An old debt collection scam is back. You need to know about it if you earn a regular paycheck, because you could be a victim. Here’s how the scam works.
A debt buying company purchases a defaulted debt from a bank. The buyer then sues the debtor without notification and falsely states the lawsuit was properly served. When the debtor fails to appear in court, a default judgment is entered, and the debt buyer may start garnishing wages.
HERE’S WHAT CAN HAPPEN
When Esther Roman, a Brooklyn grandmother, noticed a 10% reduction in her weekly paycheck last year, she was told her wages were being garnished because she had failed to appear in court when she was sued for a credit card debt. But Ms. Roman had never been served with a lawsuit.
“I couldn’t sleep,” Ms. Roman told reporters. “I was desperate.”
A process server had delivered the legal papers to the wrong address and falsely stated they were accepted by a family member. With an attorney’s help, Ms. Roman was able to prove the process server filed a false affidavit. She never lived at the address where the papers were delivered.
If a debt buying company garnishes your wages, you need to be sure that you’re not being scammed. If you are named as a defendant in a debt collection lawsuit, and if the papers are properly served, you still have legal options, and good legal help is available in the Chicago area.
HOW DO DEBT BUYERS OPERATE?
A debt buyer is a business, usually a collection agency or a law firm, that buys large numbers of charged-off or delinquent debts from a creditor or lender for about 4 cents on the dollar. Debt buying companies profit even by collecting only a small percentage of those debts.
When a debt buyer purchases a debt, it can sue the borrower – or it can scam the borrower. However, most borrowers who are sued are properly served the legal papers for the lawsuit but unfortunately 90% don’t show up in court and have a default judgment entered against them, that means they automatically lose.
Some debt buyers file a lot of lawsuits. The National Collegiate Student Loan Trust, Portfolio Recovery Associates, Midland, and Cavalry, for example, are debt buyers that each file more than a hundred debt collection lawsuits every month in Cook County alone.
HOW CAN YOU DEFEND AGAINST A DEBT BUYER LAWSUIT?
Several defenses can be used to dispute a debt buyer’s legal claim on a debt. Your lawyer will know what defense is appropriate and most effective.
In civil law, an individual or a business must have legal “standing” to bring a lawsuit – that is, some type of direct legal interest in the case. In a debt collection lawsuit filed by a debt buyer, the debt buyer must have legal standing, meaning the right or ability to sue.
However, because borrowers sign no contract with a debt buying company, if the company sues a borrower for a debt, if challenged, it must prove that the original creditor assigned or sold the debt and that the debt buyer now owns the debt, which is called standing.
ONLY THE PARTY THAT OWNS A DEBT CAN SUE FOR IT
A debt buyer will claim that it lawfully purchased the debt and is the debt’s rightful owner, but when these cases go to court, many debt buyers are unable to support their claim with the right documents. They may not have the documents because they bought the debt on an “as is” basis.
Even if a debt buyer produces purportedly original documents, the court may not find those documents sufficient or acceptable. Usually their evidence is a single line of data that may include a name, address, phone number, an amount, the original creditor, and maybe a few other bits of information. This line of data came along with thousands, even hundreds of thousands of other accounts in a spreadsheet when the debt buyer supposedly bought the account.
WHEN CAN YOU SUE A DEBT BUYER?
Under the Fair Debt Collection Practices Act a consumer can sue a debt collector, or debt collection law firm, for unfair or deceptive acts.
These bad acts may be trying to collect more than what’s owed, when trying to collect, not telling a consumer their debt is outside the statute of limitations and they can’t be sued on it, failing to note an account as disputed on a credit report after it’s disputed, are just a few. In these instances, borrowers can actually sue a debt buyer and, if successful, receive damages and have the debt collector pay for the attorney fees. This is how the little guy gets into court against the debt collectors for breaking the law.
Debt purchasing companies buy tens or hundreds of thousands of debts every year, and they rely on most borrowers not fighting back. However, because of the way debts are purchased, borrowers and their attorneys can fight back – and frequently prevail – against debt buyer lawsuits.
IS THERE A STATUTE OF LIMITATIONS ON DEBT BUYER LAWSUITS?
In civil law, the statute of limitations is the amount of time that someone has to file a lawsuit. Different types of debt lawsuits may have different statutes of limitations. In Illinois, the statute of limitations on debt ranges from five to ten years, depending on the details in the case. For credit card debts the statute of limitations is 5 years from the date of default.
If you are named as a defendant in a debt buyer lawsuit, one of the first things your attorney will determine is the statute of limitations in the case. A debt buyer may not know when you last made a payment or when the statute of limitation period begins on your debt.
If your debt collection defense attorney is able to prove that the statute of limitations has expired, the court should dismiss the debt buyer’s lawsuit against you. Suing a consumer outside the statute of limitations is also a Fair Credit Reporting Act violation and they can now sue the debt collector.
Even if a debt buyer sues you, has all of the necessary documents, and the statute of limitations has not expired, a skilled collection defense attorney may often be able to get your case dismissed.
AVOID A DEFAULT JUDGMENT WITH THE RIGHT ATTORNEY’S HELP
If a debt buyer sues you, you must respond to the lawsuit and appear in court. If you don’t, a default judgment will probably be entered against you, and that gives the debt buyer the right to garnish your wages, freeze your bank accounts, or place a lien on your home or other property.
Here’s a much better option: Let a debt collection defense attorney review the case and develop an effective defense strategy on your behalf. Your attorney will explain your rights and will aggressively challenge the debt buyer’s right to sue and litigate the case through trial if necessary.
If you are named as a defendant in a debt collection lawsuit, exercise your rights and defend yourself with an attorney experienced not only in defending collection cases, but also with a proven record of suing debt collectors. A good lawyer’s help is everyone’s right.