Risk, for debt collectors (and everybody in litigation) is divided into two questions, both vital to the decision. First, what is the chance of winning a judgment if the case is litigated? We’ll call that the “legal risk.” And second, what is the chance of collecting a judgment if it is won? We’ll call that the “collection risk.”
The first is a question of how well and how hard (they think) you will fight the case, and the second is a question of how much money you have that the debt collector can find. That is, and to be very specific about this, these are the debt collector’s guesses about these issues. They look at what they know and try to figure out what will or may happen. Of course you will want to increase their perception of risk every chance you get.
Let’s look at the issues separately.
As surprising as it may seem, the debt collector usually starts with very little actual idea of what its case’s legal “merits” (chance of winning if it goes to a judgment) are. They normally do not need to know their cases’ legal merits because so few cases are actually defended.
The FTC estimated that as much as 80% or even more of what one large debt collector collected was never owed by the people they collected from at all. They have some basic information, and they file suit. As far as I can tell, that is what most debt collectors do. Later, if necessary, they may try to find the documents that would help them win the case. So at the beginning the debt collector starts with a sense that it will win the case, but not by fighting.
Does that seem cynical? Well, welcome to the business world. If it costs a lot of money to assess the legal merits of a case that you thought you would win just by filing, would you spend any more than you had to? Perhaps some of them do the back-up research…but you might take it as a rule of thumb that the company suing you might not have done it. And that could give you an advantage.
You can change the legal risk equation by defending yourself and by knowing, or seeming to know, what you are doing. Once you start forcing the lawyer to
do some work, you highlight the facts that they might not have what they need to go after you and that you might win the case. You also increase the dollar value of the risk by forcing the company to spend dollars to chase you.
Collection risk, or the risk that the company might not be able to collect from you even if it wins the suit, is a much vaguer concept than legal risk. On the other hand, they do have some tools at their disposal to help them with this.
Bear in mind that, like the legal risk, collection risk is barely considered before the suit is filed. Again, this is simply a question of economics. They believe they will win the suit if it is filed, and it does not cost much to file suit against you. The costs of filing garnishments at your job or taking your bank accounts is also low-if they can find them. In other words, they do not consider the collection risk before filing suit because the cost is so low. Start fighting the case, though, and you bring this issue to life for them.