The West Virginia Supreme Court on Tuesday debated a subpoena and temporary injunction issued against debt buyer Cavalry Portfolio Services.  

The court heard oral arguments in an appeal of an action by former West Virginia Attorney General Darrell McGraw. His office had sued Cavalry SPVI, Cavalry SPV II, Cavalry Investments and Cavalry Portfolio Services in June 2010, with testimony at the time alleging Cavalry had filed at least 1,300 collection lawsuits before becoming licensed to collect in the state in 2010.

Of those lawsuits, 743 resulted in judgments totaling more than $3 million against West Virginia consumers, with 369 default judgments.

Cavalry officials question both the subpoena power of the AG's office without holding an administrative hearing and the impact of dismissing legitimate debts because of proper licensing issues.

Kanawha County (W.Va.) Circuit Court Judge James C. Stucky in October 2011 ordered Cavalry to stop all wage garnishments and release all liens filed against West Virginia consumers’ property stemming from judgments obtained by its companies before they became licensed. While Cavalry by that time had been found by the court to have been properly licensed and bonded at all relevant times, the company's passive debt-buying entities were not. All of Cavalry’s businesses became licensed in October 2010.

Cavalry officials say the company did not initially have a license to collect in West Virginia because it was informed by the state's tax commissioner it did not need one. Later, a different tax commissioner told the company it indeed needed one.

West Virginia Attorney General Patrick Morrisey’s response brief says the injunction was within the discretion of the court.

“(T)he debt buying industry is notorious for filing suits against unsophisticated, unwitting consumers without providing proof that it owns the debt and in the absence of any admissible proof of the amount of the debt or that it is owed by the consumer it sued,” the brief says.

Cavalry argues Stucky erred in enforcing the investigative subpoena, which it says was not supported by probable cause and issued without an administrative hearing.

Because McGraw filed the lawsuit, the subpoenas should have been terminated, the company claims.

“By filing a verified complaint, the Attorney General was evincing the fact that he had concluded to his satisfaction that such violations (of the West Virginia Consumer Credit and Protection Act) had indeed occurred,” Cavalry’s other appeals brief says. "Therefore, under the black letter of the law, his subpoena power was at an end, any further investigation he wished to make would have to be done pursuant to the rules of civil discovery."

Morrisey’s response says the subpoena, which requests certain documents and information from Cavalry, is proper. It calls the challenge "frivolous".

“Cavalry failed to produce a single case in support of (its) position because there are none,” the brief says.

Subscribe Now

Authoritative analysis and perspective for every segment of the payments industry

14-Day Free Trial

Authoritative analysis and perspective for every segment of the industry