HOW TO BEAT VULTURE DEBT COLLECTORS
Source: http://www.nakedcapitalism.com/2012/08/how-to-beat-vulture-debt-collectors.html
In a bit of synchronicity, last weekend I had
dinner with a buddy whose sibling recently was dunned by a buyer of junk debt
. For those not familiar with this dark underbelly of the credit markets, these
vultures buy consumer debt from banks (mainly credit card receivables) that
the bank has written off. That means they don’t think it’s worth
pursuing. At best it’s too close to the statute of limitations expiring
or the documentation is questionable or the amounts are all wrong. Most of the
time. it’s worse than that: the debt was never owed (they are going after
the wrong person), the debt was paid off or discharged in bankruptcy, the statute
of limitations has long passed.
The buyers of this debt pay pennies on the dollar and treat it like a lottery
ticket. They sue, but have NO intention of spending any money on the case beyond
making that filing. Their fond hope is that the borrower fails to respond, and
they win a default judgment. With that in hand, they can garnish wages or bank
accounts.
The flip side is any minimal credible response will beat back these claims.
And remember, the burden of proof is on the debt collector to demonstrate that
the consumer agreed to the debt, to provide a full record of principal, interest,
payments, and fees, and to prove a complete and unbroken chain of title (sound
familiar?).
An article by law professor Peter Holland is a superb guide on how to beat these
cases. While the intended audience for this article is lawyers, it is highly
accessible, and gives a sense of what an utter swampland this area is. He also
stresses that it takes diligence rather than experience to pursue these cases:
Revealing the defects in these documents does not require a deep background
in consumer law. It just requires a cup of coffee, your undivided attention,
a yellow highlighter, and a red pen.
The article warns, however, that fewer than 1% of the consumers who respond
in court are represented by counsel, and that they are typically not treated
equitably, since debt collectors have convinced many judges that borrowers are
deadbeats and that the rules of evidence don’t hold in small claims (as
the article stresses, that is not accurate). Holland does not intend his article
to be a guide to pro se defendants, but it can serve as a great guide for newbie
lawyers or even law students to take on these cases. And he also points out
that in the wake of the robo-signing scandal, many judges are more sensitive
to assaults on the integrity of the courts than they once were, and it’s
not difficult to depict some of the issues presented by these actions as being
similar to those in robosigning cases.
Nathalie Martin of Credit Slips recounts some of the recommendations Holland
makes:
1. Read the complaint and supporting documents very carefully. Is the named
plaintiff the same party named in the documents supporting the debt? Is there
any chain of title tying the plaintiff to the debt? Is the debt collector licensed
in your state? Is the contract for the debt even attached to the complaint?
How is the debt supported by evidence? If there is some document attached to
prove the debt, can you read it? Was it generated after the fact? By whom? Has
the statute of limitations run?
2. Know the elements of an “account stated” cause of action. These
include the establishment of a debtor-credit relationship, an agreement by the
debtor and creditor as to the amount due, and an agreement by the debtor to
pay the amount allegedly due.
3. Carefully scrutinize the affidavit. Here comes the fun. Google your affiant.
Many people who have signed these affidavits have admitted under oath to singing
thousands of these in one day, and many have signatures on Google that will
not match the ones in your affidavit. Look at your state’s affidavit rules.
Of course these rules will require affiants to have personal knowledge and likely
yours will likely not qualify as evidence. If the affidavit says this is true
“to the best of my knowledge” the affiant is admitting to not knowing
the real facts and the affidavit can be stricken from the evidence.
4. Master the relevant rules of evidence. No personal knowledge, no recovery.
No proof of debt, no recovery.
5. Tell the judge why this matters. Many of these debtors do not owe these debts.
And there’s lots more, like investigating whether the plaintiff had a
checkered history (felons on staff? violations of the Fair Debt Collections
Practices Act? FTC fines? evidence of past use of fraudulent affidavits?) and
putting the judge on notice of any findings.
Holland concludes:
Allowing debt buyers to run roughshod over consumers and the courts is a denial
of due process. It enriched junk-debt buyers at the expense of consumers, legitimate
creditors, and our judicial system…Trying and winning these cases will
have the systemic impact of helping restore a sense of justice and fairness
which lies trapped beneath the heavy weight of the junk-debt buyer.
Amen.
Please move to "Conclusion" next.
Please move to “Why is debt problematic (systemic)” next
lding relationships that will one day come back to serve
us in our own time of need? Wouldn’t this way of doing business, following
a debt jubilee, make your heart sing?