Debt Collector Ray Klein Settles Class Action for $2 Million

Ray Klein Inc. has agreed to pay $2 million to settle claims brought by Oregon residents that they were charged illegal garnishment fees by the debt collection agency, a federal court said.

The US District Court for the District of Oregon’s tentative approval of the settlement caps a three-year legal dispute over a $45 fee that Ray Klein collected from consumers whose wages were garnished to pay their debts. The company said the charge covered its attorneys’ fees.

But Oregon residents Nicholas Russell and Michael McKibben alleged in their 2019 lawsuit that Ray Klein never incurred those fees because it used in-house attorneys to issue the garnishment orders. Ray Klein has denied wrongdoing in the lawsuit.

At least 10,007 consumers fit the class definition, according to the court.

The company will pay $2 million to a settlement fund under the agreement, which would release the debt collector from liability and future claims by members of the class. The settlement agreement “appears fair, reasonable, and adequate,” the court said.

Settlement payments will go to all Oregon-based consumers who faced garnishment by Ray Klein between Jan. 1, 2018, and Sept. 30, 2019, on personal, family or household debts.

The class members are set to receive a compensation amount that is three times greater than the actual damages caused by the issuance fees, according to the district court.

“Although trial has the possibility of yielding a higher reward, the costs, risks, and delay of trial would completely dwarf any potential reward, not to mention the uncertainty of success,” the court said.

Class members can request to be excluded from the settlement agreement by Aug. 22. Those who opt out are able to pursue their own litigation against Ray Klein.

The settlement agreement is expected to receive final approval by September.

Russell v. Ray Klein Inc., D. Or., No. 1:19-cv-00001-MC, order 5/24/22