When Debt Buyers Escalate Collection Efforts: 5 Things to Do in a Collection Lawsuit

Aggressive debt buyers make big business out of purchasing and collecting on old credit card, medical, and charged- off consumer debt. Recently, California passed its new Debt Buyers Fair Practices Act in part because old consumer debt accounts that have been bought and sold by debt buyers multiple times are a source for much consumer confusion and abusive debt practices. The California act requires, among other things, that collectors must provide a chain of title for such accounts, disclose when they are barred from legally enforcing an old debt, and it restricts how bad debt is reported to the credit rating agencies.

These recent legal developments are encouraging but are specific to California residents only. Listed below are 5 things consumers can do under current federal law before and even after a debt buyer escalates their collection efforts into a lawsuit:

1. Get a Receipt.

If a debt buyer / collector files a lawsuit against a consumer, they must show the court that they purchased the debt from the original creditor. They have to essentially provide a receipt for the purchase in the form of an affidavit, bill of sale, or assignment of the consumer’s specific account. A copy of a credit application or past statements is not sufficient. Be alert: the affidavit of transfer of ownership is from the original creditor, not the debt buyer.

2. Request Documentation.

Under the Fair Debt Collect Practices Act, consumers have 30 days from contact by a collector about a debt, to dispute the validity of the debt. Once disputed, the collector has to provide evidence that supports the validity of the debt. Consumers should review any documentation with caution. Be alert: Don’t mistake receipt of excessive documentation as valid documentation. Seek assistance from a qualified legal professional if there is uncertainty.

3. Consider Aging.

If an account is old, then the debt buyer may be prevented from filing a lawsuit to collect. Check your state’s Statute of Limitations, because even if the account is valid, lawsuits to collect the debt can be “time barred”. Be alert: Consumers should take extra caution not to reactivate a time barred account by making a payment on account. Once ‘re-activated” the Statue of Limitations is no longer a valid defense. When uncertain, seek legal counsel on the proper way to proceed.

4. Monitor Communication.

Federal law restricts how debt collectors can communicate with a debtor. They cannot discuss a debt matter with a third party (such as an attorney) unless you have authorized them to do so. They cannot use harassing language, provide misleading information or call at unreasonable hours or places of work. Stay alert: Consumers should never ignore written communication from a debt collector as there are serious timing considerations that if ignored could cause a consumer to lose their rights. Most importantly, always respond to a filed law suit because a debt, while otherwise invalid, could be enforceable if a debt buyer secures a default judgement against a consumer who fails to respond.

5. Knowledge and Action.

Few debt collectors are successful without being persistent, intimidating, and assertive. Unscrupulous collectors have been known to make their communications appear as if it comes from a court, looks like a lawsuit or legal summons, which is illegal. However, they count on consumers to be intimidated into paying on accounts they would not otherwise be legally responsible to pay. Stay alert: Consumers who pro-actively challenge the validity of a debt are most apt to discourage or even defeat a collection lawsuit because a debt buyer would rather focus their attention on easier accounts.

About the Author: Since 1990, attorney David Soble has represented lenders, loan servicers, consumers and business owners in real estate, finance and compliance matters. For over 24 years, he has been involved in thousands of real estate transactions and has successfully negotiated and saved millions for his business and consumer clients.

Disclaimer: You should not rely or act upon the contents of this article without seeking advice from your own, qualified attorney.