What is Arbitration and Should you Seek or Oppose It?

January 27, 2023

Compel Arbitration or Oppose it?

Arbitration. Should you compel arbitration? Or oppose it? I’ve recently had a comment on Youtube asking me to discuss arbitration, and it has also come up in several recent teleconferences as members contemplated seeking arbitration. Others have wanted to know whether to oppose a motion to compel arbitration.

Let’s start with a definition: Arbitration is the submission of your case to a private entity known as an arbitrator. After some process and a hearing (most likely), the arbitrator will decide what happens in your case and issue what amounts to a judgment.

For debt cases, it’s always a single arbitrator or a company that will provide a single arbitrator that’s appointed, but for other cases it could be other things, like a panel, perhaps. In any event, there will be an arbitrator and some special rules that will NOT be your state’s rules of civil procedure and also might not be your state’s rules of evidence. But there will be rules that control the process.

Arbitration is popular because it makes it faster, easier and cheaper for people to engage in litigation. The discovery process will be limited, and the appeals process almost eliminated. That’s why rich companies and debt collectors always love it. Almost all of these things are completely and profoundly BAD for debt defendants. That’s why I’ve always suggested debt defendants should avoid arbitration.

But there is another side to the question, and there are some who argue in favor of allowing or even forcing arbitration in debt cases. What’s their argument?

I think the argument in favor of arbitration boils down to the fee, which apparently has to be paid up front by the debt collector And that can amount to two or three thousand dollars, or even a little more. The idea here is that debt collectors won’t want to put that much money down on the barrelhead just to chase a bad debt and that court is, for them, much cheaper.

There is some sense in this argument.

Debt collectors never worry about winning a case, but they do know you don’t have much money. That means that they’re sure they’ll win, but worry that they won’t collect, which is the most important thing to them. The more you make them spend, the more worried about that they’ll be. Maybe they’ll drop the case if you demand arbitration.

We often make the argument that by pursuing discovery, filing and defending motions, and preparing for trial you are driving up the costs of litigation and may make the whole thing too expensive for debt collectors to want to do. Again, not because they worry about losing, but just the amount of money they’re having to spend when their business model is designed around easy, cheap judgments. However, conducting discovery and filing and defending motions and the rest do in fact improve your chances of winning, and we think that, when it comes to a debt collector, you should win your case. These things are the way to do it, and the chance the company will drop the case is basically the icing on that cake.

In arbitration, it’s the whole cake. You should remember that.

One big question that may be more theoretical than real is, who ultimately pays the arbitrator?

I say it may be theoretical since I just said the debt collector isn’t sure you’ll have any money at all, but this won’t stop them from seeking as big a judgment as possible. And if they get a judgment, they WILL try to collect it. All. So be advised that the judgment size could matter.

Okay, but who pays the arbitrator?

I think some states may have rules that matter, and I know that California, for example, does have rules regarding employment and consumer-brought claims. In the absence of any state based rule, you
would look to the arbitration provision giving you the right to arbitration – i.e., the contract. That will often say who pays the arbitrator, and it can specify any of a number of things, from company pays all to loser pays all, to dividing it up. The contract isn’t often going to put all the burden on the company because, after all, the company wrote the contract.

If it says company pays all, though, the company can’t shift that payment to you if you lose. If it’s loser pays all, though, it obviously will. But if there isn’t a direction in the contract, that would usually mean you start by splitting the cost, but that the arbitrator can award the cost to the winner, i.e., add it to the judgment.

The rule in your case is going to depend on your own specific circumstances.

The net of all this would suggest that you will have some advantage if the contract makes the company pay, but there’s risk if the loser pays. And of course it matters a lot who pays up front, which is often the debt collector.

So… should you compel arbitration?

In a debt buyer/collector case (i.e., not the original creditor) I’d still lean strongly against. You should win this case under most state laws because of the rules of evidence, and you cannot depend on the arbitrator to enforce those rules rigorously. If it’s an original creditor, it’s a much closer question. You’ll have to consider all the things we’ve discussed here and make a judgment call.

Filing a motion to compel arbitration might trigger some settlement negotiation, but I wouldn’t think you could get the company to give you a very steep discount, but there I’m just guessing based on what I know about lawyers and not experience in these type cases.

I remain very hesitant about suggesting arbitration, but there may be value in considering it if you’re
dealing with an original creditor.

Light One Candle – Oct. 2021

September 28, 2021

Welcome to the first Light One Candle. As you probably saw, we call our newsletter this because it’s better to light one candle than curse the dark. If you’re facing big debt issues or even being sued, there is a series of steps you can take to get out of trouble. That’s what Your Legal Lg Up is all about – showing you those steps and helping you take them. It isn’t always easy, but debt law is not complicated if you know what you’re doing.

Evergreen

In honor of this being the first newsletter, our first “evergreen” feature is an “oldie but goodie.” It’s why you have such a good chance of winning if you’re sued by a debt buyer. It’s nothing magical and doesn’t rely on weird gimmicks you’ve seen on Youtube or any bizarre rules someone made up to sell you something. It’s just the plain old rules of evidence and the way the debt collectors acquire the debts they’re suing you for.

Link

I hope you can forgive the sound quality of some of the older videos. I don’t replace them because so many people have watched them over the years that they help other people find us, but the quality isn’t the best. On the other hand, the message is clear: you have an excellent chance to win a lawsuit filed against you by a debt collector because of the way they operate. They don’t buy all the information the original creditor has, and they most particularly don’t get an affidavit filed by someone from the original creditor testifying to the accuracy of the record-keeping.

For more on this topic, I recommend the Three Weaknesses Every Debt Collector Has Report. It’s free to all members.

What’s Up

There’s a lot going on this month here at YLLU. We’re going to be recreating many pages to make them easier to read and more up to date, and also to make them connect more easily and obviously. Click here for a link to our Link Tree that’s tied to the litigation time-line. This should tell you what resources we have related to whatever particular issues you’re addressing, and it will eventually make finding everything much easier.

A new trick the debt collectors seem to have come up with now that Covid is going on is the filing of motions for summary judgment very quickly after filing suit. They’re doing this to keep from letting you conduct discovery and also to prevent you from exercising your right to a trial. Click here for information on that – it’s something we will be working on more as time goes by.

Remember that debt litigation is a series of steps. Some are hard and some are easy, but they’re all more manageable if you take them one at a time and never stop working your case until it is dismissed. Remember that there’s always an endpoint. You should keep working on your case even if the debt collector doesn’t seem to be. You have things you need to do.

Spokeo, Activist Courts, and Consumer and Debt Law

November 10, 2020

People involved in debt and consumer law have heard a lot about “Spokeo” in the past few years, and they’re going to hear more. Spokeo is a wolf in sheep’s clothing, a Supreme Court decision purporting to limit the Judicial system’s ability to override the functions of the other branches of government, but actually itself a vast usurpation of that power. It has been used to gut consumer and debt law protections enacted by Congress, and it will increasingly be used to do so. I expect it to be extended to state courts and jurisdiction as well.

So, what is “Spokeo” and how does it usurp legislative power? We discuss these issues and suggest some possible approaches in the following article.

“Spokeo” is the way many refer to a case and the Supreme Court decision that decided it. The case was Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016). Spokeo, Inc. was a business that compiled information on essentially everybody and made it available to people searching it. Some of the information was free, and some was only available upon payment (not a distinction relevant to the case). It disseminated information on creditworthiness and lifestyle and general biographical information, and its reporting on creditworthiness (allegedly) brought it within the reach of the Fair Credit Reporting Act (FCRA).[1]

In the case of Robins (the plaintiff in the suit), Spokeo reported that he was in his mid-fifties, employed, affluent and married – all of which Robins alleged was false. Robins claimed the information had hurt his attempt to obtain employment. Robins brought suit under the FCRA.[2]

The Supreme Court held (essentially) that he had not alleged a “concrete, actual injury.” Probably every single person reading this article intuitively knows how false this holding was, in reality.

The Court based its analysis on Article III of the Constitution, which limits judicial action to actual “cases and controversies.” They pointed out a fundamental concept of the law, which is that courts are only empowered to hear cases involving real people with real adversary interests – otherwise people would make up cases to test abstract limits of the laws as a sort of judicial review. To keep the Judicial branch in its own lane, courts have determined that, to satisfy Article III, a plaintiff must show (1) injury in fact, (2) causation, and (3) redressability (ability of a court order to “solve” the wrong that has been committed. With respect to the injury requirement, the injury must be (1) “concrete and particularized” and (2) “actual or imminent.” A “bare procedural violation” of a statute is not enough: there must be some harm already, or some harm must be imminent.[3]

Article III’s “Standing” Requirement and the Federal Court’s Attack on Statutory Consumer Rights

To satisfy Article III, a plaintiff must show (1) injury in fact, (2) causation, and (3) redressability. With respect to the injury requirement, which the Supreme Court discussed at length in its seminal opinion in Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016), the injury must be (1) “concrete and particularized” and (2) “actual or imminent.” A “bare procedural violation” of a statute is not enough.

All of these requirements are designed to insure that a litigant is protecting his or her own specific rights and not some theoretical general or public right which would be akin to judicial review.

In Spokeo, the Supreme Court seemed to take the position that the “harm” or injury Robins alleged was a procedural violation – like he was some purist offended by Spokeo’s carelessness in keeping information. The harm, however, was crystal clear and not at all theoretical or akin to judicial review: Spokeo had wrong information about Robins. Having and disseminating false information about him WAS the wrong, and it was also the very “harm” that the FCRA was designed to prevent. The fact that the incorrect information was also damaging to him was irrelevant to the Article III analysis, though of course it would be relevant to the amount of damages he should have gotten.

The Court was not unaware of this; its decision was a blatant attack upon civil and consumer rights, many of which are quite difficult to quantify and are intangible. The Court is hostile to these rights, and Spokeo was a usurpation of the legislature’s Constitutional power to create them and give people the right to enforce them. Thus it is a lasting monument to the hypocrisy of the current Supreme Court. There will likely be many more over the coming years. The Spokeo decision has been used to attack civil and consumer rights from the instant it was written, most notably, perhaps, the Telephone Consumer Protection Act (TCPA), but what will be the harm to a debt litigant under the FDCPA of the debt collector failing to publish warnings in conspicuous print if the consumer sees the warning anyway? What’s the harm of making harassing phone calls late at night? The Supreme Court has put itself in the business of evaluating and quantifying those harms, while the FDCPA made them per se violations. The courts will use Spokeo to attack the FDCPA as well.

State Law Applicability of Spokeo

Even a casual reading of Spokeo will reveal that the Court pretended to be careful to limit its ruling to federal courts. There is no doubt the state courts will follow, however. Note the reasoning, applicable to every state, in the following paragraph of a New York State opinion. I include the links so you can more conveniently track down the cited cases:

“Under the common law, there is little doubt that a `court has no inherent power to right a wrong unless thereby the civil, property or personal rights of the plaintiff in the action or the petitioner in the proceeding are affected'” (Society of Plastics Indus. v County of Suffolk, 77 NY2d 761, 772 [1991], quoting Schieffelin v Komfort, 212 NY 520, 530 [1914]). Related to this principle is “a general prohibition on one litigant raising the legal rights of another” (Society of Plastics, 77 NY2d at 773). Thus, if the issue of standing is raised, a party challenging governmental action must meet the threshold burden of establishing that it has suffered an “injury in fact” and that the injury it asserts “fall[s] within the zone of interests or concerns sought to be promoted or protected by the statutory provision under which the [government] has acted” (New York State Assn. of Nurse Anesthetists v Novello, 2 NY3d 207, 211 [2004]).^[2] The injury-in-fact requirement necessitates a showing that the party has “an actual legal stake in the matter being adjudicated” and has suffered a cognizable harm (see Society of Plastics, 77 NY2d at 772) that is not “tenuous,” “ephemeral,” or “conjectural” but is sufficiently concrete and particularized to warrant judicial intervention (Novello, 2 NY3d at 214; see Spokeo, Inc. v Robins, 578 US __, __, 136 S Ct 1540, 1548 [2016]).

MENTAL HYGIENE v. Daniels, 33 NY 3d 44, 50 – (NY App. 2019).

What to Do

People familiar with my writing and videos will perhaps recognize that some of the language in Mental Hygiene is familiar. We argue the issue of standing all the time at a more basic level: a debt collector must show that it owns the right to sue – the injury in fact requirement is a constitutional necessity that the plaintiff show it owns the debt in question. Provided you dispute the debt collector’s ownership, which I have said every defendant should do in every case.

If you are alleging a violation of the FDCPA or the FCRA, you must obviously take some care to allege actual harm closely connected to the right you claim was violated. If they are suing you for debt beyond the statute of limitations, their unfair collection practice has caused you emotional distress, the expense of hiring a lawyer or seeking help, the time reading, thinking about and responding to the suit, the price of paper in filing your answer or responsive motion, postage incurred in providing notice to the debt collector, gas in taking the suit to be filed, and whatever else you can think of.

The courts are extremely aggressive in TCPA litigation, where they have held that “a single emailed fax” was not a cognizable harm even though Congress said it was, and even though even a single emailed fax would require some time to read and elicit some emotional response. If ONE emailed fax isn’t enough despite the fact that Congress made it so, then what about two? Or twenty-two? Expect the courts to apply this type of analysis routinely, and state your damages in as lurid and concrete a fashion possible.

Many state consumer protection laws are subject to what is called “strict liability” and do not require any harm at all – even a mere “technical” violation creates liability. The Supreme Court is willing to recognize that a trespasser, by stepping one foot across the line, has caused cognizable damage even though it may not be seen, felt, or even exist at all – it’s a legal wrong (to a property interest most often held by the wealthy). Will it see deceptive sales language that did not deceive a consumer as a violation in the same way? I believe a careful litigant should consider alleging shock and outrage, perhaps a call to a lawyer or at least photocopying expense – something, anything – to show actual harm until some theoretical limitation has been placed on the courts’ “discretion” to reconsider and reevaluate damages determined by the legislature. Spokeo abandoned the principle of Judicial limitation.

[1] Among other things, the FCRA states that “[a]ny person who willfully fails to comply with any requirement [of the Act] with respect to any [individual] is liable to that [individual]” for, among other things, either “actual damages” or statutory damages of $100 to $1,000 per violation, costs of the action and attorney’s fees, and possibly punitive damages. § 1681n(a).

[2]Apparenty Robins did not dispute his “report” (and perhaps he couldn’t because of the nature of Spokeo) and sue under the provisions provided by that. Instead, he seems to have alleged a failure of Spokeo to use the required care to obtain information. This may have been a litigation decision based on the attempt to bring the claim as a class action, which requires “commonality” of legal issues among the class members. If so, it was the wrong decision for Robins’s individual chances, as it turned out.

[3] “Imminence” has created some interesting legal issues not important here. The courts have held that an enacted law may create imminent harm, but they have also held that where the executive has renounced enforcement of the law, the harm is not imminent.

Usury and Non-Bank Loans

September 26, 2020

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.

National Banking Act Allows Usury

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).

Under Madden, Debt Collectors Don’t Receive NBA License to Commit Usury, Regulation Changes That

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 2^nd 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.

Possible Outcomes

This leaves us in an odd place. If you are in the 2nd Circuit currently being sued by a debt collector on a card with interest higher than your state allows, you have a powerful defense and a counterclaim probably under the usury law and FDCPA. 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 2^nd 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 2^nd Circuit? Will the regulation affect the way the 8^th Circuit, for example, reads Madden? It probably should not, but it probably will. The regulation is supposedly based on 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 limited to litigation attempting to collect the debt.

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 itself can charge usurious rates, then, must conclude that it can indeed do so.

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.

If you get a loan now and at some point in the future a debt collector tries to collect usurious rates that would have allowed to the original lender, I think you’re out of luck regarding the defenses and counterclaims we’ve discussed here. The new regulation permits it, as I read it. Of course you still have all the usual defenses and attacks we always use against debt collectors, so your chance of winning remains srong.

Genetic Privacy and Government Data Bases

September 9, 2020

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

September 2, 2020

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

September 2, 2020

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 2^nd 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 2^nd 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 2^nd Circuit? Will the regulation affect the way the 8^th 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

Overview of Debt Litigation

December 23, 2019

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?

December 23, 2019

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.

Your Legal Leg Up

Your Legal Leg Up is dedicated to helping people defend themselves from debt lawsuits without having to hire a lawyer. Lawsuits have a number of points where specific action is called or, and we have products to help you deal with most of these situations. We also have memberships that give you access to more materials and better training, and also provide a regular opportunity to ask questions and get answers in real-time. You can use this time to find out what the debt collectors are trying to do and what you might do in response, and you can get guidance on the issues that matter and how to think about and address them.

In addition to that, our website is a resource for all. Many of the articles and materials are reserved for members, but many others are available to everyone. Every page has a site search button in both the header and footer. Put in a key word – a word you think relates to what you’re looking for – and enter. You will get a page of results.

Products Related to this Article

There are no specific products related to this article because it addresses a strategy you should use throughout your defense. You might consider our memberships or our new program that we’re going to call Vision 20-20, out soon.

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Members get discounts on all products as well as unlimited opportunities to join our regularly scheduled teleconferences. This gives invaluable real-time assistance, answers to questions, help with strategies, and encouragement. You also get the Litigation Manual and the Three Weaknesses Report for free with membership. Find out about memberships by clicking the “About Memberships” link in the menu at the top of the page.

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Voidable Judgments – the Other Kind of Motion to Vacate

December 10, 2019

Voidable Judgments – the Other Kind of Motion to Vacate

For a free copy of this article in PDF form, click here: the other kind of motion to vacate

Most of the time when people talk about motions to vacate they’re talking about motions to vacate a default that occurred as a result of failure to respond to a properly served lawsuit. There is another kind of motion to vacate, though, for people where the court did not have proper jurisdiction. If that’s your situation, this is a better way.

A Quick Review

Once a lawsuit is properly served on a defendant, the court has “jurisdiction” (the power to address the claims made in the suit) at least provisionally. If a defendant fails to respond appropriately to such a suit, the plaintiff will probably get a default order and judgment. That is what happens in a large majority of debt cases.

An “appropriate” response that will prevent a default judgment is either:

An Answer, or
a motion to dismiss the suit.

It is also possible to file a motion “for more definite statement” in some states, as well. The point is, though, that every allegation in the petition must either be moved against or answered. If that happens, a default judgment should never be issued.

If you fail to answer and the court awards a default judgment, you can ask the court to give you another chance by asking it to “vacate” the default and allow you to defend the case. I discuss what this is, what the time limits are, and how to do it in several articles, see, e.g., Overcoming Default Judgments.

Voidable Judgments

But what if the court does NOT have or get proper jurisdiction over you?

This can happen in two common ways: the debt collector does not manage to serve you properly; or the debt collector sues you in a court that doesn’t have power over you (because you live somewhere else). Other ways are possible, but these are by far the most common.

If you find out that you are being sued in a court that lacks jurisdiction before judgment, you can move to dismiss the case on that basis, but that can defeat the whole purpose of the rule – since in order to do so you would have to appear (“specially”) in the court to do it, and if you’re far away, that’s impractical. Another way to handle the situation is to let the court rule and then attack the judgment in the correct court. That also has significant drawbacks, so if you know about the situation before judgment, it can present a tough question.

But most people do not learn about suits where the courts lack jurisdiction before judgment. They find out about them later. What do you do if that happens?

No Authority, No Judgment

The good news is that there is NO time limit on a voidable judgment. The court never had authority to enter the judgment, and “all” you have to do is establish that fact. You can do that at any time, and it completely undoes the judgment. It is called “void ab initio,” meaning “from the beginning” as if it never existed.

Burden of Proof

The bad news is that you can have a high burden of proving that the court did not have authority over you. Most courts require you to present “clear and convincing” evidence of the facts that you were not subject to the court’s jurisdiction. In the case of residency – you were living in California but sued in Florida, that isn’t necessarily so hard.

In the case of sewer service – where you weren’t served, but the process server swore you were, it can be much more of a challenge. Still, almost everybody I’ve known who tried it succeeded. That’s because the process servers normally describe the person to whom they theoretically gave the petition, and they usually won’t know your age or body shape, and often guess incorrectly your gender and race. If their affidavit says they served a woman 5’2” eyes of blue and you’re obviously not that, you’re good. Other things obviously aren’t as easy to prove.

What you Have to Prove

You have to prove by good evidence that the court lacked jurisdiction over you.

What you Do Not Have to Prove

You won’t have to prove you made any mistake (you didn’t) or that the substance of the judgment (i.e., you owe $2,000) was wrong in any way. You do not need to allege or prove any “defense” to the suit, in other words. Attack the jurisdiction, and the case goes away.

What you Should Not Have to Prove

You shouldn’t have to prove you didn’t receive notice of a sewer service filing. Suppose, for example, you found it in the trash in a nearby dumpster. Most courts require proper service and not “notice” of the suit. But I’m afraid you can’t count on the courts to apply that rule consistently. You will not want to offer proof or any indication that you heard about the case in any way prior to judgment. If you became alerted to the fact that a process server was around and do some research in the court files, you will want to disguise the fact and cover your trail.

Special State Rules

The rules for this sort of motion to vacate are NOT the easily found rules in the rules of civil procedure. You must research your state’s rules for voidable judgments and follow whatever rules you find there.

Products Related to this Article

We do not have a product directly related to this article if you are moving to void a judgment. You may find our Motion to Vacate Pack helpful in showing you the form of motions and proof, but it does not contemplate the rules you would need to follow. I emphasize, again, that in filing a motion to void a judgment entered without jurisdiction, you would not want or need to include a “proposed Answer,” and you would not need to allege a defense (although claiming a defense wouldn’t hurt and might help).

You would probably find our memberships useful, particularly if the situation with the debt collector that brought you here is not the only one you’re facing.

Memberships

Members get discounts on all products as well as unlimited opportunities to join our regularly scheduled teleconferences. This gives invaluable real-time assistance, answers to questions, help with strategies, and encouragement. You also get the Litigation Manual and the Three Weaknesses Report for free with membership. Find out about memberships by clicking the “About Memberships” link in the menu at the top of the page.

Sign Up for Free Information

You can sign up to receive information from us by clicking on this link and following the instructions: https://yourlegallegup.com/blog/sign-up-for-free-information/

What you’ll receive if you sign up is a series of several videos and articles spread out over several days, and then you will occasionally hear from us as we add information to the site. We don’t always announce that information, though.

What you will not receive is any marketing from other people – or much from us, either. Our goal is to make the site more useful to members and visitors, not to swamp anyone with sales materials. The information we send will have links to information or products that we think may be helpful.