Fair Debt Collection - California Lawyer

FAQ: How can a debt collector prove a debt?

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.

FAQ: What happens if I dispute the debt or am not sure if I owe it or the amount claimed?

My office receives many inquiries regarding a debt collector's activities after the alleged debtor sends a written dispute to the debt collector.  Indeed, my office brings many federal lawsuits that include allegations that the debt collector violated the Fair Debt Collection Practices Act ("FDCPA") in relation to a consumer's right to dispute the validity of the debt. 

Many debt collectors, unfortunately, attempt to keep the exact nature of the debt hidden from the consumer - often contacting the consumer by telephone and demanding an exhorbitant amount, and then offering to "settle" for significantly less.  Meanwhile, the consumer is left wondering what the debt is for, whether this particular debt collector has the legal right to collect the debt, and whether the amount being claimed is actually owed.

Fortunately, several provisions of the FDCPA provide the consumer the opportunity to learn more about the debt before agreeing to make any payment.  The importance of proceeding with caution with a debt collector cannot be overstated.  If you actually owe the debt collector the amount owed, there should be no resistance to your request for detailed information about the debt.  Unfortunately, that is rarely the case.  Be aware that if a payment is made of any kind within the statute of limitations (four years in California), that can begin another four year period, meaning it extends by another four years the time within which a lawsuit can be brought to collect the debt.  If any sort of new agreement is made after the statute of limitations has expired (meaning the debt cannot be legally enforced), a new period of four years may begin. 

Section 809 of the FDCPA (15 USC 1692g) provides as follows:

Within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the following information is contained in the initial communication or the consumer has paid the debt, send the consumer a written notice containing--

(1) the amount of the debt;

(2) the name of the creditor to whom the debt is owed;

(3) a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector;

(4) a statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and

(5) a statement that, upon the consumer's written request witin the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor.

This provision means that it is a violation of federal law for a debt collector to continually contact a consumer by telephone without providing the required written notice described above.  If you have been contacted by a debt collector and have not received the required written notice, contact a consumer attorney who handles debt collection matters for a consultation.  California residents can contact my office.  Consumers outside California can visit the National Association of Consumer Advocates to find an attorney in their state.

Let's assume a written notice is sent containing the required information.  It should be noted that the validation notice cannot be "overshadowed" by the debt collector's collection activities.  Thus, demanding immediate payment (e.g., within ten days) or threatening to file suit in a manner so strongly as to suggest that the collector will not cease collection efforts while validating the debt pursuant to the consumer's request in the same letter as the notice misleads the consumer about his or her validation rights and violates the FDCPA.

If the consumer now sends a written dispute to the debt collector (which should be done in a manner by which you can prove the debt collector received the written dispute - I recommend both faxing with a printed fax receipt and sending a copy by certified mail, return-receipt requested), Section 809 (15 USC 1692g) provides the debt collector must cease collection activities:

If the consumer notifies the debt collector in writing within the thirty-day period . . . that the debt, or any portion thereof, is disputed, or that the consumer requests the name and address of the original creditor, the debt collector shall cease collection of the debt, or any disputed portion therof, until the debt collector obtains verification of the debt or a copy of a judgment, or the name and address of the original creditor, and a copy of such verification or judgment, or name and address of the original creditor, is mailed to the consumer by the debt collector.

In short, the collector must halt all collection activities (including initiating a collection lawsuit) on the date it receives the request for verification, and may not begin collecting again until it mails verification to the consumer.  Thus, it is very important that consumers exercise their right to validation, even if they believe it likely they owe the debt. 

A debt collector that violates the FDCPA by failing to provide adequate or any validiation rights notice, or overshadowing that notice with collection activities, or continuing collection activities after a timely, written dispute from the consumer is liable to that consumer for actual damages, statutory damages, and any attorney fees and costs.  If a resident of California, contact my office for a free consultation.  Residents outside California should visit the National Association of Consumer Advocates to locate an attorney in their state.

FAQ: Can a debt collector threaten to sue?

A frequent inquiry received by my office involves the question of whether a debt collector can threaten to sue a consumer (alleged debtor) over a debt.  The answer is yes, with limitations.

From the federal Fair Debt Collection Practices Act (aka "FDCPA"), 15 U.S.C. 1692e(5):

[T]he following conduct is a violation of this section: (5) The threat to take any action that cannot legally be taken or that is not intended to be taken.

When a debt collector threatens to sue, it is difficult for a consumer to know whether the debt collector actually intends to follow through on its threat.  Examples of circumstances that tend to make the threat suspicious include: the debt is relatively small; the debt is disputed; or the debt collector has infrequently filed collection lawsuits in the past, or even not at all.  Researching the specific debt collector is a good place to start.  Consumer advocate and credit expert Bud Hibbs has a website on debt collectors that includes a list of collection agencies to avoid.  You might also try a google search on the debt collector.  Speaking with an experienced attorney that handles debt collection matters for consumers also can be very helpful.  California residents can contact my office.  Residents outside California can find an attorney through the National Association of Consumer Advocates.  The bottom line: if the debt collector does not actually intend to sue, or intend to sue in the threatened time frame, the debt collector is in violation of the FDCPA.

Also from the FDCPA, 15 USC 1692f:

A debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt.

Courts have held that it is unfair and deceptive for a debt collector to threaten to file a time-barred debt.  In California, most debts are outside the statute of limitations four years after the debtor became delinquent.  However, any payment at all within that four year period may start a NEW four year period, and a written agreement to pay the debt after the statute of limitations has expired may start a new four year period on the new agreement.  Thus, consumer-debtors should proceed with extreme caution if a debt collector tries to induce a payment on the debt.

The bottom line regarding a debt collector's threats to file a lawsuit is that it may not do so if it does not actually intend to file the lawsuit in the manner and time period threatened, and they may not do so if the debt is actually barred by the statute of limitations.  There may be other limitations as well (for example, threatening to file the suit in a manner that overshadows a consumer's right to dispute the validity of the debt), as this is not meant to be a comprehensive article.  Researching the debt collector and consulting with a consumer attorney would be prudent in any situation where suit is being threatened.