FDCPA and Minnesota and the Dakotas’ “Pocket Service”

Under the Fair Debt Collection Practices Act (FDCPA), a debt collector is required to provide written notice of your right to dispute a debt within five days of its first attempt to collect the debt. See 15 U.S.C. Sec. 1692g(a). The law states that “a communication in the form of a formal pleading in a civil action shall not be treated as an initial communication under this section.” 15 US.C. Sec 1692g(d). The question we address here is whether the system Minnesota and the Dakotas use, which provides for service of a document that is not yet a civil action, is excluded from the definition of “initial communication.” In plain English, if a document may become part of a lawsuit, is serving it upon a debtor an initial communication under the FDCPA requiring the disclosures of Sec. 1692g(a). We argue that it is.

That would make most lawsuits, as they are currently being served in Minnesota and the Dakotas, a violation of the FDCPA.

“Pocket Service”

Minnesota and the Dakotas have a system of lawsuit initiation that is different than that of all other states, called “pocket service.” Under this procedure, plaintiffs are permitted to create what look like lawsuits and petitions and serve them on defendants without ever having filed suit. According to Minnesota law, this “commences” the action. MN Rule of Civil Procedure 3.1. Then, if the defendant fails to answer in time, the plaintiff can file suit and seek a default judgment. If the defendant does answer, however, the would-be plaintiff is free to leave the suit unfiled. It is “deemed” dismissed with prejudice if not filed within a year, MN R. Civ.P. 5.4, but “deemed” means, as is obvious, that it is NOT, in fact, dismissed – because it was never filed. Given that roughly 85% of debt cases are not answered but are in fact defaulted, while in almost all of the cases in which people do intelligently defend themselves the defendants win, pocket service is patently unjust in debt collection cases.

But our question here is, must the petition in a state allowing pocket protection include the right to dispute the debt? Or to put it slightly differently, is service of a petition and summons in a case which has not been filed constitute an “initial communication” for purposes of the FDCPA’s disclosure requirements? Our position is that it does, and that a debt collector whose first contact with a debtor is pocket service must include within that written document a notice of right to dispute.

They never do at present.

Further, even if they did include notice of the right to dispute, the pendency of the lawsuit would probably “overshadow” the right to dispute and be another violation of the FDCPA.

Here is the operative language of 15 U.S.C. Sec. 1692g:

(a) Notice of debt; contents 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… 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 within 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.

Under the statute, pleadings of an “action” are not initial communications for purposes of the statute. Here is that provision at 15 U.S.C. Sec. 1692g (d):

(d) Legal pleadings

A communication in the form of a formal pleading in a civil action shall not be treated as an initial communication for purposes of subsection (a).

At first blush, Sec. 1692g(d) would seem to make a summons not an initial communication, but note that it says formal pleading “in a civil action.” The FDCPA has a section of definitions at 15 U.S.C. 1692a. It includes no definition of “civil action,” probably because the term has a widely accepted definition that it is a lawsuit that has been filed in court. With pocket service, no suit has been filed, and no suit need ever be filed. It is clearly not a pleading in a civil action. At most, it’s a pleading in what may become one.

Under Minnesota law, the action is supposedly “commenced” by service (Rule 3.1), but 15 U.S.C. Sec. 1692g(d) is federal law subject to federal interpretation – it is not governed by Minnesota’s vague use of the word “commenced.” At the time service is made, no court has knowledge of or jurisdiction over the matter – there has been no judicial involvement at all – and there may never be. Such a document cannot reasonably be construed as an actually existing lawsuit.

In addition to the plain language of the statute referring to a “civil action” and not a “potential civil action,” courts should require the FDCPA warnings in pocket service because the FDCPA is a “remedial” statute that should be read broadly and it is necessary to protect the interests the FDCPA requirements were designed to protect.

The purpose of the dispute provision of the FDCPA is to prevent debt collectors from pursuing people who do not owe the money. Congress had found that many such suits resulted in default judgments that were unjust. That risk, and that result, are plainly present in the pocket service jurisdictions. Moreover, as I understand the law, a debt collector can continue to communicate – completely free of the FDCPA – for up to a year under the most coercive conditions imaginable, before needing to file suit and submit to a court’s oversight.

The justification often given for exempting pleadings in a suit from the protections of the FDCPA is that once suit is filed, a court has oversight of the matter and can prevent overreaching and unjust behaviors. If pocket service is permitted without the notices required by the FDCPA, then the protections are withdrawn without that judicial oversight. Indeed, that state of affairs would enable the very thing the FDCPA was designed to prevent for the very reason that it allows debt collectors to seek default judgments without costs or judicial oversight, but to drop the case in the event a defense is offered, also without cost. So frivolous and unjust suits are encouraged, and debt collectors – notorious for their dishonesty and overreaching – would be permitted to set up a “heads I win, tails you lose” scenario fundamentally at odds with the purpose of the FDCPA.

If the defendant appears and defends, then the quasi lawsuit can continue without judicial oversight for up to a year (or even beyond) without a court even becoming aware of it. Such a situation is ripe for abuse, and there can be no doubt that is being abused on a routine basis.

The fact that Minnesota and the Dakotas would allow such a process for lawsuits other than debt collection may reflect badly on them but has no effect on the FDCPA. Under the Supremacy clause of the constitution, Federal law governs where there is any conflict with state law. The FDCPA makes pocket service without the notices required by the FDCPA illegal.

Genetic Privacy and Government Data Bases

Michael Connelly is one of my favorite authors, and he’s just come out with a new novel, Fair Warning. It is, like so many Connelly books, about serial killers. In this one, the killer appears (I haven’t finished the book yet) to be using a company selling genetic family tracing information to locate victims. Unlike any other Connelly book of which I’m aware, Connolly uses a real person as a character, and a real business of which he is actually a part (FairWarning.com). He also makes this point (and verifies that it is current law): the marketing of genetic information is not regulated by the government.

I see those messages as activism,  by Connelly, although the message that a business or type of business is unregulated by the government is far enough from my main concern on this issue that I haven’t looked to see if Connelly has actually identified what he was doing as activism. In my opinion, the government itself poses the far greater danger, and of course government always exempts itself from regulation.

Here are the facts. In the book, the company in question was selling genetic sample packs. You fill them out, give them to the company, they do a genome analysis and tell you, among other things, whether you have unknown family members. The company makes very little money off of its customers, and it gets rich by selling their anonymized information to companies all over the world. (All of this happens in real life. There’s even a cliche about it: if you don’t know how a company makes its money, YOU are the product.)

In addition, there are many other sources of “bio-information” about people. Apple (at least) lets you use your fingerprint as the security password controlling whether or not a phone opens. And everywhere you go there are video cameras videoing you and everybody. Even as you read this article, police are using those camera images to track down suspects related to the protests happening everywhere. Facebook keeps everything you give them, and as much as they can appropriate with their snooping software, as well. Companies track the location of your mobile phone 24/7 and store the information forever, and this, I suppose, will be the basis for the “contact-tracing” apps we keep hearing about. I keep hearing that Microsoft or other companies are working on microchips that could be embedded in our bodies that would store and transmit various biological information.

There is a vast amount of information out there linking your genetics, lifestyle, and looks, your computer habits and identities, and every other conceivable fact about you. It is all accessible to government, and computers now have the capacity to assimilate it and use it in many ways.

Of course there’s a fox (or many foxes) for every hen house, and that’s what Michael Connelly likes to write about (which he does, superbly). I am concerned with the bigger question: is freedom possible when we all live in such a hen house? I fear that it already isn’t possible, but that if it still is, it won’t be for long. I believe protecting, restricting and reducing such information is everyone’s responsibility – everyone who believes in freedom, anyway.

To link this to debt collection, which is my normal task, is simple. The existence of all this information makes it easier for debt collectors to find you and your money. Makes it easier for them to sue you, and whatever makes it easier to sue you makes it more likely that they will. And it makes it more likely that your information will be stolen and fraudulent accounts will be created in your name. The more information the scammer has, the harder it will be for you to clear your record.

Moratorium on Evictions

There’s a New Moratorium in Town

With evictions beginning to happen, the feds have stepped in with an eviction moratorium. See, hosted.ap.org/berkshireeagle.
You have to prove four things to block an eviction: 1) Income < 99,000/yr if single; (2) you have sought government assistance to pay; (3) you can’t pay because of “Covid-19 hardships” and (4) likely to become homeless if evicted. The courts supposedly determine whether the moratorium applies in specific instances. The fact that the moratorium is a *defense* to eviction rather than a ban on access to the courts for landlords seeking eviction suggests that some landlords will ignore the moratorium and press on with evictions. And it raises issues of proof as to what must be shown and how, so it is not an ideal solution even to the evictions.
On the other hand, if enough people assert the right, it may simply cause cost-conscious landlords not to bring eviction suits. The problem there is that landlords need and want their rent, and in most places the legal fees for asserting an eviction are not much of a deterrent to bringing an eviction action. Thus landlords have a large incentive to try to evict and small reason not to go for it even if they shouldn’t get it.

Usury and Non-Bank Loans

National Banking Act and Debt Law

I have had my hands full lately with the National Banking Act (NBA). Specifically, the question is whether the NBA, which protects national banks from usury claims, applies to debt collectors which buy the debts. It turns out that question has several possible answers.

Some Background

Here’s the background: some states have laws limiting the amount of interest lenders can charge. Under the NBA, a bank can issue credit cards that charge high interest in states with usury laws. Yes, it’s a scam (they call it “exporting interest rates”), but they can. What happens if your debt gets sold to a debt collector? The NBA applies to national banks, not other businesses, so you might think a debt collector would be committing usury by trying to collect illegal rates. That would also violate the Fair Debt Collection Practices Act (FDCPA).

The Second Federal Circuit of Appeals found that debt collectors collecting usurious rates was, in fact, illegal in a case called Madden v. Midland Funding, LLC 786 F.3d 246 (2015). Some other circuits, notably the 8th, have tended in the other direction. The Supreme Court denied certiorari (review) of Madden, so it remains in place as law of the 2nd Circuit. Unfortunately, the debt collectors managed to sneak a new regulation through that negates Madden. That regulation is at: 12 C.F.R. part 331, 84 Fed. Reg. 66845.

Do you Have a Usury Defense or Attack?

This leaves us in an odd place. If you are in the 2nd Circuit being sued by a debt collector on a card with interest higher than your state allows, you have a powerful defense. I think it is still good, though you can expect some fighting on the question of retroactivity of the regulation. What about claims arising in the future, though? What about claims outside of the 2nd Circuit?

Courts are supposed to give “great deference” to regulations duly issued by agencies charged with enforcing specific laws. Without going into details, this regulation would seem to fit that bill and should probably receive that deference. It is not unheard of for the courts to reject such a regulation, but it is rare, and, in my opinion, very unlikely in this situation – even in the Second Circuit. Thus I believe that in the future this defense will not be effective. I do believe it could be raised in good faith however, at present, and that may have some advantage for a pro se defendant. It will be a long shot even in the Second Circuit, however, and longer elsewhere.

What about claims existing now but outside the 2nd Circuit? Will the regulation affect the way the 8th Circuit, for example, reads Madden? It probably should not, but it probably will. The regulation is supposedly the FDIC’s reading of an existing statute rather than a new legislative enactment – it will probably be considered an authoritative interpretation of the statute even though, in practical effect it is a new legislative act. But this is not certain, and again, I think the issue may have advantages for pro se litigants to raise, and winning is not out of the question in my opinion.

What if you live in a state with a usury law and a debt collector is trying to collect higher rates – but is not suing you. Can you sue them? I believe the answer is yes – all the foregoing analysis applies to the attempt to collect the debt, not necessarily litigation attempting to collect the debt.

Application to WebBank

Incidentally, the NBA explicitly extends to all FDIC-insured entities. This question came up in a teleconference relating to loans issued by WebBank, which apparently IS FDIC insured. Our consideration of whether WebBank can charge usurious rates, then, must conclude that it can indeed do so.

Public Policy

One might consider that enforcing an explicitly illegal contract (usury) would be void as against public policy under state law. And so it is. However, the federal preemption doctrine that the NBA invokes overrules that – states cannot claim a federal policy is against their public policy. In a very real sense, it is to exploit this facet of the law that the NBA exists in the first place

Could this Be a Good Time to Start Something New

This is a bad time in the world and in the economy. Could it be a good time to open a new business? Maybe – if it’s the right one. In this article I’ll take a look at a couple of ideas that occurred to me. This isn’t my normal mission here, but maybe it could help some people in what’s coming.

I do not believe the Corona Virus is finished with us. Although it looks like state authorities are about to open up businesses again, I have my doubts about the wisdom of doing that, and it also seems unlikely that things will stay open. On the contrary, I think we’re in for a longer haul. And when normal returns, it will be a new normal – I saw one study projecting that over 40% of jobs lost now will not come back. So an alternative could be a good idea.

I make one suggestion to people considering a new business. Make it pay immediately unless money isn’t an issue for you. This isn’t a good time to go out on a limb.

The two ideas I’m going to discuss are pretty different from each other. The first is something almost any adult with a car could do. The second is far more specialized but could be used as a template for anyone with such a specialized background in various things. Neither should involve an outlay of cash at all, and both are “scalable” (can be ramped up and leveraged). Both are based on current realities.

Restaurant Food Delivery

As everybody knows, most restaurants have been forced to shift from in-store dining to curbside pickup or delivery. And you may know that they are relying on certain delivery service apps. For a much fuller discussion of the way this is hurting restaurants and the way the companies involved make money and use their power, check out this link: Uber-Grubhub: How the Pandemic Is Launching the Era of Online Platform Regulation. To summarize the article very briefly, the delivery service apps are charging up to 30% of the price of the meal for delivery. Some (few) jurisdictions have mandated a maximum of 15%, and some have required that tips be given to the drivers, instead of what appears to be the prevailing custom of having them go to the apps.

The money charged restaurants is killing them. I’m told that there is also a direct charge to consumers as well sometimes, and there is another danger of which restaurant owners may, or may not, be aware. But I know.

The way most phone apps work is not by charging for their use. Do you know how they make their money? They make money by selling data the apps generate to big data processing companies (“Big Data”). Food delivery apps are creating a lot of data. Of what? Of restaurants and their customers, of addresses, food preferences, time preferences, spending habits, and net delivery income. If you owned Joe’s Pizza, would you want Sam’s Pizza, or Frank’s Italian Food, two blocks away, to know all these things about your business?

Not unless you’re crazy. And do you trust Big Data not to sell that information to your competitors? Again, not unless you’re crazy. But restaurant owners might not know what the delivery apps are, or could be, doing. And they may not have a choice.

You could give them that choice. You could call up Joe’s Pizza and offer to deliver for them. Make your best deal, and see if you can make it pay. It’s low risk physically if you’re careful, and if you already drive, you’re risking only your time, financially. You’d be local helping local business and local people, and you would be thwarting, to some extent, Big Data (which I think is a significant social benefit). There could be regulatory obstacles, of course, and eventually you will need to take it seriously as a business, of course, but those things wouldn’t stop you from starting. And as you learn, you can figure things out.

Dungeons & Dragons Dungeon Master

Dungeons and Dragons (D&D) is a “table-top role-playing game” (ttrpg) that several people can play. You create characters and navigate a “dungeon,” which is a made-up world inhabited by a large variety of creatures, many of them hostile, and some with missions for you to perform. Your character starts at a certain level of skill and talent and gains experience and items as you navigate the dungeon. I played the game in college and found it addictive just like that. There was a computer game based on D&D which had overall goals – a “game story” of which you were a part. Whether that’s part of a dungeon master’s trade I don’t know.

An amateur dungeon-master was facing eviction and a great need to earn money but was worried about leaving the house and possibly risking the life of at-risk members of his household. I suggested he consider being an online professional dungeon master. I know that gamers, and especially D&D gamers, are often techies who have not been as hurt by the Corona Virus or social distancing, so the customers for dungeon masters should have money. But if they’re social distancing, people who were playing the game in person might want to do it online, but how? They’d need an online dungeon master.

D&D is an intensely social game, with interaction between player-characters and the dungeon master, and between player-characters as they face various battle scenes and strategic choices. That’s what makes it such a fun game. An online dungeon master would need a video app. The person to whom I spoke also said he needed a computer program costing $300 and microphone, another $100. So that was a $400 risk – that he could not afford to take, and which I said everybody should avoid anyway.

Finding Out

And anyway, who knows whether online dungeon mastering would pay? How would you find out without spending a ton of money?

Here’s how you solve both of those issues. You advertise, for free, in Craigs List or whatever online advertising forum you can, as long as it’s free. And what do you advertise? Online dungeon mastering, of course. Figure out how much you would need to make for it to be worth it to you, and how much people are willing to pay, and if those two numbers intersect, you have a start. But you still have to get $400 to set it up, how do you do that? You sell prepaid subscriptions. If it was going to cost $50/month per person for one evening per weekend, you offer a prepay price of $25. When you have 16 customers paying that, you buy your equipment and start.

Note that I just made up all of the numbers I used (except the equipment), from what the market would pay to how many evenings per week you would do. I just wanted to illustrate the way prepaid subscriptions could get you started. That would be true of any board game or, actually, any other service you might sell, at a profit, if you needed capital to start. You can get it from the people who want your service – and looking for those people helps you learn how valuable the service is and what the demand for it is.

I believe the market is going to be very tough for wage-earners or people with jobs dependent upon physical customer contact for quite some time, and I also think that many jobs that previously existed simply won’t come back. If you can find something where you are not an employee and which does not require a lot of customer contact, I think that would be a smart thing to do.

Default During the Time of Corona Virus

It is not yet clear whether the courts are now accepting new cases for filing in debt collection or not, but some people are contacting me with cases they have recently received. Are some law firms have cases previously filed served? Are service processors just finding people home now? Or are people just finding cases that have been dropped off in some way? I don’t know.

But here’s what I do know: if you get served and do not answer a lawsuit in time, you will be “subject to default.” It could happen without further notice. And this presents a huge risk for people in debt.

Let’s talk about what “default” is, first, then I’ll show you why it’s such a risk now.

What Default Is

In litigation, a default judgment occurs when you don’t respond to a suit within a certain amount of time. The judgment will normally be for whatever was sought in the lawsuit. If this happens to you, you have “lost” your suit.

How Default Happens

Default is a two-step process, though often, but not always, these two steps are collapsed into one. The first step is the “Order of Default.” In that, the court finds that service of process occurred and was proper to establish jurisdiction, and you failed to respond. It declares you liable.

The second step is the “Judgment of Default,” in which the court establishes the amount you owe and enters a judgment against you. At that point the debt collector can begin to garnish wages or attach bank accounts (take them). They don’t start collecting, in other words, till there’s a judgment.

The way defaults normally happen in most courts is you are served and due to respond or show up in court on a specific date. THAT is your NOTICE. And no other notice is required unless you do, in fact, respond in court. The court doesn’t require plaintiffs to keep you informed after you ignore service of suit.

Increased Risk During Corona Virus

Suppose you receive summons now of a lawsuit. You may, or may not, even be able to file an answer. But probably are able to, even though you won’t be required to go to court (as of now). If you do NOT file an answer, you may not be entitled to any further notice of the suit at all. That would mean, or could mean, that when the courts reopen, you are immediately liable to have an order of default against you. It MAY even mean that there already IS one, because the courts are in business even if they are closed to the public, and they could be issuing default orders.

When they open again, the debt collector will seek and get a default judgment without ever needing to tell you. Your first notice could be from your employer telling you your check has been garnished. Or from bounced checks coming back to you. During a time like this especially, but always really, this is likely to be a life-threatening disaster.

What to Do

If you have been served a lawsuit, you should respond either with a motion to dismiss or an answer. You cannot ignore the suit just because the court is closed and you don’t have to, and cannot, go to court. In other words, don’t treat this as a vacation. If you’re being sued, take defensive measures immediately. Start defending yourself. As I have pointed out elsewhere, this is actually a good time to do that, because the debt collectors are not in a position to a lot of work on your case. Start defending, and they may drop your case and look for easier pickings.

Debt Defense in 20-20 Vision

Introducing the 20-20 Memberships

We are introducing two new types of membership, the 20-20 and 20-20 plus. Right now, the difference is just how long they last, but it is likely that there will be some special content or materials for 2020+ before too long.

If you have watched the videos at the Overview of Litigation page, you know why we’re offering these products and why I think they’re a great deal. I will outline the new memberships briefly below.

First and mainly, the 20-20 membership will be a “pay-once” program. For a flat price you will receive all membership benefits for 12 months. This should get you all the way through to the end of any litigation you are involved in now. You won’t buy anything else from us or be charged again. Here’s what the 20-20 membership includes:

Teleconferences – currently we have them twice per week. Depending on need, that number could increase so that people regularly have an opportunity to ask questions in real time.

Access to member-only materials, including what used to be called the document bank. This gives you access to materials that have been created for a variety of different real-life situations as well as a large number of articles addressing the situations most debt litigants encounter. In other words, the 20-20 is a full membership, and you get everything members ever get.

Free access to all of our products. You won’t have to buy anything anymore. If you need a motion to compel pack, for example, you can download it for free. And that’s true of all of our materials that are currently for sale.

Specifically, that includes the Debt Defense Litigation Manual, the Three Weaknesses Almost every Debt Collector Has and how to Use them, materials on assignment contracts (not yet, but soon, a product), the Legal Research and Analysis report, and much more.

Comparison to Other Memberships

You can check the prices, but you’ll find that, added up, these materials and benefits would cost at least $1,000, so this is by far the lowest price we’ve ever offered. The 20-20 (regular) will cost $250 for 12 months, and the 20-20+ will cost $300 for 18 months. These prices will stay good at least through February 15.

Our other memberships are designed more on a pay-as-you-go basis. They all include at least two teleconferences per week, with the possibility of increasing as necessary to allow you to get questions asked and answered. Beyond that, they offer general access to most documents in what used to be called the document bank. And they have a graduated discount on specific products you might need. Our goal was to let people get and pay for what they need but not other stuff.

That turns out not to be ideal for some, since it involves repeated billing (monthly) and occasional extra expense when they need a new product. If you prefer, though, this membership remains available.

Our 20-20 memberships eliminate the repeated and occasional costs. Pay once up front and get it all for a year (20-20) or year and a half (20-20+). The overall price will be much lower than one of the other memberships if you end up needing one or more products, as most members will. I say that because if you need a discovery pack and any one motion pack you’re already saving money, and it is likely that you will need those things. Many members need much more.

Overview of Debt Litigation

The new 20:20 project –

New Year, New Kind of Membership

There are three videos in this series. Together, they describe the debt litigation process and almost everything you will encounter as you go through it. We have products for every situation, but these videos are more about the process than our products. Below the videos you will see more about a new product that brings all of our other materials together. If you prefer what we have previously offered, those things will still be available.

Part One

The debt and debt litigation industry.

Part 2

Debt Defense and why it can be so difficult

Part 3

Why Pro se works and how you can do it.

Here is the 20-20 Membership

We are introducing two new types of membership, the 20-20 and 20-20 plus. Right now, the difference is just how long they last, but it is likely that there will be some special content or materials for 2020+ before too long.

If you have watched the videos above, you know why we’re offering these products and why I think they’re a great deal. I will outline the new memberships briefly below.

First and mainly, the 20-20 membership will be a “pay-once” program. For a flat price you will receive all membership benefits for 12 months. This should get you all the way through to the end of any litigation you are involved in now. You won’t buy anything else from us or be charged again. Here’s what the 20-20 membership includes:

Teleconferences – currently we have them twice per week. Depending on need, that number could increase so that people regularly have an opportunity to ask questions in real time.

Access to member-only materials, including what used to be called the document bank. This gives you access to materials that have been created for a variety of different real-life situations as well as a large number of articles addressing the situations most debt litigants encounter. In other words, the 20-20 is a full membership, and you get everything members ever get.

Free access to all of our products. You won’t have to buy anything anymore. If you need a motion to compel pack, for example, you can download it for free. And that’s true of all of our materials that are currently for sale.

Specifically, that includes the Debt Defense Litigation Manual, the Three Weaknesses Almost every Debt Collector Has and how to Use them, materials on assignment contracts (not yet, but soon, a product), the Legal Research and Analysis report, and much more.

You can check the prices, but you’ll find that, added up, these materials and benefits would cost at least $1,000, so this is by far the lowest price we’ve ever offered. The 20-20 (regular) will cost $250 for 12 months, and the 20-20+ will cost $300 for 18 months. This membership should be available for sale as soon as December 27, and the prices will stay good through February 15.

Click here for a more detailed description and comparison of these new memberships to the other memberships.

Proving Ownership of the Debt – How Big is that in Debt Law?

 

Proof of Ownership of the Debt – How Hard Can it be?

To download a free copy of this article in pdf form, click here: How Hard is Proving Ownership

I get comments like this all too often: “A debt collector got a judgment without even proving ownership of the debt.” It makes me feel bad, but it makes me angry, too. Let’s talk about proof of ownership and then seque to a larger point – the point that ever person being sued by a debt collector MUST LEARN.

Proof of Ownership

It is not hard to prove ownership in the law. For a car or piece of real property (land), you just need a title (car) or (deed). You get them, essentially, by the seller giving the buyer a bill of sale which in turn gets verified by the state.

The state procedures complicate things a little bit, but it’s basically a very simple, rubber-stamped process. It is a mistake to regard this process as much of a hurdle or legal protection against the collectors. It isn’t in anybody’s interest to make it difficult or unpredictable – on the contrary.

Selling a debt is easier than selling a car. You need a bill of sale that identifies the thing being sold. And that’s all. Our commercial system favors a simple sales process because people believe that where there is easy and rapid commerce, there will be more commerce, and that makes everybody better off. That’s the theory, anyway.

It is Possible to Blow it

Now, as it happens, debt collectors sometimes do not satisfy this very simple process. How? By not identifying the thing being sold.

A typical debt bill of sale document says, “I, Bank, hereby assign all rights to the following debts to Debt Collector. See Attachment A for the debts assigned.” Sometimes – and quite often, actually – the debt collector, in attempting to prove it owns the debt, neglects to attach the “Attachment A” to its proof. That leaves the bill of sale unconnected to any specific account and thus fails to prove that the debt collector owns the debt.

The courts should always take that failure seriously, as it really does mean the debt collector did not prove it owned the debt. If it happens at trial, and you demonstrate the failure of proof, it should result in instant dismissal of the case because you have shown that the plaintiff has not established a constitutional requirement – that it be a true party in interest.

Still, you can see how it is basically a technicality, and you should know that the courts don’t like technicalities that help people avoid debts.

Chain of Title

Now let’s go one step further. Suppose a debt collector buys a debt and then sells it to another
debt collector. That happens all the time. If either of the bills of sale forget to attach “Attachment A,” then you say that the debt collector cannot prove a “valid chain of title.” That’s because with rare exceptions, a party that does not own a valid title cannot sell a valid title.

Again, though, not all courts are sensitive to the justice of this “technical” rule. It is NOT really a “technical” rule. Proof of title is critical to making sure that the plaintiff is the correct party in interest, as a bogus suit which manages to get a judgment against you will not bind the person with a legitimate title. If they scam you enough to get a judgment, then this will not stop the person with the legitimate title from suing you. Why should it? And that means you might have to pay twice.

Nevertheless, the courts have treated this requirement as if it were a technicality because it can look like the debt collector simply overlooked that element of the proof. You will be burned sometimes if this is all you depend on. Even though in my opinion you should always win.

The Bigger Issue of Attacking on ALL Fronts

Okay. Now let’s move on to the bigger issue. We put out a video called “The Most Dangerous
Myth for People in Debt” which may give you some insight into this question. The point there is that is that you cannot depend on other people – not courts, debt collectors, or opposing lawyers – to help you. You can’t depend on them to do the right thing.

In the real world, what you have to do is pile up as many reasons to do the right thing as possible and hope that one of them works.

If they don’t legitimately prove ownership you should win and probably will win more than 50% of the time. If that’s all you’ve got, you go with it, right?

But if you’ve got a debt collector, you know the chances are strongly against them having
legitimate, admissible evidence of the amount of the debt.

So you attack that, too.

They probably don’t have good evidence that you owe any debt, or that the original creditor
ever sent you statements, so you attack those things, too.

Any time you stop attacking before you run out of things to attack, you’re depending on someone else to take care of you. You’re hoping they’ll do the right thing without having been told all of the reasons to do so.

And how do you know what to attack? By doing discovery, by probing, researching, thinking… by doing everything you can, in other words, to find out what to attack. Our materials help you develop a full plan of attack and help you at every stage in implementing that attack, from answering the petition and submitting discovery, to motions and eventually trial.

Whether you use our materials or not, make sure you keep attacking the debt collector’s case until there’s nothing left to attack. Then you can hope to win.

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