Common credit reporting errors: the “mixed file”

Unfortunately, many credit reports contain errors. One common type of credit report error is the mixed file. A “mixed file” is a term used to describe a credit report when credit information for one person is placed on the credit report of another person, creating a false description of the person’s credit history.  Occasionally, this problem is caused by the “furnisher” of credit information (ie. a bank or credit card company). For example, a bank may incorrectly report that a spouse is responsible for a mortgage loan that was only in his wife’s name.

Mixed fileMore often, a mixed file is caused by the way credit reporting agencies match data to a consumer’s file to create his credit report. Credit reporting agencies get mountains of credit data from creditors and public records. This data is then matched to an individual consumer’s credit report through identifying information such as name, address, and social security number. Mixed files occur when the credit reporting agency’s computer doesn’t correctly match the identifying information in the credit data to the identifying information in the credit report. The credit reporting agencies closely guard their exact matching criteria and
process, but it appears that commons reasons for mixed files
include:

* Mismatches between generations with the same name (ie. Jr./Sr.)

* People with similar names (ie. Jon Smith / Jonathan Smith)

* People with similar social security numbers

Mixed files are a big problem. According to one study, 44% of consumer complaints to the FTC involved mixed files. It’s a particularly serious problem with the other person’s accounts are delinquent or in collections. This can torpedo your credit score and lead to debt collection calls for a debt you don’t owe. And mixed files are often very difficult to fix because it can be difficult to prove a negative–that the account isn’t yours. You may have to submit birth certificates, social security cards, or sworn statements in order to prove an account doesn’t belong to you.

If your credit report appears to have been mixed with someone else’s, the first step is to write a detailed dispute letter to the credit reporting agency. You may have to follow up with additional information if the credit reporting agency requests more details or documents. Unfortunately, many mixed files are not resolved through the informal dispute process and only a lawsuit can get the credit report cleaned up. If you’ve disputed your mixed file and haven’t gotten it fixed yet, your next step should be to talk to an attorney who is familiar with credit reporting issues and can advise you of your rights under the Fair Credit Reporting Act.

 

Featured photo by kenjoey / C.C. 2.0

Common credit report errors to look for on your report

Your credit report is becoming increasingly important in our data-driven society. Lenders use it to determine your eligibility and terms for all types of credit. Employers may use it to determine whether to hire you. It’s therefore critical to review your credit report on a regular basis to make sure it doesn’t contain any incorrect information. Studies have shown that nearly 80% of credit reports contain a mistake of some kind. Here are some of the common credit report errors:

Incorrect name. Make sure your name is right, especially if your name is relatively common. An incorrect middle name or nickname may be a sign that someone else’s information is incorrectly on your report. For example, if your name is Samuel and you sometimes go by Sam, make sure that the name Samantha isn’t showing on your report.

Inaccurate biographical info. Similarly, make sure that the correct social security number and address appears on your report. Most reports will also list previous addresses. Make sure these are accurate too. If an address you never lived at shows up on your report, that’s a sign that someone else’s info may be on your report.

Mistaken account status. Review each account to be sure that current accounts are not reported as delinquent and that open accounts aren’t showing as closed.

Duplicate reporting. Make sure that accounts aren’t mistakenly listed twice on your credit report. This could lead a lender to believe that you have more debt than you actually do.

Accounts that aren’t yours. Any accounts that don’t belong to you should be an immediate red flag. This mistake is often caused when your file is mixed with another person’s file. It could also be a sign that someone has stolen your identity and fraudulently opened accounts in your name.

If your credit report contains these, or other mistakes, your next step is to notify the credit reporting agency of the errors and ask it to correct them. This dispute will trigger the agency’s duties under the Fair Credit Reporting Act. Normally, credit reporting agencies have 30 days to investigate credit report errors and correct them. Unfortunately, these agencies don’t always take consumer disputes seriously and you may have to dispute multiple times to get the mistake corrected. If you’ve sent multiple disputes and the credit reporting agency still hasn’t corrected your credit report error, you may want to consult with an attorney who handles credit reporting issues. An attorney can advise you about your options to get your inaccurate credit report corrected.

 

Collectors are liable for emotional distress caused by illegal collection tactics

The Fair Debt Collection Practices Act prohibits debt collectors from using false, misleading, abusive, and harassing tactics to collect debts. Under the FDCPA, any person who has been subjected to illegal debt collection practices may sue the debt collector to hold it accountable and enforce the law. If successful, the plaintiff is entitled to $1,000 in statutory damages and the collector must pay her reasonable attorney fees and costs.

More importantly, the collector may also be responsible for compensating the person for any emotional distress that she has suffered from the illegal collection tactics. Commons symptoms of emotional distress caused by illegal collection practices include:

*Crying
*Loss of sleep
*Loss of appetite
*Headaches, vomiting, or stomach pain
*Martial problems
*Problems concentrating at work

While many debt collectors profess cold-hearted skepticism that a person could be so upset by collection efforts, I’ve worked with many clients who suffered from emotional distress symptoms. I had one client who spent many sleepless nights crying in her bedroom because a collector was pursuing her for a debt she already paid. Another client suffered from severe anxiety, nausea, and headaches because a collector pursued her for a debt she didn’t owe. So I know for a fact that  illegal debt collection practices cause emotional distress.

The law says that a collector has to pay for the emotional damage their harassing or abusive collection tactics caused. While medical evidence is usually helpful in proving the extent and cause of the emotional distress, most courts don’t require it. In most cases, it is sufficient for the person to testify in detail about their emotional distress symptoms. Often, a witness, such as a spouse, co-worker, or friend has seen the symptoms and can corroborate the plaintiff’s testimony.

Depending on the severity and duration of the emotional distress, the amount of damages awarded can be significant.

For example, in Fausto v. Credigy, the collector made repeated calls and false threats of credit reporting over a Wells Fargo account. The Faustos believed that they had already paid off the account and told the collectors to stop calling. The collector continued to call–over 90 times in total. At trial the Faustos testified that they had many sleepless nights, an inability to eat, and the stress caused problems within their family. Ultimately, a Northern California jury awarded the Faustos $100,000 for emotional distress caused by the collector’s harassment.

In another case, McCollough v. Johnson, Rodenburg & Lauinger, a collection law firm filed a lawsuit that was barred by the statute of limitations. The law firm, JRL, had information from its client that the suit was time-barred, but continued to prosecute it for 8 months. At trial, McCollough testified that JRL’s wrongful lawsuit caused him anxiety, pain, increased temper, and conflict with his wife. Although McCollough already suffered from a disabling pre-existing condition due a traumatic brain injury, he characterized JRL’s suit as the straw that broke the camel’s back. A Montana jury awarded McCollough $250,000 for the emotional distress caused by JRL.

In another case, Yazzie v. Law Offices of Farrell & Seldin, a collection law firm tried to garnish the wages of Lucinda Yazzie, despite repeated notice that the debt was actually owed by someone else with the same name but with a different social security number. The law firm had changed the social security number in its files from the SSN of the correct account holder, to Ms. Yazzie’s. Farrell & Seldin’s collection attempts continued for three years. The New Mexico jury awarded Ms. Yazzie $161,000 for her emotional distress suffered during the three years of being wrongfully pursued for a debt that wasn’t hers.

Similarly, in Mejia v. Portfolio Recovery Associates, a debt buyer sued the wrong person for a $1,000 credit card account. Ms. Mejia repeatedly told them it wasn’t her debt, but the debt buyer persisted with the lawsuit. Ms. Mejia testified that the lawsuit terrified her and that she feared she would lose her house or be arrested. A Missouri jury awarded Ms. Mejia $250,000 for emotional distress.

Of course, these cases all involved particularly egregious collection conduct and severe emotional distress. Obviously, not every case results in these kind of damages.

But if you’ve endured illegal collection practices that caused you stress, anxiety, fear, or other symptoms of emotional distress, the law may require the collector to be accountable for your suffering.

 

How to stop collection calls to your cell phone

Few things are more annoying than repeated debt collection calls to your cell phone. Often, these calls are made by an automatic dialer. It’s not unheard of for people to get 10 or more of these robocalls per day. This is incredibly frustrating if you rely on your cell phone for work or to keep tabs on your children. The good news is that there are a couple ways to stop these annoying robocalls.

Verbally tell the collector to stop the robocalls

collection calls to your cell phoneYou should first figure out if the collection calls to your cell phone are being made by an autodialer. You can usually spot a robocall if there is a pause or click before a person comes on the line. An automated message is also a clear sign of an autodialed call. If the collection calls are robocalls, there is a powerful federal law called the Telephone Consumer Protection Act that protects you. The TCPA forbids anyone from using an autodialer to call your cell phone without your consent. In most debt collection situations, consent is given in the fine print of the terms and conditions of the credit agreement. Most credit agreements have language buried in them that gives the creditor your consent to robocall your cell phone. This consent is then passed on to the debt collector if you fall behind on your payments.

Fortunately, the TCPA gives you the right to revoke your consent to autodialed calls at any time and in any reasonable way. This includes revoking your consent verbally over the phone. All you have to do is tell the collection representative that you are revoking your consent to robocall your cell phone. Under the TCPA, they have to stop the autodialed calls immediately.

Write a letter demanding that the collection calls to your cell phone stop

Even though you can make the autodialed calls stop by verbally revoking your consent, there are two drawbacks to that approach. First, it can be difficult to prove a verbal statement. Second, the TCPA only allows you to revoke your consent to autodialed calls. The collector is free to continue calling your cell phone as long as they manually dial the calls.

Thankfully, there is another federal law that regulates debt collection calls: the Fair Debt Collection Practices Act. Under the FDCPA, you have the right to stop all calls from a debt collector by writing the collector and requesting that they stop calling you. This letter doesn’t have to be fancy. Just make sure to include your full name and your account number if you have it so that the collector can properly identify your file. All the letter has to say is that you want the collection calls to stop. You should list the all of the phone numbers that you no longer wish to receive calls on. If you want to continue to get collection calls on a certain phone number, you should say so. If you want to only get calls at a certain time, you should say that too. Under the FDCPA, the debt collector has to comply with these requests or face possible legal action.

In some cases, you can sue the collector to make the robocalls stop

Although not all collection calls to your cell phone are against the law, some of them are. And the penalties for illegal autodialed calls are significant. Under the TCPA, the collector must pay you between $500 and $1,500 per call for each offending robocall. The court will also issue an injunction against the collector forbidding further autodialer calls. Here’s how you know if debt collection robocalls are illegal:

(1) The collection calls were made with an autodialer

Under the TCPA, an autodialer is anything that “has the capacity to store or produce telephone numbers to be called, using a random or sequential number generator; and to dial such numbers.” The Federal Communications Commission has made it clear that this definition is very broad and covers most, if not all, of the popular dialing software used by debt collectors.

As technology advances, though, this issue is becoming more complex. Some courts have said that even if an autodialer is involved, if it requires some human intervention to make the call, then the calls aren’t barred by the TCPA. It’s no surprise, therefore, that debt collection industry vendors are currently designing software that requires some human intervention in an effort to evade the TCPA. The FCC, however, has signaled that it doesn’t approve of these efforts to exploit the spirit of the law, so future rule making may be coming.

(2) The robocalls were made to your cell phone

The TCPA only prohibits robocalls to wireless phones. Most autodialed debt collection calls to a landline are permitted.

(3) You’ve revoked your consent OR you never consented in the first place

Robocalls to your cell phone are only illegal if you didn’t consent to them. As noted above, in the context of debt collection consent is typically given in the credit agreement. That consent, however, can be revoked verbally or in writing. Once you’ve revoked your consent, all future robocalls to your cell phone violate the TCPA and you’re entitled to $500 to $1,500 for each illegal call.

It’s also possible that you’ve never given consent for the collection calls to your cell phone. This most often happens when the collector is trying to reach the previous owner of your cell phone number. Because you never consented to any of these wrong-number calls, you can enforce your rights under the TCPA without first revoking your consent.

Debt collectors cannot lie to you

The Fair Debt Collection Practices Act forbids a debt collector from making any false or misleading statements when they are attempting to collect a debt. If a debt collector lied to you, here’s what you need to know about your rights under the FDCPA.

debt collector lied

The FDCPA applies to “debt collectors” collecting “consumer debts”

The FDCPA only covers a debt collector that is collecting a debt for someone else. It does not apply to a creditor collecting its own debts. So if the false statement was made by a bank or credit card company that is collecting its own debts, the FDCPA doesn’t apply. But the FDCPA does apply to collection agencies, debt buyers, and law firms who are collecting debts for someone else.

In addition, the FDCPA only applies when the debt being collected is a consumer debt. This is a debt used for personal, family, or household purposes. If the debt was incurred for a business, the FDCPA doesn’t apply.

Common debt collection lies

Although the FDCPA is clear that virtually any false statement is a violation, there are some collection lies and misleading statements that seem to happen frequently. These include:

*Telling you that you owe a debt that you already paid or that was discharged in bankruptcy

*Threatening to sue or garnish you after the statute of limitations has expired;

*Incorrectly reporting information on your credit report;

*Mis-stating your rights in student loan collections;

*Claiming that you personally owe a debt you have no obligation to pay, such as a debt for an ex-spouse or a deceased relative;

*Incorrectly stating the balance of your account (possibly because of unauthorized fees or uncredited payments);

*Suggesting that they are affiliated with an attorney when they are not;

The false statement probably has to be “material”

Although the FDCPA doesn’t say anything about it, many courts have adopted a rule that the false statement has to be “material.” This generally means that it’s not enough to show merely that the debt collector lied to you. You must also show that they lie impacted your ability to evaluate your options in some way. In my opinion, any statement about the balance of the account, the legal status of the account, your legal rights, or the collector’s legal remedies should be considered material.

If a debt collector lied to you, hold them accountable under the FDCPA

The FDCPA gives consumers the power to sue a debt collector that violates the law. It’s a great way to stop collection harassment cold and to hold the debt collector accountable for its illegal conduct. Under the FDCPA, a successful claim gets you:

* Up to $1,000 in statutory damages (even if you’ve suffered no monetary loss);

* Provable actual damages (including for emotional distress);

* Your attorney fees and court costs must be paid by the collector

Most consumer lawyers, including me, handle FDCPA lawsuits on a contingency fee. This means that you don’t pay us any fees unless I recover money for you and those fees come from the collector’s pocket, not yours. Congress wrote the FDCPA this way to incentivize people to enforce the FDCPA and help the government regulate debt collectors and ensure compliance with the law.

(photo: Joe Penniston)

Can a debt collector call me at work?

The Fair Debt Collection Practices Act strictly regulates collection calls while a person is at work. The Act recognizes that you have a right to keep your personal financial information private and that it’s difficult to maintain that privacy while you’re at the office. If you’re getting collection calls at work, here’s what you need to know.

The FDCPA only applies to “debt collectors” collecting “consumer debts”

The FDCPA only covers a debt collector that is collecting a debt for someone else. It does not apply to a creditor collecting its own debts. So if the calls are from a bank or credit card company that is collecting its own debts, the FDCPA doesn’t apply. But the FDCPA does apply to collection agencies, debt buyers, and law firms who are collecting debts for someone else.

In addition, the FDCPA only applies when the debt being collected is a consumer debt. This is a debt used for personal, family, or household purposes. If the debt was incurred for a business, the FDCPA doesn’t apply.
collection calls at work

Collection calls at work are illegal if the collector knows that your employer prohibits them

The FDCPA doesn’t expressly forbid a debt collector from calling you while you’re at work. But if the collector knows that your employer doesn’t allow you to take calls on the job, then the FDCPA prohibits further calls. For example, let’s say that you’re a nurse and you’re not allowed to make personal calls during your shifts. Knowing this, you tell a collector not to call you at work. Once you’ve told the collector this, any further collection calls while you’re at work probably violate the FDCPA. There’s no special language that you have to use to notify the collector that your employer forbids calls. It’s enough to tell the collector that you can’t talk while you’re at work.

Depending on your job, you may not even be required to tell the collector that you can’t take collection calls at work. For example, some jobs–such as manufacturing, health care, and teaching–so obviously don’t allow the employee to take personal calls at work that a debt collector should know that calls are prohibited without being told.

Collection calls to someone else at your work are almost always illegal

Although the FDCPA doesn’t prohibit all collection calls to you while you’re at work, it does prohibit most calls to someone else at your employer. So most collection calls to your co-workers are illegal, especially if the collector discusses your debt with the co-worker. There is an exception if the debt collector is calling a your employer to enforce a court judgment. For example, a collector may call your human resources department to discuss a pending wage garnishment against you.

How to use the FDCPA to stop illegal collection calls to your workplace

The FDCPA gives you the power to sue a debt collector that violates the law. It’s a great way to stop illegal collection calls to your work and to hold the debt collector accountable for its illegal conduct. Under the FDCPA, a successful claim gets you:

* Up to $1,000 in statutory damages (even if you’ve suffered no monetary loss);

* Provable actual damages (including for emotional distress);

* Your attorney fees and court costs must be paid by the collector

Most consumer lawyers, including me, handle FDCPA lawsuits on a contingency fee. This means that you don’t pay us any fees unless I recover money for you and those fees come from the collector’s pocket, not yours. Congress wrote the FDCPA this way to incentivize people to enforce the FDCPA and help the government regulate debt collectors and ensure compliance with the law.

If you’re dealing with debt collectors, make sure to download and use our free debt collection call log so that you can document all of the debt collectors’ communications. And if the debt collector does anything that you think was unfair; untrue; or harassing, oppressive, or abusive, please contact us to discuss the situation further. We offer a free case review for all FDCPA cases and if we agree to handle your case, you won’t have to pay us any money up front. Our fees come from the money we recover for you if you win your case or accept a negotiated settlement.

(phote: Apreche)

Can a debt collector call my friends and family about my debt?


collection calls to friends and familyThe Fair Debt Collection Practices Act generally forbids collection calls to friends and family. In fact, collection calls to most third-parties are illegal. There are some exceptions to this general rule, though. Here’s what you need to know if a debt collector is talking to someone else about your debt.

The FDCPA only applies to “debt collectors” collecting “consumer debts”

The FDCPA only covers a debt collector that is collecting a debt for someone else. It does not apply to a creditor collecting its own debts. So if the calls are from a bank or credit card company that is collecting its own debts, the FDCPA doesn’t apply. But the FDCPA does apply to collection agencies, debt buyers, and law firms who are collecting debts for someone else.

In addition, the FDCPA only applies when the debt being collected is a consumer debt. This is a debt used for personal, family, or household purposes. If the debt was incurred for a business, the FDCPA doesn’t apply.

The FDCPA generally prohibits a debt collector from “communicating” with a third party

Under the FDCPA, a debt collector “may not communicate, in connection with the collection of any debt, with any person other than the consumer…” Although this language seems straightforward, it’s important to understand what it means to “communicate” under the FDCPA. The Act defines “communication” as the conveying of information about a debt. So a missed call to your boyfriend, without a voicemail, is probably not a communication. But if the collector leaves your boyfriend a message or actually talks to him, it’s likely to be considered a communication for the purpose of the FDCPA.

Communications with certain third parties are allowed

There are a couple of exceptions to the general prohibition against collection calls to friends and family. For example, the FDCPA allows a debt collector to communicate with a couple of different people without violating the law. These people include:

*your attorney

*the debt collector’s attorney

*the creditor (ie. the debt collector’s client)

*the creditor’s attorney

*a credit reporting agency, if otherwise allowed by law (ie. Equifax, Experian, TransUnion, etc);

A collector may also communicate with your employer if it’s reasonably necessary to enforce a court judgment. For example, the FDCPA allows a debt collector to call your employer and confirm that you work their so that they can garnish your wages.

A collector may also communicate with a third-party to learn your contact information

Another exception to the general rule against third-party communications is the “location information” exception. The FDCPA allows debt collectors to place collection calls to friends and family to learn your location information. Location information is your address and phone number. But this call is strictly regulated:

*the collector must identify himself and tell your friend that he is confirming your location information;

*the collector can’t identify his employer unless your friend asks;

*the collector can’t tell your friend that you owe a debt or discuss the details of the debt;

*in most cases, the collector can’t ask your friend to have you call the collector back;

*in most cases, the collector only gets to make this “location information” call one time

It also follows that if the collector already knows your address and phone number, then it can’t call a third-party for your location information.

If collection calls to friends and family are illegal, why do collectors do it?

Although it violates the FDCPA, many debt collectors use this tactic because it’s profitable. If you’re like most people, you’re understandably embarrassed by not being able to make ends meet. It’s stressful enough to suffer this embarrassment privately. But when a debt collector tells your friend or family member that you aren’t paying your bills, your private embarrassment quickly turns into semi-public humiliation. Debt collectors know this and use the third-party calls to put pressure on you to make a payment. Debt collectors also know that most consumers don’t know about their rights under the FDCPA, so there is little chance that the consumer will do anything about the illegal third party calls. Rather than paying the debt collector to make the third party calls stop, it may be best to discuss your situation with a consumer lawyer. Paying the shady debt collector will only encourage him to keep breaking the law. But a consumer lawyer can help you hold the debt collector accountable by bringing a FDCPA lawsuit on your behalf. After being sued for violating the FDCPA, most debt collectors will think twice about violating it again.

If you’re dealing with debt collectors, make sure to download and use our free debt collection call log so that you can document all of the debt collectors’ communications. And if the debt collector does anything that you think was unfair; untrue; or harassing, oppressive, or abusive, please contact us to discuss the situation further. We offer a free case review for all FDCPA cases and if we agree to handle your case, you won’t have to pay us any money up front. Our fees come from the money we recover for you if you win your case or accept a negotiated settlement.

(photo: http://www.flickr.com/photos/12567713@N00/463392640/)

Stop collection harassment with the FDCPA

stop collection harassmentThe best way to stop collection harassment is to know and enforce your rights under the Fair Debt Collection Practices Act. The FDCPA is a powerful federal law that regulates what debt collectors can and can’t do when collecting debts. In passing the FDCPA, Congress recognized the negative impact that abusive debt collection has on people and provided powerful remedies against collectors who break the law. Here’s what you need to know about how the FDCPA protects you from debt collection harassment:

The FDCPA applies to “debt collectors” collecting “consumer debts”

The FDCPA only covers a debt collector that is collecting a debt for someone else. It does not apply to a creditor collecting its own debts. So if you are getting collection calls from a bank or credit card company that is collecting its own debts, the FDCPA doesn’t apply. But the FDCPA does apply to collection agencies, debt buyers, and law firms who are collecting debts for someone else.

In addition, the FDCPA only applies when the debt being collected is a consumer debt. This is a debt used for personal, family, or household purposes. If the debt was incurred for a business, the FDCPA doesn’t apply.

The FDCPA protects you even if you owe the debt

It doesn’t matter if you owe the debt, the collector still must follow the FDCPA. The law recognizes that you shouldn’t be subjected to collection harassment and abuse just because you owe someone money. The FDCPA also protects people who are being wrongfully pursued for debts that they don’t owe.

Any conduct that is unfair, untrue, or harassing is prohibited

In general, any collection conduct that is harassing or abusive, false or misleading, or unfair is a violation of the FDCPA. This is extremely broad and potentially covers a wide range of collection tactics. The FDCPA itself and various court decisions have established that the following specific conduct is illegal:

* Collecting a debt that you don’t owe;

* Communicating with other people about your debt;

* Calling you at work after you’ve told the collector not to;

* Telling you something that is false or misleading (often a problem in student loan collections);

* Harassing you, insulting you, or using racial slurs;

* Not telling you that they are a debt collector;

* Robocalling your cell phone without your consent

This isn’t an exhaustive list. If you think a collector’s conduct might be illegal, you should talk to a consumer lawyer to determine whether the FDCPA has been violated.

How to use the FDCPA to stop collection harassment

The FDCPA gives consumers the power to sue a debt collector that violates the law. It’s a great way to stop collection harassment cold and to hold the debt collector accountable for its illegal conduct. Under the FDCPA, a successful claim gets you:

* Up to $1,000 in statutory damages (even if you’ve suffered no monetary loss);

* Provable actual damages (including for emotional distress);

* Your attorney fees and court costs must be paid by the collector

Most consumer lawyers, including me, handle FDCPA lawsuits on a contingency fee. This means that you don’t pay us any fees unless I recover money for you and those fees come from the collector’s pocket, not yours. Congress wrote the FDCPA this way to incentivize people to enforce the FDCPA and help the government regulate debt collectors and ensure compliance with the law.

 

Debt collection judgment? What you need to know.

debt collection judgmentA debt collection judgment is a court order that you owe the creditor money. The judgment is the final decision in a collection lawsuit. It gives the debt collector the power to garnish your bank account and wages. It has a negative impact on your credit score. And in some cases, creditors will exercise their post-judgment power to seize some of your personal property and have it sold to pay the debt. Having a judgment against you is an unpleasant situation to be in and is one of the main reasons why it’s so important to answer the summons and complaint. If a debt collector has a judgment against you, here are some of your options:

Consider vacating the debt collection judgment

If the judgment was obtained by default, you may be able to bring a motion to vacate the judgment. This will give you a chance to defend yourself. Think of it as a do-over. But you’re only able to get a debt collection judgment vacated in very limited circumstances. A consumer lawyer can help you decide if a motion to vacate is right for your case.

Negotiate a settlement or payment plan

If a motion to vacate the judgment is not appropriate in your situation, your options are pretty limited because the time to dispute the debt has passed. In many cases, your best choice may be to try to negotiate a settlement of the debt collection judgment. That may be the only way to avoid the stress and inconvenience of garnishments. Good deals are hard to come by after judgment because you’ve lost most of your leverage. But if you can demonstrate a significant financial hardship, or have a lump sum of cash available, you may be able to get the creditor to knock a decent chunk of the balance off.

If all else fails, bankruptcy may be your best option

If the judgment is for a significant amount of money, or if you have multiple judgments, your best choice may be bankruptcy. Bankruptcy puts an immediate stop to garnishments and other collection activity and will allow you to wipe out or manage all of your debts.

Remember that the FDCPA applies even after the judgment is entered

The FDCPA is a federal law that regulates what debt collections can and can’t do when collecting. If a collection violates the FDCPA, you have a legal claim against them for up to $1,000 in statutory damages, plus provable out-of-pocket and emotional damages. The debt collector also has to pay your attorney fees and costs. A viable FDCPA claim is also great leverage to get a debt collection judgment resolved favorable. So keep a record of all the conversations you have with the debt collector and save all letters and voice mails from them. And if you think that a debt collector has violated the FDCPA, talk to a consumer lawyer right away.

 

(photo: Xurble)

Debt buyer lawsuit: What you need to know.

A debt buyer lawsuit is a collection lawsuit brought by a company that bought the debt after it went into default. It’s a completely different animal than a collection lawsuit brought directly by the original creditor.

What is a debt buyer?

A debt buyer is a company that purchases delinquent debts from creditors for pennies on the dollar and then tries to collect the full amount, often making a nice profit in the process. Debt buyers have strange names like Midland Funding, Cavalry Portfolio Services, or Unifund CCR Partners. As with any business, they come in all shapes and sizes. Some debt buyers operate nationwide and have millions or billions of dollars in accounts. Others operate regionally and have much smaller debt portfolios. Some specialize in certain types of debt, like credit cards, second mortgages, and the like.

Here’s a partial list of some of the debt buyers I’ve come across:

  • Asset Acceptance
  • Cavalry Portfolio Services
  • Central Prairie Financial
  • Dakota Bluff Financial, LLC
  • Debt Equities, LLC
  • Equable Ascent Financial, LLC
  • Livingston Financial, LLC
  • LVNV Funding
  • Midland Funding
  • Palisades Collection
  • Pipestone Financial, LLC
  • Portfolio Recovery Associates
  • Red Rock Lake Financial, LLC
  • Unifund CCR Partners

Why it’s critical to answer a debt buyer lawsuit

Debt buyers are notorious for filing collection lawsuits in bulk. According to a 2009 article in the William Mitchell Law Review, debt buyers obtained 2,400 default judgments a month in Minnesota. These judgments were obtained by default because the consumer didn’t show up in court. In almost all of these cases, the debt buyer didn’t have to present any evidence to a judge.

This last point is crucial because debt buyers acquire accounts in bulk and often don’t have the account-level documents needed to prove their claims. That’s why it’s so important to answer a debt buyer lawsuit within 20 days of being served to ensure that a judge reviews their evidence.

Possible defenses to a debt buyer lawsuit

One good way to defend a debt buyer lawsuit is to challenge their proof of ownership. Because they didn’t extend the credit, they should be required to prove their ownership of the account and their entitlement to collect the balance. The more times a debt has been bought and sold, the less likely it is that the current debt buyer can prove each step in the chain of ownership.

Another possible defense is to dispute the debt buyer’s evidence. Under the court rules, if a party wants to introduce documents (like credit card billing statements, for example) it must provide testimony about the reliability of the documents. This can be difficult for the debt buyer to do properly because they didn’t create the account documents in the first place.

An additional defense to consider in a debt buyer lawsuit is the statute of limitations. The statute of limitations is the length of time that a creditor has to start a lawsuit after the account goes into default. In Minnesota, it’s generally six years, although there are exceptions. It’s not uncommon for a debt to be bought and sold multiple times and some debts bounce around for years before a legal action is taken. These repeatedly-sold accounts are sometimes called zombie debts (because they never die) and the statute of limitations is often a powerful defense in these cases.

There are other possible defenses that are more fact specific and will depend the particular facts and circumstances of your case. There are also some bad defenses that consumers often put in their answer. It may be wise to discuss your case with an attorney experienced in defending debt buyer lawsuits before proceeding too far to see what defenses apply to your case and how strong they are.