Your Right to a Jury Trial in Debt Litigation

Your Right to a Jury Trial in Debt Litigation

Under the Seventh amendment you have a right to a jury trial for cases involving “damages.”

Damages is a little bit of a term of art in this sense, but it basically means “money” for claims that were traditionally brought in courts of “law” (as opposed to courts of “equity”). As it happens, breach of contract, which is what most credit card cases are, is a legal claim subject to the 7th amendment. On the other hand, claims brought under, for example, the claim of “account stated,” are equitable claims that don’t give you a right to a jury trial by themselves.

That means that if the debt collector is suing for breach of contract or “open” or “closed” account, you have a right to a jury trial under the constitution. If they are suing you EXCLUSIVELY for account stated, on the other hand, you don’t.

When you have a right to a jury trial for one claim, you have a right to jury trial for all claims, so if they bring breach of contract AND account stated, you’ll have a right to jury trial for both. Most debt defendants, therefore, do have a right to trial by jury. Should you demand a trial by jury? I usually think so.

Trials by jury force the judge to take the law of evidence more seriously. In fact they take jury trials more seriously in a lot of ways. That benefits the debt defendant because our case is usually that the debt collector does not have any evidence that complies with the rules of evidence, and we need the court to take that seriously.

I also suggest demanding a jury trial because they are far more difficult for the debt collectors.

Understand what I’m saying, though. It isn’t that debt collectors don’t know how to do jury trials or even that they aren’t good at them – individual talent varies, of course.  I’m only saying that debt cases tried to a judge can take twenty minutes. Picking a jury can take hours. And all the rules have to be carefully followed, and there are special rules and procedures, too. So demanding a jury might require 20 times as much attorney time. And time is money. Especially attorney time at $250/hour.

Debt plaintiffs don’t like cases that take a lot of time. It increases their costs, and they know you don’t have much money, so they worry about getting it back. Debt collector lawyers also worry about cases taking a long time because their performance affects their annual pay, and long debt cases hurt them.

In my opinion, those are strong reasons to seek a jury trial, and I might add that there will be times when a jury is also more sympathetic to the defendant than a judge would be. Judges haven’t faced debt trouble in a very long time, in general, by the time they’ve become judges. Most jurors, on the other hand, will have money worries. But I wouldn’t rely on this too much. Some judges are sympathetic, and some take their work seriously whether they’re sympathetic or not. And some juries can be pretty harsh.

But our goals in jury trials don’t depend on the jury that much. We want the judge to exclude evidence that shouldn’t be seen, and they take that more seriously when there’s a jury. Then it’s clear the debt collector didn’t make its case.

So why might you NOT want a jury? The only reason I’ve ever heard from debt defendants is that they’re scared of them. And I hear that a lot, but it’s not a good reason. Almost everybody I know who has ever had a jury trial has said it wasn’t scary. Not when you’re doing it. They are a little scary to think about and get ready for – pretrial jitters are normal, but once the trial starts, you’ll be too busy to be nervous. That’s as true of jury trials as it is of judge-tried cases.

You have a right to a trial by jury, but how and when you ask for it can make a difference. In some jurisdictions you just put it at the end of your Answer. In some jurisdictions you have to enter it as a separate request, separately. Which of these you’ll need to do is probably in your court’s local rules, but you might ask a court clerk about that. If you can’t get an answer from an authority, I’d suggest putting it both on your Answer and making a separate request which you submit at the same time as your Answer.

If you didn’t ask for a jury trial, is it too late?

The law favors jury trials, but individual judges often don’t, since they know as well as I do that jury trials take more time and attention. For that reason, if you haven’t already asked for a jury trial, I suggest you do it ASAP. The number of days could matter, since a court’s discretion to deny a request for jury is probably tied to how long the case has been going on. You should do a little research before filing your jury demand, though, because if you don’t do it right off the bat, you’ll need to file a motion that tells the judge why you should get one. That isn’t complicated, but you’ll want to know what the rules are that apply to it.

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.

Difference between Original Creditors and Debt Collectors

Debt Collector or Original Creditor

For a free copy of this article in pdf format, click here: difference between original creditors and debt collectors

We used to face a simple either/or question in debt defense. Were you being harassed or sued by the original creditor? That’s the person who allegedly lent you the money in the first place. If so, you were dealing with a person who had better rights against you – but some concerns over public perception that could help you. If it was a “debt collector” who had bought the debt from someone else and had nothing else to do with you, you had better rights and a better chance of winning.

Various things have blurred the line somewhat, but it is still worth keeping the distinctions in mind. There are now really three important categories to consider: original creditors, debt buyers, and “debt collectors,” and the last two categories overlap to some extent.

How Debt Arises

Debt can arise in a number of ways. If you buy a club membership, for example, and then stop paying on it, the club is the original creditor. If you stop paying, the club will bug you for a while, and then they may send the account to a debt collector to bug you some more. Eventually, they may sue you or sell the debt to another company. Whatever they do directly to you, however, they must worry about their reputation in the community, and harsh collections might reduce their sales.

This concern, that they needed to have – about reputation, was considered a check on their debt collection practices. The legislature thought that was enough protection against the worst abuses.

Debt Collectors

Debt collectors, by contrast, lack that relationship with the consumer. Their only client is the creditor company or, if they have purchased the debt for themselves, their only loyalty is to their own bottom line. Thus that protection from abusive collection practices was not there, and the FDCPA was designed to put it there.

The emphasis was on how the debt originated and how it came into the possession of the person bugging you. Thus for a long time we simply considered anyone who bought debts as a “debt collector.” Such people or companies had no need to protect their relationship with the public, and so the public needed protection from them.

Supreme Court

The Supreme Court has made things a little tougher for debt defendants by holding that debt buyers are not, by that fact alone, now defined as “debt collectors” under the Fair Debt Collection Practices Act. Legally, a company can be a “debt collector” under the FDCPA if its “principle business” is the collection of debts. But otherwise a debt buyer isn’t necessarily a debt collector.

This will protect some very bad people from consequences for some of their actions, and it will prevent many people from being able to get lawyers to protect themselves from debt lawsuits.

It will also complicate the way you handle your lawsuit against someone who may be a debt collector, since you will have to try to prove the company bugging or suing you is a debt collector. We have changed our model discovery to address that new reality, and if you’re being sued, you will need to take it into account.

New Reality

Unfortunate as the Supreme Court decision was, it’s now the law until and unless it gets changed. In the current political climate, that seems unlikely. So you must bear in mind some practical distinctions.

Debt buyers, whether or not they are “debt collectors” under the FDCPA, will have difficulty getting or using certain evidence in court. The distinction is very important in assessing your defenses against a lawsuit for debt. Debt buyers will likely face major hurdles from the hearsay law, and they won’t have the same records as an original creditor.

You will have more and easier counterclaims against those who are defined as “debt collectors” under the law, but you will need to conduct discovery specifically to prove that they are, in fact, debt collectors.

Original creditors will probably have fewer issues with hearsay and may or may not have many records. They seem to have fewer records and less control over their files than they used to, for whatever reason, so you will need to explore this in your discovery and defense strategy. And you will have a better chance defending against an original creditor than used to be the case.

Difficulty of Defense

It is not more difficult to defend yourself from one group than another. The legal process itself is basically the same. You have to do all the same things to defend yourself, from answering the petition to showing up in court, responding to discovery, and going to trial if necessary. But the content of the discovery as well as the process of the suit, will likely be different. The original creditors will be more reluctant to sue you, but will have more materials to support the suit. The debt buyers will be more willing to sue, but have less material to support their claim, and if you  can prove the other side is a debt collector, you’ll probably have a counterclaim.

Whichever you’re facing, you should defend yourself. We suggest our materials and membership if you’re ready to do that on your own.

Your Legal Leg Up

Your Legal Leg Up is a website and business dedicated to helping people defend themselves from debt lawsuits without having to hire a lawyer. As you can see below, we have a number of products as well as memberships that should help you wherever you are in the process. In addition to that, our website is a resource for all. Many of the articles and materials are reserved for members, but many are available to everyone.

Finding Resources

Our website is both a business and a public resource, and you can use it to find information on a wide variety of debt law-related topics. While many of our resources are restricted to members, of course, many more are free to the public. Please feel free to use it. Every page has a site search button in both the header and footer. It’s a little magnifying glass icon that looks like this:

Click on the magnifying glass icon, and a small window opens. 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.

Do Our Materials Work against Original Creditors

Do Your Materials Work for Cases against Original Creditors?

Yes. When I represented clients in these cases, there used to be a more significant difference between original creditors and junk debt buyers. We’ve written a lot about the differences between original creditors and debt buyers. They boil down into two things: you are more likely to have a counterclaim against a “debt collector” (which all debt buyers used to be considered); and debt buyers are less likely to have the documents they need to beat you. These differences are still there, but they are less important now than they used to be.

We will discuss both defense and possible counterclaims.

Defense

The main reason our materials work against both original creditors and others is practical. That is, it is because of the way law is actually practiced and the way people dispose of lawsuits. As we have often pointed out, parties settle cases only because they think a particular settlement offer is the best overall result they can obtain. It has nothing to do with what might be good, or nice, or anything else, for the other side. As a practical matter, you look for what is best for you and don’t try to help the other side, right?

Debt lawyers consider three things in this analysis: the risk of losing, the price of winning, and the chance of collection. These three things are very different.

Risk of Losing

The risk of losing is the chance that you will lose. It’s obviously never quite zero, but the people suing you pretty much ignore this risk – they think they will win, and the few times they don’t, don’t hurt. At the beginning of a lawsuit, therefore, this risk might as well be zero in the minds of the debt collectors. Our materials are designed to help you see whether they have any weaknesses, and if so, to build on them to create doubt in their minds. For pro se defendants, that’s pretty much all you will ever accomplish.

Price of Winning

The price of winning is very different. That is MUCH more of a consideration for the people suing you. Given (they think) that they will win, what will it cost to get the thing to trial and get the judgment? At the beginning of the case, the people suing you also ignore this issue because most people don’t put up much or any fight. The debt collectors expect their judgment easily and quickly – probably by default without any work at all.

And they get it most of the time. Our materials help you change their perception of this factor. Everything you do will cost them money, and the more you have done, the more they expect you to do. In other words, as you defend, the pile of costs grows, and the pile of expected costs grows even more. Whether they are debt buyers or original creditors, this radically changes the equation in their heads. It raises the likelihood that they will lose money whether they win the case or not.  Frankly, this is why most of them settle for a reasonable amount.

Chance of Collection

The other factor is the chance of collection: given that they will win, can they get money from you. Debt collectors and original creditors both understand that most people want to pay their bills, and the reason some don’t is that they have money problems. They know they can’t get money from you if you don’t have it, and they think you probably don’t have it.

This factor is very much a part of their thinking at all stages of the case, and it’s why most debt collectors will probably give you a discount on the case before you do anything – if you ask. It won’t be much of a discount, but it will be more if you offer a lump sum (eliminating the risk of collecting the rest) than if you offer payments. Does that make sense?

Factors Work Together

Notice how these factors work together. If you don’t give the other side information about your assets, and you do conduct discovery, you (slightly, in their minds) increase their chances of losing and drastically increase the costs of suit. You also delay the judgment they had expected to get quickly – and that reduces their chances of collection if they win.

The two most important factors, cost and delay, are the same for original creditors and debt collectors. Risk of losing goes up more for debt collectors than original creditors, but this factor is never important for either debt collectors or original creditors.

Thus our materials help you drive the value of the case down in the same way for both groups. If the other side regards your case as less valuable, it is more likely to offer you an actually good settlement, or to walk away from the litigation eventually. But what if it doesn’t? How do our materials work then?

Remember that law is a contest with very specific rules. It has always been our belief that either debt collectors or original creditors COULD win their case against you. To do so, however, they have to get the stuff they need and follow through with it, and these are expensive to do.

When we started Your Legal Leg Up, we knew that debt collectors almost never had what they needed to win if the case went to trial, and we were satisfied that they could not get it in a cost-effective and timely way. But we believed original creditors did have the necessary evidence or could easily get it. We have discovered that this is not true.

We are unaware of any reason why this is so. From our perspective, it would seem to be a simple process to retain the necessary records and do what is necessary to “authenticate” them as evidence (make them admissible in court). Nevertheless it is an observable fact that they often do not obtain or use appropriate evidence, and therefore there must be some reason for it. Perhaps it is the same for original creditors as it is for debt collectors – either they don’t think it’s worth it given the collection risk, or they are set up in a way where getting the information would clog up their systems and increase costs in general. In any event, you can find out if they have the evidence and the will to use them correctly by doing only one thing: fighting their case and conducting discovery. We believe there’s a good chance you will win if you do this.

Counterclaims

The other side of debt defense is using a counterclaim to take control of the lawsuit. We do still regard this as an important thing, if you can do it. That’s because if you can hold the debt collector in the suit with a counterclaim, you can make them dismiss the case “with prejudice,” which prevents anyone else from suing you on the debt. It will also help you repair your credit if you destroy the claim against you.

You will probably never have a good counterclaim against an original creditor, whereas you might get one against a debt collector. Some claims do exist – notably defamation or, for extreme acts, something called the “tort of outrageous infliction of emotional distress,” but the courts have historically been amazingly tolerant of original creditors. Much less so of debt collectors.

But again, as a practical matter, these things have turned out to be less important than they might have been. If you win the suit against another party (without prejudice), they are unlikely ever to sue you again even if they could. And if they sell the debt, the person buying the claim would have little chance against you in court. It also appears to be true that after dropping a suit against you the other side would have less energy and desire to prevent you from credit repair. It isn’t that they like you or couldn’t make trouble, it’s just that they have no financial interest in doing so. This appears to cause a lot of them to take no steps to prevent your efforts to remove their credit references.

Most people being sued by debt collectors just want the suit to go away and are not interested in trying to make the other side pay. This reduces the importance of the other side’s status as debt collector or not.

Conclusion

Therefore all things considered, our materials are about equally effective against debt collectors and original creditors. If the matter goes all the way to trial, you might have a somewhat larger chance of losing to an original creditor, but fighting intelligently will give you your best chance of preventing that from happening. The actual court processes are the same in either case, so you will be prepared to fight.

Court Involvement in Discovery

What is the court’s involvement in discovery? Does it oversee interrogatories, requests for production and requests for admissions?

In most jurisdictions, there is no court involvement in the discovery process unless and until a motion to compel becomes necessary. Even in those jurisdictions, a lot of people will send a “notice of service of discovery” which simply informs the court of the date and type of service certain discovery was served on the other side: “On this date, defendant served his first set of interrogatories, requests for admissions, and requests for production on plaintiff by first class mail, postage prepaid, at the address noted below as the service address.”

Perhaps a very few courts require this by local rule. For other courts, it probably does not hurt and may occasionally do some good. If, for example, some issue of notice arises, parties are usually held responsible for knowing what was in a notice to the court. I’m not aware of that ever actually making a significant difference, however, and most lawyers do not send such notices unless required by rule.

In a very few courts – I just heard of one shortly before writing this article – the courts still take copies of the discovery. That’s a question you could ask a court clerk and probably get an answer, because if they don’t want it, they really don’t want it. That is, for most courts if you send them a copy of the discovery you sent to the other side, the court will return it to you and not accept it.

The Way Discovery Works

What happens is simple. You serve discovery directly to the other side. They answer, object, or ignore you.  If you take no further action, nothing will happen. No one looks out for you! Some people think that’s wrong, but the court gives the parties the freedom to choose their fights, and if you don’t fight about it, the court is only too happy to forget it.

Specifically this means that if you serve discovery on the other side and they ignore it, the court will probably not prevent them from using things they should have given you at trial. If you want to protect yourself you have to follow through.

If you want to force the debt collector to answer, you must file a motion to compel (and typically you have to send them a “good-faith” letter to try to get them to agree to answer, first). Then you attach all your discovery requests and their answers and objections, and file it with the court. That’s the first time the court will see it, so your motion to compel has to be thorough and complete.

And there’s more. After the other side responds, you will need to “call” (schedule your motion with the court) and argue it in front of the judge in order to get the court to rule. The court will either sustain their objections or overrule them and order them to answer the requests. It will usually give them a little time to do that.

At the argument and in your motion, you have to go through each item of discovery and every objection one at a time. It can be maddening, but you are asking the court to rule on a long series of objections, and it must make up its mind on each separate thing.

 

Who can use FDCPA and Who follows it

Who Can Use, and Who Must Follow, the Fair Debt Collection Practices Act

The Fair Debt Collections Practices Act only applies to consumer debts and, by and large, the actions of debt collectors (or original creditors pretending to be debt collectors). This is broken down into the questions of the type of debt for which collection is sought and the type of entity seeking the debt. In this article we will first discuss what the FDCPA covers, and then what that means to you.

Consumer Debts only

The FDCPA applies to “consumer debts,” or debts incurred primarily for personal, family, or household purposes. 15 U.S.C. Sections 1692a(3) and (5), Creighton v. Emporia Credit Service, Inc., 981 F.Supp. 411 (E.D.Va. 1997). When the debt is rung up on a corporate or business credit card, the courts will look into the nature of the debt – and not simply the name on the card. As I have pointed out elsewhere, however, making this argument can be dangerous to the “corporate shield” since it suggests a merging of assets which is sometimes used to defeat the corporate shield and allow a creditor to pursue an owner of the corporation.

Natural Persons Only

The act also only protects “natural” persons, which means it applies only to actual people and not corporations or separate associations. Again, since debt collectors never actually speak to corporations or businesses, but only to human individuals, this simply means that if a debt collector is calling on a debt rung up for business purposes, or calling a business regarding its debt (and harassing whoever picks up the phone, for example), the FDCPA does not apply.

Transactions Only

Because the FDCPA applies to only consumer debt, it applies only to “transactions” engaged in primarily for personal, family, or household debt. In other words, it does not apply to debts generated by child support obligations, tort claims (lawsuits against you for harming another person), or personal taxes, for example. Mabe v. G.C. Services Limited Partnership, 32 F.3d 86 (4th Cir. 1994); Zimmerman v. HBO Affiliate Group, 834 F. 2d 1163 (3rd Cir. 1987); Hawthorne v. Mac Adjustment, Inc., 140 F.3d 1367 (11th Cir. 1998).

On the other hand, the term “transaction” can be fairly broad, and would include things like condominium fees or other fees or debts incurred as part of a transaction that might, in fact, have occurred years before the debt in question arose. Because the FDCPA applies to debts arising out of transactions, it has applied to condo fees for a house the consumer once lived in but later (at the time of the FDCPA violation) was renting out to others for the purpose of generating income. This would suggest the reverse might also be true – a condo originally purchased for business purposes but later converted to personal use might not be covered by the FDCPA, but I have not seen a case with that holding.

The Act does apply to things you might consider “non-credit” obligations, such as bad check debts, condominium assessment fees, residential rental payments, municipal water and sewer service, and other non-credit consumer obligations – Bass v. Stolper, Koritzinsky,Brewster & Neider, S.C., 111 F.3d 1322 (7th Cir. 1997); FTC v. Check Investors, 502 F.3d 159 (3d Cir. 2007).

Debt Collectors Only

In general, the FDCPA applies only to “debt collectors.” What that means used to be a lot clearer than it is now.

The Supreme Court confused the question of who was a debt collector in some decisions in 2018. Primarily, it determined that when a company buys a debt – regardless of its status at the time of purchase – it is a “creditor” under the part of the law debt defendants had been using to sue junk debt buyers.

Instead, a person buying a debt might be a debt collector if its “principle business” is the collection of debts. It is not clear HOW MUCH of a company’s business must be collection of debts for that to be its “principle business.” I would guess a sizable majority – perhaps 90% or more – but the term has rarely been litigated, and has never been quantified to my knowledge. It would seem clear that a bank with a sizable business providing credit cards would not be a debt collector if it happened to buy someone else’s debts and bring suit on them. Likewise, law firms buying debt and suing on them would probably not be debt collectors if they do anything else – a truly unfortunate result, in my opinion.

But classic debt collectors (i.e., those working for someone else) would still be debt collectors, and so, probably, are the largest junk debt buyers.

What the FDCPA does not cover is actions by an “original creditor” (i.e., the company or person who claims you borrowed from it) unless it is pretending to be another entity. Sometimes original creditors seek to exert additional pressure on delinquent bill payers by pretending to be a debt collector, and when they do this they are not only covered by the FDCPA but also often in violation of it, since the Act prohibits deception and unfair collection methods. The Act will also not cover the actions of loan “servicers,” which are financial companies that buy debt not in default and manage it as if they had extended credit in the first place.

What It Means to Be Covered by the FDCPA or Not

As I am sure you know, the FDCPA requires and prohibits certain actions, giving you defenses and the right to counterclaim or file suit against a debt collector. If the FDCPA does not apply, you simply cannot claim any rights under it – cannot require verification, bring claims for deception or abusive conduct, or seek to enforce any other rights under the FDCPA against non-debt collectors or against debt collectors for their actions in pursuit of non-covered debt.

Making such a claim could damage your ability to defend against these debts, so you should carefully consider whether the Act applies before attempting to assert rights under it.

If your debt or bill collector is not covered under the FDCPA, that does not necessarily mean that you have no rights worth asserting. It just means that you must look somewhere else for them. Many states have their own debt collection laws, and these may apply to situations the FDCPA does not. Also, more generally, most states have laws regarding how “outrageous” a person – including a debt collector – is allowed to be.

One of the great things about the FDCPA is that it gives some specific rules – debt collectors cannot call before 8 in the morning, for example, whereas a few calls by an original creditor early in the morning will probably not be illegal. As the behavior becomes more and more extreme, however, the more likely it is to be “outrageous” enough to give you the right to sue. Threats of physical harm or police activity probably go over this line, for example; cussing you out a time or two? – maybe not. It is simply not clear what non-debt collectors are allowed to do in many instances. Courts have been pretty tolerant of some surprisingly bad or extreme actions by original creditors.

Debt Collection Laws – Debt Collectors and Creditors

If you are being threatened with a debt collection lawsuit, or if you are being harassed or sued over a debt by either a debt collector or an original creditor, you should know that there are some laws in place that could help you. This article will briefly discuss a few of the sources of legal rights you may have.

The difference between “Debt Collectors” and “Original Creditors”

First, a distinction that is very important in the law: the difference between debt collectors and original creditors. An “original creditor” is an entity (the law calls it a “person,” but it could be a human or a business) that extended credit to you in some way. For present purposes, it could also mean someone you owe money to in a non-credit transaction, and also means “servicers” of loans. Debt collectors are “persons” a significant part of whose business is the collection of debts due to other people.

Laws pertaining to Original Creditors

Because original creditors have some connection with the public other than debt collection and are therefore at least somewhat vulnerable to negative public opinion, the law gives them much more latitude in dealing with people who owe them money. They are not, however, permitted to assault you, obviously, or engage in other extreme and “outrageous” behavior. Where that line is drawn, however, differs from place to place. Some jurisdictions have allowed original creditors to post your name on a “hall of shame” board, for example, but I’ve never heard of anyone being allowed to chase you down the street calling you names. It’s vague, I know.

Laws do prevent anybody from defaming you (publication of false, seriously derogatory information), and this would include the publication of false information to your credit report. By and large the rule is, that all the basic rules apply to creditors, but very few special ones do. There might be particular laws in your jurisdiction, though, so you must take that with a grain of salt.

Laws pertaining to Debt Collectors

Debt collectors don’t have the “civilizing” connection to the community that most businesses do, and so the law is much more stringent regarding them. The rule there is that the Fair Debt Collection Practices Act makes “unfair” or deceptive debt collection techniques illegal. Again, the law is rather vague, but this time its vagueness is in favor of debtors. Debt collectors try many sneaky and underhanded tricks, and many shockingly abusive and outrageous tricks too, and the law is designed to try to cover them all. For further discussion, please see other articles.

Other sources of legal protections include state merchandizing practices acts (which mostly apply to marketing techniques) the Federal Truth in Lending Act, the Uniform Commercial Code, and the Federal Trade Commission. Other resources could also include the Better Business Bureau and State Attorneys General.

For a much more complete understanding of the debt law – especially if you are being sued, check out the Debt Defense System. If you are still in negotiations and want more information about what that might mean or how to go about it, check out the Debt Negotiation and Settlement System. And of course this website has a wealth of information available for free. Be sure to contact me if you have questions.

Who or What is a Debt Collector

The definition of “debt collector” became a lot less clear in 2018 when the Supreme Court ruled that owning a debt made one a “creditor” regardless of the status of the debt at the time of purchase. But there are still ways to prove that the company suing you is a debt collector. Doing so means they have to follow the FDCPA – or more particularly it means that if they don’t obey it you can counterclaim against them or file suit yourself.

The Company Suing You

The company suing you, if it’s one of the big debt collectors, probably still is a debt collector. As far as I’ve heard, these companies don’t really do anything other than buy debts and collect on them. But I doubt this situation will persist. After there is some litigation quantifying what makes an activity a “principle purpose” of the business, the debt collectors will likely buy subsidiaries or engage in some other business to an extent necessary to exempt them from the FDCPA. I would, and in this area of business and law, these guys are more knowledgeable and smarter than I am. Expect them to take steps to reduce their liability.

What Is a “Debt Collector?”and When Are You being Sued by One?

So who is a debt collector? Well, there is the classic debt collector – the company that a creditor hires to hassle debtors to pay bills to the creditor. In that situation, the debt collector is an agent of the original creditor and is supposed to follow certain rules (the Fair Debt Collection Practices Act).

There’s another kind of debt collector, though. This is a business or person whose “principle business” is the collection of debts. Just what percentage of business makes the activity the “principle purpose” of the business is not clear – I would suggest it is very significant, at least 90%. But that’s just a guess at this point, as there has been very little litigation on the point. It seems clear that a bank that makes lots of money on regular banking services and also has a junk debt buying subsidiary is probably NOT a debt collector.

There is a tremendous amount of confusion of who is suing you. People will tell me that they are “being sued by a debt collector, but the name on the suit is Capital One,” for example. They think that because the lawyer signs the pleadings, or a lawfirm shows up in court, that it is the lawyer who is suing them.

And in a very limited sense – but only in a limited sense – that is correct. For most purposes, the entity suing them is the one named as “plaintiff” in the lawsuit

Lawyers who Regularly Collect Debts Are Debt Collectors

The lawyer and law firm representing the company suing you are probably debt collectors within the meaning of the FDCPA. That means that their personal actions may bring them within the law, but it isn’t always clear when they will, though. It appears that if the pleading asks for something, the lawyer signing it will be liable (on the hook) personally (and his or her lawfirm, also) for the violation. But the company won’t always be liable for the actions of the lawyer – its agent – as would normally be the case for most things.

If the company was an original creditor, and the lawyer threatened you with suit, and you sought verification of the debt, would the company be unable to sue you using the same lawyer? Not likely. Because the company – not a debt collector – has no obligations to you under the FDCPA, and that’s where the right to verification comes from. If you filed a motion to dismiss the lawsuit based on the company’s failure to verify the debt, it should be denied.

The Name on the Lawsuit Is the Important Name

If your lawsuit says “Cap One vs. You,” you are being sued by an original creditor and not a debt collector. They don’t have to play by the rules that apply to debt collectors. That means they don’t have to verify the debt, and they can do some of the things debt collectors are not allowed to do. You need to direct you Answer, Defenses, and any Counterclaims with the awareness that the other party is the original creditor and not a debt collector. It means, for example, that they needn’t verify the debt before or after suit, and that an attack by you on the ownership of the debt is not going to work – their name is on the debt. There’s no “chain of title” issue where title has never passed to another company.

But how they act when they sue you may bring the lawyers within the FDCPA.

You Will Probably Win if you Fight Debt Collectors

If you are being harassed or sued by the debt collectors, there’s no need to give up. You have an excellent chance to win, and it isn’t that hard to defend yourself.

 

Defending Yourself against Debt Collectors Isn’t That Hard

 

Your Legal Leg Up is designed to help ordinary people defend themselves from debt collectors. The problems occur in three main ways. First, before there is litigation, there is usually some sort of harassment – it would be easier and cheaper for the debt collector to scare you into paying if possible. At the same time, it might be possible to get the debt collector settle the issue with you without having to go to court. Thus we help people with debt settlement.

If debt settlement doesn’t work, or if the collector proceeds to a lawsuit without any chance to try to negotiate, you’ll need to defend yourself in litigation. That’s where we got our start, and we have lots of materials that will help you defend yourself. Keep in mind that debt collectors handle everything in bulk. That means they can be very efficient at parts of their lawsuit, but much less so at others. So our materials and approach are designed to exploit that problem. That makes litigation much more expensive and less profitable for the debt collector and maximize your chance of winning, too. That’s why most of our members win their cases.

Even after your lawsuit – or sometimes they don’t even sue – you will probably have damage to your credit report. Thus we help people repair and reconstruct their credit reports. This is a multi-step program that works at eliminating bad information on your credit report while generating new good information.

We have memberships aimed at each of these areas of the debt law. Find the right one for you and let us help you.

Avoiding Service of a Debt Petition and Summons

The nearly universal advice of process servers and collection lawyers is that you should never attempt to avoid service of process. Many lawyers who represent people being chased by debt collectors also recommend the same thing. Is this good advice, though?

That depends.

Debt collectors are usually not the most energetic litigants, and anything that increases their costs of suit makes them think twice. On the other hand, it is not extremely difficult or expensive for them to get you served by alternative means. Our conclusion is that avoiding service can have some benefits, but there are risks, and you must pay attention to the lawsuit.

In answering the question, it will help to clarify the purpose and effect of service of process, and then to define “avoiding service” more carefully. Then, we will look briefly at what you are attempting to avoid.

Purpose and Effect of Service of Process

Obtaining “effective” service of process is necessary for a court to have jurisdiction over any person.  This is because of a constitutional requirement of “notice” any time the state exercises judicial power against a person.[1] The most effective form of service is by physically handing a copy of the lawsuit to the defendant. The process server gives you the suit, fills out an “affidavit of service” (sworn statement that you were served), and the case proceeds.

Is it Possible to Avoid Service?

Given the lives most of us lead, it is not possible to avoid service of process if the process server is determined and a little bit resourceful. Many, and perhaps most, of them are, but debt collection is characterized by a factory approach at every level. You have a better chance of avoiding service of debt collection cases than other kinds of cases. Even for process servers, time is money, and a very significant number of cases are dismissed for failure to obtain service. This is at least partly because so many debtors move from place to place – process servers are never sure whether you’re still living where they’re trying to find you, and they hate to waste the time looking if you aren’t.

Getting you physically served is obviously not always possible, and it isn’t required. Under some circumstances, other things can be allowed. What these other things are is established by state law but can include giving the suit to certain members of your household, or serving you through mail or “publication” (which is basically advertising in a legal publication). None of these things would normally require any sort of acknowledgment by you to be effective – which means that the suit could go forward whether or not you ever heard about it. If you avoid service, this is the risk you take.

Avoiding Service

Let’s consider the crudest way to avoid the process server. The service processor meets you in front of your house, says “Are you Mr. Smith,” and when you say “yes,” attempts to hand you the lawsuit. You run away without accepting it.

That would be considered “constructive service” – in the eyes of the law, you are “served” when you are offered the suit regardless of whether you take it or not. If you run away after the introduction and offer, you have probably been served. How far does that go? What if you see the process server and run away before the introduction, and the process server never gets closer than 20 feet? Or what if you see the process server coming and close and lock the door? He knocks and introduces himself, but you don’t answer or make a sound?

These are gray areas in the law. As a practical matter, sometimes the process server will swear that he served you, and the court will accept that unless you challenge it. Process servers do NOT always tell the truth. On the contrary, they frequently lie, and if they claim, rightly or wrongly, that you have been served, our suggestion, usually, is to defend yourself from the lawsuit.

Evading Service

What if you move to a different residence? Will that prevent service?

It might, and the wisdom of this would depend largely on what you’re trying to accomplish. If you don’t mind being served by publication, and you’re just hoping that the collectors won’t find you to collect the money, then moving might be effective. One would think that they have plenty of means to find you even then, but the practical fact is that they often don’t spend the money.  A judgment would hurt you, though, in various ways other than just collection.

Of course, it is very possible that if you move the debt collector will just drop the case – they often do.

If you think you may be getting sued sometime, it makes sense to watch the courts and see if you are. If you find that you are being sued, then the next question is whether they ever claim to have served you. Watch for that – if they do make that claim, then you will need to do something about it or else they’ll get a default judgment.

The Cost of Avoiding the Process Server

Avoiding the process server is one of the things that people hate most about being in debt – you never feel safe about  opening your door, you worry about strangers, and you’re afraid to answer your phone. As we discuss below, if you are being chased by a debt collector, there is no need to be afraid – you can and should win that case. We don’t suggest that you try to make the process server’s job easier, but there’s nothing to fear and no need to hide from strangers.

What if it Just Happens – they Just Never Reach You

Our position has been that you should never go out of your way to make things convenient or easy for the process server. It’s their job to get you – if they can’t do it, that isn’t legally your problem and in fact will benefit you. If they leave you a note asking you to come get the suit or asking when you’ll be around to be served, you don’t have to answer and probably shouldn’t. This method of (the process server) trying to ease the job shows a willingness to use cunning and trickery, though, in my opinion. If you receive some sort of request for help or cooperation, you must be careful that the process server doesn’t lie about serving you. Again, process servers often lie.

What to Do

The chief danger, once you have been sued, is that the debt collector will claim you have been sued one way or the other. If you have become alerted to a suit against you, you will need to monitor the case and see if that happens. Sometimes it will happen, but often it will not, and where it does not, the case will eventually be dismissed. When it does happen, however, you will need to take action to defend yourself. Until it is dismissed, you must not forget about the case even if they never serve you. You are gaining some time. Use this time to learn how to defend yourself or to put yourself in a better position to settle or win the case.

What Are You Running From

We have treated this lawsuit as a danger and suggested that avoidance is not always a bad idea. It will result in delay of the suit and sometimes its complete dismissal, both of which are good things. Lawsuits are always dangerous and often expensive, so we’re confident our approach makes sense. On the other hand, lawsuits are not all created equal by any means. Your chance of winning a suit brought by a junk debt buyer, if you have the resources in time or money, is very good – debt collectors would lose almost all their cases if they were fairly run and intelligently fought. Many original creditors should lose their cases, too. So fighting is a good idea.

Our suggestion is not to make the process servers’ jobs easier, but if they do get it done, you should certainly not lose heart. Fighting will give you an excellent chance of winning, and even if you can’t win, fighting will delay the suit and improve your chances of settling on better terms.

 

[1] In cases of real estate and certain other things, the thing being sued over – your apartment, for example, in an eviction action – is considered the “defendant” in the eyes of the law. The thing is adequately given notice by stapling or taping a notice of suit on the door, perhaps. There are lots of interesting legal cases and theories describing and explaining this, but debt collection cases typically involve jurisdiction over the person being sued, so that discussion is beyond the scope of this article.