Blog

Defending Credit Card Lawsuits

Reasons to Defend a Consumer Collection Complaint

The distressed debt buying industry is a multi-billion dollar industry in which debt collectors purchase literally millions of old debts for pennies on the dollar that the original creditors have written off. The debt buyers receive minimal information on each account, and certainly do not receive the contract or copies of any communications in which the consumer might have disputed the amount owed. In addition, after having unsuccessfully attempted to collect the accounts, these debt buyers regularly resell repackaged portfolios of uncollectable debts to other debt buyers whose connection to the original creditor—and to original documentation and proof—is even more attenuated.

Statute of Limitations

Because debt buyers purchase very old debt, the statute of limitations is an important consumer defense. Debt buyers who cannot produce the written contract often bring the case on an account stated or other claim not based upon a written contract. In many states, such causes of action have a shorter limitations period than a claim based upon a written contract. Credit card collection cases, even when brought on a contract theory, may have to be brought within a shorter limitations period applying to non-written contracts. Moreover, the action may have to be brought within a shorter limitations period found in the law of some other state than the forum state.

Because the debts are old, the consumer often will have moved after the credit account was closed, and the debt buyer must first try to locate the consumer’s present residence. Debt buyers may try to serve the consumer at the wrong address or even sue the wrong consumer. Debt buyers rely on credit reports to locate the consumer, but the credit reports themselves are filled with errors, including incorrectly merged information that mixes the credit reports of two or more people with similar names and other identifying information, and that results in the collector then suing the wrong person.

Quite often, the debt buyer does not have sufficient evidence to prove its case, relies on business records that are not properly introduced into evidence, or tries to prove its case based on clearly defective affidavits. Debt buyers frequently cannot even prove that they own the debt they are collecting. Debt buyers may not have access to better evidence or may not want to expend the resources acquiring that evidence, so they try to win cases by default without an ability to prove that money is owed.

Creditors also may commit billing errors which may be the reason the creditor stopped collection efforts—the consumer did not owe all or part of the money claimed. When these debts are sold, the debt buyer does not receive or retain this information concerning consumer defenses. The consumer can then defend the collection action based upon the original dispute the consumer had with the creditor.

Too often debt buyers will bring actions against spouses and other parties knowing these defendants do not owe the debt, but hoping to either pressure them into payment or obtain a default judgment against them. Examples includes suits against authorized user not liable on the account and against family members of a deceased debtor. The debt buying business model is to cast a wide net without consideration as to whether the consumer owes the money, and see what money is recovered.

Reason #1: Prevailing Can Improve Your Credit Rating

If your case is dismissed, the consumer can take action to ensure that credit reports indicate that the current balance of that debt is now reported as zero. If the judge also rules that the consumer never owed the money (for example, because the collector sued the wrong consumer), then the consumer can seek to delete information in their consumer report that the debt had been in default in the past. In addition, the attorney can help the consumer dispute inaccurate information in a credit report, and the consumer has a cause of action under the Fair Credit Reporting Act (FCRA) if that information is not properly investigated and corrected.

Reason #3: Alleviate Stress

Being sued is an extremely upsetting and difficult experience. You probably have never been sued in your entire life and may be feeling distressed over the suit, even for a relatively minor debt. That distress can place strain on your intrafamily relationships, work, and health. Medical problems can be accentuated under stress. You need legal representation to explain what is happening and how to depend your interests.

Reason #4: Protection of Your Assets and Income

A judgment against you can have serious financial consequences. Your assets and income may be at risk. Bank accounts, even those containing certain exempt funds, may be frozen for days or even weeks, and may eventually be seized unless exemptions are properly pursued. Your wages can be garnished. Cars and other property can be seized. Defeating this collection action eliminates those threats. Even if a default judgment has already been entered, an attorney can assist the consumer either in setting aside the default judgment or in minimizing the impact of these creditor remedies.

Reason #5: You May Have Legal Claims Against the Debt Collector

Often we discover that the consumer has separate affirmative actions under the FDCPA, FCRA, and other federal and state statutes, resulting in significant actual and statutory damages and attorney fees, either on an individual or class-wide basis. Investigating the facts relating to the collection action will often uncover various systematic law violations.

Reason #6: Debt Collector May Have to Pay the Consumer’s Attorney Fees

Often Debtors wonder how they may be able to pay for an attorney. However, there are a several ways that we may be able to recover our legal fees from the debt collector. Fees may be recovered by statute in about twenty states. Fees are also available to the consumer for prevailing on certain counterclaims, or as a result of the collector’s bringing an action without adequate facts.

Reason #6: Stopping Systematic Abuse of the Court System

Debt buyers today are using the courts to engage in wholesale litigation abuse. They sue huge numbers of consumers with no real knowledge of whether the consumer owes the debt or whether the statute of limitations has run. Debt buyers sue with little or no evidence to prove that the consumer owes the money, that the debt buyer in fact owns the debt, or even that they are suing the right consumer. This litigation strategy is effective because very few consumers obtain legal representation, and the overwhelming majority of consumer defendants default in the collection action.

When the consumer contests an action, the collector utilizes various techniques to win without having to produce admissible evidence to prove its claim. The collector may take advantage of the unrepresented consumer by working out a stipulated judgment without disclosing that the collector cannot prove the debt. Another technique is to send the consumer a long list of requests for admission to which the consumer does not timely respond. The requests are deemed admitted, and the collector needs no other evidence to prove its case. Alternatively, collectors seek summary judgment on junk evidence—attachments that are not attached, affidavits from debt buyer employees (or even non-employees) who state conclusory facts about which the affiant has no personal knowledge, or about pretend business records created years after the fact.

Consumers fare much better in court when they obtain legal representation. Many debt buyers will not even pursue the case once they realize the consumer has legal representation. Such an individual consumer victory has no adverse impact on a debt buyer that has purchased the debt for pennies on the dollar.

If you have outstanding debts or judgments then let an Arizona bankruptcy attorney help you come up with a solution. Call the Dunaway Law Group at 480-389-6529 or email us at clint@dunawaylg.com.