Under the Fair Debt Collection Practices Act (FDCPA), a debt collector is required to provide written notice of your right to dispute a debt within five days of its first attempt to collect the debt. See 15 U.S.C. Sec. 1692g(a). The law states that “a communication in the form of a formal pleading in a civil action shall not be treated as an initial communication under this section.” 15 US.C. Sec 1692g(d). The question we address here is whether the system Minnesota and the Dakotas use, which provides for service of a document that is not yet a civil action, is excluded from the definition of “initial communication.” In plain English, if a document may become part of a lawsuit, is serving it upon a debtor an initial communication under the FDCPA requiring the disclosures of Sec. 1692g(a). We argue that it is.
That would make most lawsuits, as they are currently being served in Minnesota and the Dakotas, a violation of the FDCPA.
Minnesota and the Dakotas have a system of lawsuit initiation that is different than that of all other states, called “pocket service.” Under this procedure, plaintiffs are permitted to create what look like lawsuits and petitions and serve them on defendants without ever having filed suit. According to Minnesota law, this “commences” the action. MN Rule of Civil Procedure 3.1. Then, if the defendant fails to answer in time, the plaintiff can file suit and seek a default judgment. If the defendant does answer, however, the would-be plaintiff is free to leave the suit unfiled. It is “deemed” dismissed with prejudice if not filed within a year, MN R. Civ.P. 5.4, but “deemed” means, as is obvious, that it is NOT, in fact, dismissed – because it was never filed. Given that roughly 85% of debt cases are not answered but are in fact defaulted, while in almost all of the cases in which people do intelligently defend themselves the defendants win, pocket service is patently unjust in debt collection cases.
But our question here is, must the petition in a state allowing pocket protection include the right to dispute the debt? Or to put it slightly differently, is service of a petition and summons in a case which has not been filed constitute an “initial communication” for purposes of the FDCPA’s disclosure requirements? Our position is that it does, and that a debt collector whose first contact with a debtor is pocket service must include within that written document a notice of right to dispute.
They never do at present.
Further, even if they did include notice of the right to dispute, the pendency of the lawsuit would probably “overshadow” the right to dispute and be another violation of the FDCPA.
Here is the operative language of 15 U.S.C. Sec. 1692g:
(a) Notice of debt; contents Within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the following information is contained in the initial communication… send the consumer a written notice containing —
(1) the amount of the debt;
(2) the name of the creditor to whom the debt is owed;
(3) a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector;
(4) a statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and
(5) a statement that, upon the consumer’s written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor.
Under the statute, pleadings of an “action” are not initial communications for purposes of the statute. Here is that provision at 15 U.S.C. Sec. 1692g (d):
(d) Legal pleadings
A communication in the form of a formal pleading in a civil action shall not be treated as an initial communication for purposes of subsection (a).
At first blush, Sec. 1692g(d) would seem to make a summons not an initial communication, but note that it says formal pleading “in a civil action.” The FDCPA has a section of definitions at 15 U.S.C. 1692a. It includes no definition of “civil action,” probably because the term has a widely accepted definition that it is a lawsuit that has been filed in court. With pocket service, no suit has been filed, and no suit need ever be filed. It is clearly not a pleading in a civil action. At most, it’s a pleading in what may become one.
Under Minnesota law, the action is supposedly “commenced” by service (Rule 3.1), but 15 U.S.C. Sec. 1692g(d) is federal law subject to federal interpretation – it is not governed by Minnesota’s vague use of the word “commenced.” At the time service is made, no court has knowledge of or jurisdiction over the matter – there has been no judicial involvement at all – and there may never be. Such a document cannot reasonably be construed as an actually existing lawsuit.
In addition to the plain language of the statute referring to a “civil action” and not a “potential civil action,” courts should require the FDCPA warnings in pocket service because the FDCPA is a “remedial” statute that should be read broadly and it is necessary to protect the interests the FDCPA requirements were designed to protect.
The purpose of the dispute provision of the FDCPA is to prevent debt collectors from pursuing people who do not owe the money. Congress had found that many such suits resulted in default judgments that were unjust. That risk, and that result, are plainly present in the pocket service jurisdictions. Moreover, as I understand the law, a debt collector can continue to communicate – completely free of the FDCPA – for up to a year under the most coercive conditions imaginable, before needing to file suit and submit to a court’s oversight.
The justification often given for exempting pleadings in a suit from the protections of the FDCPA is that once suit is filed, a court has oversight of the matter and can prevent overreaching and unjust behaviors. If pocket service is permitted without the notices required by the FDCPA, then the protections are withdrawn without that judicial oversight. Indeed, that state of affairs would enable the very thing the FDCPA was designed to prevent for the very reason that it allows debt collectors to seek default judgments without costs or judicial oversight, but to drop the case in the event a defense is offered, also without cost. So frivolous and unjust suits are encouraged, and debt collectors – notorious for their dishonesty and overreaching – would be permitted to set up a “heads I win, tails you lose” scenario fundamentally at odds with the purpose of the FDCPA.
If the defendant appears and defends, then the quasi lawsuit can continue without judicial oversight for up to a year (or even beyond) without a court even becoming aware of it. Such a situation is ripe for abuse, and there can be no doubt that is being abused on a routine basis.
The fact that Minnesota and the Dakotas would allow such a process for lawsuits other than debt collection may reflect badly on them but has no effect on the FDCPA. Under the Supremacy clause of the constitution, Federal law governs where there is any conflict with state law. The FDCPA makes pocket service without the notices required by the FDCPA illegal.
(More extensive notes coming soon)
It is not yet clear whether the courts are now accepting new cases for filing in debt collection or not, but some people are contacting me with cases they have recently received. Are some law firms have cases previously filed served? Are service processors just finding people home now? Or are people just finding cases that have been dropped off in some way? I don’t know.
But here’s what I do know: if you get served and do not answer a lawsuit in time, you will be “subject to default.” It could happen without further notice. And this presents a huge risk for people in debt.
Let’s talk about what “default” is, first, then I’ll show you why it’s such a risk now.
What Default Is
In litigation, a default judgment occurs when you don’t respond to a suit within a certain amount of time. The judgment will normally be for whatever was sought in the lawsuit. If this happens to you, you have “lost” your suit.
How Default Happens
Default is a two-step process, though often, but not always, these two steps are collapsed into one. The first step is the “Order of Default.” In that, the court finds that service of process occurred and was proper to establish jurisdiction, and you failed to respond. It declares you liable.
The second step is the “Judgment of Default,” in which the court establishes the amount you owe and enters a judgment against you. At that point the debt collector can begin to garnish wages or attach bank accounts (take them). They don’t start collecting, in other words, till there’s a judgment.
The way defaults normally happen in most courts is you are served and due to respond or show up in court on a specific date. THAT is your NOTICE. And no other notice is required unless you do, in fact, respond in court. The court doesn’t require plaintiffs to keep you informed after you ignore service of suit.
Increased Risk During Corona Virus
Suppose you receive summons now of a lawsuit. You may, or may not, even be able to file an answer. But probably are able to, even though you won’t be required to go to court (as of now). If you do NOT file an answer, you may not be entitled to any further notice of the suit at all. That would mean, or could mean, that when the courts reopen, you are immediately liable to have an order of default against you. It MAY even mean that there already IS one, because the courts are in business even if they are closed to the public, and they could be issuing default orders.
When they open again, the debt collector will seek and get a default judgment without ever needing to tell you. Your first notice could be from your employer telling you your check has been garnished. Or from bounced checks coming back to you. During a time like this especially, but always really, this is likely to be a life-threatening disaster.
What to Do
If you have been served a lawsuit, you should respond either with a motion to dismiss or an answer. You cannot ignore the suit just because the court is closed and you don’t have to, and cannot, go to court. In other words, don’t treat this as a vacation. If you’re being sued, take defensive measures immediately. Start defending yourself. As I have pointed out elsewhere, this is actually a good time to do that, because the debt collectors are not in a position to a lot of work on your case. Start defending, and they may drop your case and look for easier pickings.
Three Weaknesses Most Debt Collectors Have
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Debt collectors tend to buy debts in large quantities (called “tranches”) at a cost that varies from 25 or even 50 cents or more per dollar of “nominal” debt owed (that is, how much the documents say you owe) all the way down to small fractions of a cent per dollar of nominal debt. The price depends on various risk factors, including the date of the debt, how many other people have owned the debt, and so on. As a general rule, the older the debt, and the more owners it has had, the less a debt collector pays for them.
Most of the debts tranches are sold at auction, so there is also a competitive factor, although considering the amount of debt that exists, this can’t be very significant. We have written extensively about the contracts that control the terms of these auctioned debt sales, because getting this contract can be extremely helpful in defending against a debt lawsuit. Members, See, Assignment Contracts, Holy Grail for Debt Defendants.
Most debt collectors bug the people who supposedly owe the money and collect as much as possible before bringing suit, but they can simply bring suit immediately. In any event, when they file lawsuits, they tend to file them “in bulk” often filing fifty or a hundred suits at a time in the same court.
Most of the people they sue do not fight back.
Because the price of the debts is often so low and so many people don’t respond to lawsuits against them and give up a default judgment, the debt collection business is mainly not designed to fight a determined opponent, and it rapidly becomes uneconomical for them to do so.
This gives ordinary debt defendants a tremendous advantage if they know how to defend themselves and where to focus their efforts. Our materials are designed to help you fight back intelligently, and our Three Weaknesses Report will show you where to focus your efforts in most cases against the debt collectors. You’ll have to do some work both to figure this out and to apply it to your case, but it will take much of the work out of your defense and give you a shortcut to victory.
The weaknesses debt collectors share all come from the carelessness that handling cases in bulk with an absolute minimum amount of individual time spent on them brings. There is very definitely a “factory mentality” among the debt collectors, and individual time is by far the most expensive part of the collection process for them.
This factory mentality pervades the process from top to bottom and infects sales of debts between the debt collectors. Remember, none of these weaknesses are “magical” or “secret.” They are simply the inevitable result of a process which focuses so much on bulk purchases and processes that rarely get tested by defendants. The debt collectors tolerate problems that can be fatal to their case in individual cases because most people don’t attack the problems.
No Adequate Bill of Sale or Chain of Title
We tell you specifically what to look for to know that the debt collector has this problem, but many debt collectors can’t seem to show an adequate bill of sale that proves they own the debt.
A related problem occurs when the debt has been sold more than once. In that situation adequate proof of every transfer is necessary. And when the debt has been sold more than once, the debt collector is almost never going to have what it needs to prove its right to sue you. The Report shows you what questions to ask in discovery to get proof of the problem, how to show it to the court, and give you case authority for the position you are going to take. The bottom line, though, is that the debt collector will often fail to prove actual ownership of the debt. Without that, it has no right to sue you.
Hearsay and the Business Records Exception
Debt buyers buy debts from other people who created and kept all the records of the debt. They almost never get what they would need to introduce these records in court properly. We explain the rule against hearsay in the report and show why the debt collectors’ efforts to avoid that rule not only should not work but actually probably amount to a violation of the Fair Debt Collection Practices Act (FDCPA). We give you cases and arguments, and we show you how to get what you need to prove your case.
Debt collectors rarely bother to get the credit card contract or application for which they are suing you. They say they don’t have to, but…
We’ll show you why they usually do need to have that proof. Again, we give you the case law and show you how to find the debt collector’s weaknesses through discovery. And we also show you how to deal with the most common way debt collectors try to avoid the huge problem not having a contract can often bring: the “Account Stated” claim.
As we’ve said, almost all debt collection cases share these weaknesses, and you can usually kill their case with the information in this report. You will need to do some research to make it just right, and you will definitely need to understand the arguments, but this report will take you a long, long way towards beating any case brought by a debt collector.
Your Legal Leg Up
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Is Pro Se Debt Defense Hard?
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How hard is it to defend yourself from the debt collectors?
You would think that wouldn’t be a very difficult question to answer, given that the business is largely automated and conducted by people who all want one thing: your money. And yet the answer can vary because all litigation is a fight, and how hard you will have to fight depends on a number of factors you can’t know ahead of time.
Still, with that said, the difficulty is mostly psychological. It can be scary at first, but if you do the things that need to be done one at a time, it isn’t that hard. And you have a great chance to win.
The first, most important factor in determining how hard it will be to fight the debt collectors is probably YOU.
I often say that debt collectors “aren’t the sharpest knives in the drawer” when it comes to legal work. They could be, but they aren’t, because lawyering as a debt collector rarely requires legal expertise beyond a very basic level. For the most part, they file suits and collect judgments – it requires the expertise of a bully walking up and down a beach kicking sand in the face of people who don’t look like they’ll fight back.
The bully’s expertise is in choosing victims and scaring them, not in fighting them, and debt collectors are the same way. The first, most difficult, step is to get up and fight. It doesn’t take that much effort, but it’s the hardest thing you’ll do.
The Debt Collector
The next biggest question is what kind of debt collector do you have. Many of them have no interest in fighting the case at all. I don’t know what the percentage of debt collectors is who are like this, but it is surprising how many of them will drop the case if all you do is answer the petition. They don’t show up, and the court dismisses their case, just like that.
Most of them have more fight than that, but as I say, you’d be surprised by how many walk away as soon as you answer the petition. They’re only interested in the absolute easiest pickings, and when you answer, you aren’t that. They go away.
The others have some point to which they’ll go. It appears to me that lines typically get drawn near the following events:
- You answer
- You file counterclaim
- You serve discovery
- You pursue discovery
- You file motion to compel
- You file motion for summary judgment
- You defend against their motion for summary judgment
- You show up for trial
Each of these steps is one step further along, of course. What may not be so obvious is that each of these steps involves a decision on their part to spend money and time on your case. It isn’t the fact that time is passing, it’s that you’re making them spend money on your case.
Why is That?
When debt collectors purchase your debt, they do so at a small price, and they can file suit remarkably cheaply – that’s their business. By the time you’ve been served, they’ve “sunk” these costs of doing business into your case. Their goal is not to spend any more, but simply to pick up a default judgment and send it to the people who look for your money or try to harass you into paying it. Low wage earners. It works this way 80 – 90% of the time.
Every time you make the legal department take some action, though, you are making them pay high wage earners, and you are making them pay for something they didn’t expect to pay. AND you are making them pay something that wasn’t already a sunk cost. You are costing “extra.”
They don’t like this, and for good reason. A dollar spent chasing you is much, much less efficient than a dollar chasing the 80-90% who give up. And when they spend NEW money to chase you, they have to worry more about whether they’re going to be able to get the money out of you. It’s one thing to get a judgment, but a different thing to collect it. And they’re very aware of that difference.
Almost all debt collectors have a line beyond which they will not go. The sooner you make them think they’ll have to go past that line, the sooner they will drop the case.
Notice I haven’t even mentioned the possibility that you could win the case. They don’t worry about that much, but if you can make them worry about it, that will push all but a tiny fraction of them to the point where they drop your case. It’s not “weakness” on their part or laziness or any other bad quality. It’s business.
So that Brings us Back to you
The question is, how hard is it to make them go away? You will have to learn how to do things up to the point they give up. It might be just learning how to answer, and that is very, very easy. It might be putting discovery requests together or pursuing the steps leading to a motion to compel. It might be filing or defending against a motion or two.
No one of these things is all that hard, and you will have time to learn as you go. You’ve probably heard the saying, “inch by inch it’s a cinch.” Well, I don’t know about “cinch” once you get past the answer, but it’s all manageable, and in the greater scheme of things it isn’t hard at all. And it pays you very well, depending on how much they’re suing you for.
It Isn’t Hard
So after all, it isn’t hard. You will need to learn enough to defend yourself intelligently at each step. It takes some effort, but mostly it’s the psychological effort to realize that you CAN do this and that you DESERVE to win for yourself. The more you do, the more you will realize these things are true, so you don’t even have to start with much hope of winning.
Eventually you will learn what you need to know. When you do, you’ll know they’ll never be able to push you around again.
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.
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Library of Glossary Videos
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Glossary: Introduction Video
Glossary: Business Records Exception Video
Glossary: Dismiss, Dismissal
Glossary: Evidence – What Makes Something Evidence
Glossary: Small Claims Courts
Glossary: Statues of Limitations