely just a sensible compliance decision to avoid more lawsuits and CFPB investigations about attempts to collect interest.

PRA’s claim that awards of interest in court cases are “rare” is more problematic: many states, including Maryland, provide for substantial interest on unpaid judgments. Far from being rare, the award of post-judgment interest in legal cases is routine. In Maryland, if PRA takes you to court and wins, PRA (like all other litigants) is going to get post-judgment interest at the legal rate of 10% per year.