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Debt-Buyer Lawsuits Predicated on Inaccurate Data

Blogs from March, 2014

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There is now another reason that those in debt should feel confident about fighting lawsuits brought by a debt-buyer.

GavelAccording to a new report published in the spring 2014 issue of Communities & Banking‚ debt-buyers are frequently suing the wrong party and for the wrong amounts. Our Woodland Hills consumer attorneys know that these kinds of inaccuracies can tank a case‚ sometimes leading to the complete dismissal of your liability for the debt.

The problem is that too many borrowers assume they can’t win‚ so they don’t show up to court. In these cases‚ because there is no one to ask questions or represent your interests‚ the courts often impose a default judgment in favor of the creditor. That can result in your wages being garnered or even liens being placed on your vehicle or home. They are banking on the fact that you won’t fight back.

But many times‚ the plaintiffs in these cases aren’t even the original creditors. As the recent report indicates‚ many banks have moved away from collecting outstanding debts in-house.

Instead‚ banks routinely sell the rights to collect debt for pennies on the dollar. Then these companies aggressively pursue these parties however they can. However‚ they may lack the proper paperwork to prove it:

  • They own the rights to the debt.
  • You still owe the debt.
  • The debt is for the amount they are claiming.

Many times‚ when the banks sell those debts‚ contracts between the banks and the third party buyers indicate that the debts are to be taken “as is.” That means that the information may not be accurate‚ documentation may be missing and the bank does not guarantee that the amounts claimed are correct. The banks also indemnify themselves for the inclusion of “ineligible accounts” in these mass sales‚ meaning that the debts have been paid off or discharged in bankruptcy or for whatever reason are no longer owed.

That doesn’t stop the third-party debt buyer from trying to collect. In some cases‚ it’s been shown that the only thing these debt-buyers have is an Excel spreadsheet with names‚ addresses‚ phone numbers and amounts. And yet‚ this is the information with which the debt-buyers show up armed to court. It’s flimsy evidence that often won’t stand up to even a preliminary challenge. But again‚ they are hoping you won’t challenge it at all.

While debt buyers only pay about 3 to 4 percent of the face value of the debts (sometimes even less) they aggressively seek to collect 100 percent – regardless of the strength of the documentation they have to back it.

And who are those they most frequently pursue? According to the report: The elderly‚ low-income families and those who would have a tough time hiring a lawyer or taking a day off work to show up in court. It’s clearly exploitation. It’s worth noting‚ however‚ that if you win‚ you may be entitled to collect attorneys’ fees from these agencies.

This issue has drawn the attention of the Office of the Comptroller of the Currency. In a recent review of the problem‚ that agency found that third-party debt buyers:

  • Have filed affidavits in which there are false representations of personal knowledge of the debt;
  • Have filed sworn documents that were erroneous and yet still resulted in judgments with financial errors in favor of the debt-buyers;
  • Have filed countless affidavits that weren’t properly notarized;
  • Have failed to follow the proper procedures under the Servicemembers Civil Relief Act‚ designed to protect active duty soldiers from financial ruin;
  • Failed to devote enough resources to adequate controls‚ training and policy with regard to its collection and litigation processes.

Let us help you fight back.

If you are contemplating bankruptcy in Woodland Hills‚ contact Cal West Law to schedule your free consultation. Call (818) 446-1334