The National Association of Retail Collection Attorneys ("NARCA") reports there are challenges for collecting purchased debt:
The difficulties from a lawyer's perspective lie mainly in problems of proof. A creditor that originates debt has access to the documentation that courts require attorneys to introduce as evidence in order to obtain a judgment. Many debt purchasers either do not have access to the source documents or can only obtain those documents at great cost.
The reality is that most debt collection firms file lawsuit primarily to obtain default judgments, in other words hoping that you won't respond to the lawsuit and that the court will just enter judgment based on your failure to respond. For this reason, it is crucial that anyone served with a collection lawsuit take the first step of responding to the lawsuit. Read the summons you are served with very carefully for information on how to respond and when to respond. California residents can obtain a free consultation with my office. Residents of other states should visit the National Association of Consumer Advocates to find an attorney in their state.
This admission by NARCA that it is very difficult to prove these debts also underscores the importance of exercising your right to validation under the Fair Debt Collection Practices Act. Remember, within five days of their first contact with you, a debt collector is required to send you certain written notices, including notice of your right to validation of the debt. If you exercise that right in writing within 30 days of the notice sent by the debt collector, they are required to cease all collection efforts until they provide you verification of the debt or a copy of the judgment they are collecting on. I discuss more about validation rights here.
NARCA goes on to discuss in more detail the problems of proving a purchased debt:
A purchasing plaintiff is unable to swear to the authenticity of the originating or source documents of a credit transaction because they do not have personal knowledge of the events which transpired at that period of time in the life of the credit agreement. The original cardholder agreement, any correspondence, and monthly statements issued by the original credit grantor are not admissible as the purchasing plaintiff's business records, as the purchasing plaintiff has no personal knowledge of how those records were created or maintained.
In the lawsuits I defend, I see over and over attempts by the plaintiff (not the original creditor but rather a debt collector who purchased the debt, sometimes for pennies on the dollar) to "prove" the debt by their own testimony. This simply does not meet the evidentiary requirements because the plaintiff debt collector has no personal knowledge of how the alleged debt originated.
NARCA recommends one way of overcoming this hurdle:
[One] alternative would be to attempt to obtain a novation of the original credit agreement, which might be accomplished by either obtaining a signed statement from the debtor agreeing to pay the balance owed [or] [a]lternatively, if the debtor refuses to sign such a statement, the purchaser could send monthly statements which, if not objected to by the debtor, might be introduced by way of the purchasing plaintiff's affidavit, indicating that no objection had been made to the statements of account. Therefore, the debtors are estopped from denying the existence of the balance.
Consumers need to be very careful when dealing with debt collectors. Often their primary goal in collection attempts is for you to agree to the validity of the debt, either by entering into a new payment arrangement or by sending them any kind of payment on the debt. This action by a consumer can start a new obligation on a new agreement, and start anew the statute of limitations, not to mention the possibility of making it much easier for the debt to be proven in court. Request documentation before taking any other action! If you actually owe the debt collector and they can prove it, the debt collector should not hesitate to provide you the proof. Unfortunately, they rarely are willing to do so because rarely are they able. If the debt collector starts sending you written statements, dispute each one in writing every time.
Absent your agreement you owe the debt, they have to go to the original creditor and get business records and testimony. Thus, after responding to a collection lawsuit, it is necessary to send written discovery, i.e. requests for answers to questions under oath and, more importantly, documentary evidence that the consumer owes the alleged debt and that the plaintiff (debt collector) owns the debt and has the right to collect it.
Again, make sure to request documentation of the debt, both in response to a debt collector's initial communication and in response to a collection lawsuit. California residents feel free to contact me for a free consultation. Residents outside California should contact the National Association of Consumer Advocates.