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.
Sued for Debt – What’s Reasonable to Want out of Settlement
What’s Reasonable to Want and How do you Get it?
If you’re being sued for debt and have at least some money, you may be thinking about settling the case. What’s reasonable to pay? What’s reasonable to want in return for your money? And how do you go about it all?
These are questions that came up in a recent case evaluation. The answers are dynamic, but in a general way they point to some useful ideas.
Settlement Happens When Both Parties Agree they Can’t Do Better
In lawsuits, and perhaps all of life, you take actions you think will give you the best possible outcome. That’s a simple idea, but what it means is that if a company is suing you, they will settle if and only if they think it will give them a better outcome than pursuing the case to trial. In evaluating their case they look at “risk” (of losing) and cost (to pursue the case). When they file the suit, they fully expect to win the case either by default or within a few short weeks without having to spend any significant effort on it. Their only concern is whether you’ll be able to pay, but they do have a serious concern about this issue and will likely either settle for less than they demanded. But not much less.
If you want a better settlement, you’re going to have to take actions to change the way they view the suit.
Look at the Overall Case
Not all lawsuits or claims for money are created equal. If the plaintiff is a debt buyer (and not an original creditor), they will very likely have some or all of the weaknesses we mention in our Three Weaknesses Report. That is, they probably cannot win the case if you fight it intelligently. But they don’t expect many people to fight at all, and of those who do fight, they don’t expect many to know what they’re doing.
That means that when they file suit they completely discount all risk of losing, and they expect costs to be minimal. You need to change those opinions, and if you fight you can change their opinions about both of those things… eventually.
If the plaintiff is an original creditor, there is still a chance they’ll have the three weaknesses. But again they will completely discount any risk of losing. And remember, the lawyers bringing these cases scarcely if at all look at the cases – they have no real idea of what they have. They base their lack of concern over losing on the fact that so few people fight the cases.It’s a waste of money, they figure, to spend even one minute per case looking at the file when almost none of them will actually be disputed.
Again, you can change that by fighting. In discovery you can find out whether they have what they need – and at a minimum you will be adding to their risk (since they’ll have to start spending money to pursue the case, and they’re worried about whether they’ll get it back).
Therefore, it almost always makes sense to start fighting – and to do as good a job at it as possible – whether you have a debt buyer or original creditor, and whether or not you want to settle or try to win.
When it’s Time to Talk Settlement
After a while, you may be able to get the other side to take settlement more seriously. When you do, what can you reasonable expect from them? Well, in short, that all depends on just how worried they are about their risk of losing and the cost of continuing. If they’re very worried, you could get them to clear whatever credit damage they have done to you, take little or no money to walk away, and give you a dismissal with prejudice.
If they’re not worried, you won’t get much from them. Simple as that.
Factors to Consider in your Favor
Some things that could help your case – you’ve shown them that:
Factors that Could Hurt Your Case
There are some things you can do to make settlement more difficult. And understand, the better your chances of winning are, the more likely they are to settle, so these factors should be considered damaging to your chance of winning at trial.
Do you see how all of these things lower their risks or uncertainty regarding getting money from you?
Note that one thing that is NOT a factor is how much they paid for the debt (if they’re debt buyers). They probably did not pay much, and this might have a small effect on the amount of money they insist on, but their rights are measured by the amount of the original debt. And they will push for the most they can get according to the factors we mentioned above. How much they paid for the debt makes almost no difference. Whether they have “written off” the debt is an accounting matter that also has no impact on your negotiations or the case in general.
Conclusion
If you can do a lot of the things that help you and avoid most of the things that hurt you, you have a very good chance of winning at trial. The better your chance of winning is, the better a settlement you could get if you settle. It all starts with knowing what you’re doing as soon as you can (and of course that’s what our membership is for).
We often say there are no free lunches, and that most definitely extends to settling lawsuits. They will only settle with you and give you what you want because they think that is better than the alternative of continuing to fight. Don’t expect them to settle as a favor to you or from the goodness of their hearts. It just doesn’t work that way.
Vehicle Repossession and Breach of Contract Lawsuit
Vehicle repossession is not “debt law” in the sense we mean it at our site.
If you’ve read many of our materials, you know that we consider debt law as good as it gets for self-representation. That is because debt buyers buy vast quantities of debt and essentially take a “factory” approach to bill collecting and lawsuits. You can expect pretty much every case brought by a debt buyer to follow a similar approach – the petitions are almost always virtually identical, and the whole process is usually shoddy. Typically, the debt collectors don’t have what they would need to win a contested fight – and they don’t want to get what they would need to win because they are designed to catch the 80 – 90% of the people who do not fight.
And debt cases are “document-intensive,” meaning that the debt collector’s whole case will usually depend on getting some documents into evidence. There is very little testimony and no expert witnesses. So that means a pro se litigant can focus on a few simple evidentiary questions and not worry too much about arranging testimony or other trial tactics.
But our materials do not apply to vehicle repossessions and the surrounding issues. Those cases present a different set of issues and opportunities.
What is a “Vehicle Repossession?”
When you buy a car on credit, you will typically sign a contract agreeing to pay a certain amount per month (plus a variety of other terms, obviously). And these contracts and their terms are, in general, a terrible, terrible deal for the customer. One of these terms is a lien and right to repossession, and there is a whole body of somewhat specialized law on all of the repossession process.
If you fail to make payments, the company may have installed tracking and disabling devices in the car – so the car may stop working. And then the repo guys come and get the car. And then the REAL scam begins.
When dealers repossess a vehicle, they are not “collecting a debt.” They are, in legalistic terms, exercising their liens and cutting off your right to a security. It looks like a collection, and it is one, but the law of most jurisdictions does not see it that way.
Still, the idea is for them to get their money back, and what they plan to do is sell the vehicle at an auction.Early in the process, then – before they get your car – you can talk to them and negotiate terms more effectively than later.
Once they get your car, they will want to sell it. If they do this in a “commercially reasonable” way, you will be on the hook for whatever amount of your car note remains. And inevitably, this is a shocking amount. For various reasons (some good and some bad) the courts are extremely lenient as to what constitutes “commercially reasonable.”
But the fact is that the dealers get almost nothing for the cars they repo. They sell them to each other, at auction, so this is one of the all-time scams – and the courts wink at it. In any event, repossession law focuses extensively on this question of “commercially reasonable” and on certain notice provisions. State laws in this area are complex for most people, and the court decisions are not easy to understand.
And the car dealerships have stacked the deck in most cases. Their lawyers specialize in this law, know the facts of the cases they bring (much more than debt collectors, anyway), and will almost always have the contract you signed. They’ll have people who can swear to them, too, because most car dealerships are built around the repossession process.
This doesn’t mean you don’t have a chance to win. It just means that this isn’t the best kind of law to go pro se. Fortunately, if you are broke, most of the legal service organizations that help people without money are good at this. It’s a problem a lot of people with money problems have. We suggest you find one of these places – many law schools have clinics that do this, too – and see if you can get help.
If you can’t do that, it still makes sense to fight, and on a simple dollar basis, joining us to help you do that will probably be worth your money. Your chances of winning aren’t great, but they do use a factory approach, and some of our tools will apply to that. And by fighting you can reduce some of the damage they will do to you.
Repossession and Suit to Collect the Difference Happen Fast
Unfortunately, vehicle repossession cases can happen very quickly. Our advice is to make every effort to find help. Filing an answer by yourself could very well hurt your case. If you must do it by yourself, our membership can give you SOME help – and in that case you simply must join and talk to us before answering the suit. Trying to represent yourself without any help is just not a good idea.
Our Case Evaluation Service
One of the services we provide to members and non-members alike is a “case evaluation.” It’s a great deal for people being sued by debt collectors who would like some guidance about their case. We do not recommend this service for people facing vehicle repossession, though. If you send us one, we will have to spend the time to figure things out (so we will keep your money for the time we must spend) – and then we’ll almost certainly give you pretty much what we say here. Save your money and your time and look for a lawyer who can handle this case for you.
Motions to Dismiss Part 2
Motions to Dismiss in Debt Collection Cases, Part Two
When you’re being sued on a debt by a debt collector, motions to dismiss can come up in one or both of two ways: you could file one against them – or they could file one against you. More specifically, (1) you could file a motion to dismiss their lawsuit, or (2) they could file a motion to dismiss your counterclaim.
It is also possible that either or both of you could file a motion to dismiss certain affirmative defenses, although this does not happen very often in debt cases.
This is the second part of a two-part article. For the first part, click here. For a video on arguing motions in court, click here.
What Motions to Dismiss Are
So what is a motion to dismiss? A motion is always the way a litigation party asks the court to take some official action. A motion to dismiss is a motion asking the court to get rid of some part of the other party’s case on the grounds that, even if what the other side says is true, it doesn’t give them the right they claim. For this reason, motions to dismiss are sometimes called motions “for judgment on the pleadings” or “demurrers.” The crucial fact in all of these motions is that all the facts alleged in the pleadings are taken, for purposes of the motion, as granted just as if they had been proven. If the motion is denied, the facts will still have to be proven later in trial.
In the Litigation Manual I illustrate the concept by supposing that a policeman has issued a ticket for exceeding the posted speed limit, but the ticket says you were going 25 mph in a 30 mph zone. There, even if what the ticket says is true (and in this case, specially if it is), it simply does not state a violation of the law. A similarly basic example in the debt law would be where you sued the other side under the Fair Debt Collection Practices Act without alleging an action that violated the act.
Many motions to dismiss really seem to be calling the court’s attention to some obvious mistake, a simple oversight, perhaps. Naturally, however, many motions to dismiss are not so simple. In many cases, although the facts are clear, what the law provides or requires is not, and these would be cases appropriate for motions to dismiss.
You can move to dismiss any claim or count of the petition. If you do not seek to dismiss the entire petition, you have to answer the part you do not try to get dismissed.
Because the motion assumes that every fact alleged is considered true, motions to dismiss are said to be “testing the sufficiency of the pleadings.” Most courts will go ever further than that, and state that, if any set of facts (alleged or not) consistent with the pleadings could result in a valid claim, the motion to dismiss is to be denied, but from the point of view of a pro se defendant, this rule has limitations. Depending on unalleged facts can be a dangerous occupation for someone wanting to avoid a motion to dismiss.
Defendant’s Motions to Dismiss vs. Plaintiff’s Motions to Dismiss
Technically, a defendant’s motion to dismiss is treated in the same way as a plaintiff’s motion to dismiss, the only differences being who brings them and when. In any event, what is up for grabs is purely a legal question: does the law allow or prohibit certain action, and does it give a right to the person claiming it?
Despite the legal equivalence of the motions brought by plaintiff and defendant, it makes sense for us to look first at defendant’s motions, which you are likely to file against debt collectors, and secondly at plaintiffs’ motions to dismiss counterclaims or affirmative defenses, which debt collectors are likely to file against you.
Motions to Dismiss by Debt Defendants
When Petitions (or counterclaims) are filed, they are supposed to be following one of two types of pleading: “notice” pleading or “fact” pleading. The type of pleading required can make a very large difference, and it is determined by State law. In other words, your state requires either fact pleading or notice pleading. One of your first actions as a defendant in a debt lawsuit should be to find out which rule your state follows. Most states require fact pleading.
Fact Pleading
If your state requires fact pleading, then filing a motion to dismiss is as “simple” as looking at the elements (parts) of the case the plaintiff is alleging (its “prima facie” case), seeing if every fact necessary to prove that case is alleged, and moving to dismiss if any parts of the prima facie case is missing. You might think that debt collectors, who file millions of these cases per year, would never omit a part of their case in the pleadings. In fact they do so quite often, and this is simply because of the nature of their business: they buy huge numbers of supposed debts with minimal paperwork, file cases by the truckload, and rarely get challenged by defendants or the courts. In reality, lawyers are creating forms that secretaries fill out much of the time. They are not sharp, in other words, nor do they need to worry very much about their petitions. It is easy for them to make mistakes in the pleadings, and they often do. And sometimes they do it on purpose.
For a simple example, consider the filing of a claim of breach of contract in Pennsylvania, where a plaintiff on such a claim must either state the terms of the contract or attach a copy of it. Debt collectors almost never do this despite the rule – because they can’t. They don’t have the contracts. The huge majority of the cases are won by default, but those who defend simply file a motion to dismiss (called “Preliminary Objections” in Pennsylvania). Eventually the cases of persistent defendants get dismissed with prejudice, but for each case that gets dismissed, probably thousands of inadequately pleaded cases result in default judgment for the debt collectors. And the debt collectors are never punished for flouting the law. See the attached sample motion and judgment.
Notice Pleading
Where the jurisdiction is “notice” pleading, a motion to dismiss is much more difficult to win. Notice pleading means that a petition must give the party being sued some “general idea” of what he is being sued for, and in some courts this is such a vague standard that it is almost impossible to succeed in your motion to dismiss. Unless the debt collector actually names its theory in a heading (as they often do), if it does not state all the elements of an obvious claim, your motion may well be a “Motion for More Definite Statement.” In this motion you point out that the plaintiff has not alleged any specific claim and you ask that the case be dismissed or that the debt collector be required to state the elements of a claim. Your argument there is that the vague petition fails to give you adequate notice of the claims being brought against you. This type of motion (for more definite statement) has many of the advantages of a motion to dismiss and should probably be brought if possible.
If you win that and the plaintiff then files an Amended Petition that is also inadequate in stating a claim, you will either oppose the amendment or file a new motion to dismiss.
Timing – When to File
There are two aspects of time you must consider when filing a Motion to Dismiss (or for More Definite Statement). The first of these is whether you must file your motion to dismiss before filing an Answer. In my opinion it is always a good idea to file a motion to dismiss – on any basis – before filing an Answer.
Copy of the FDCPA
If you have any kind of debt problems or just want to understand the laws that apply to debt collection, you should start with the Fair Debt Collection Practices Act.
For most purposes, who the FDCPA covers and what it requires and allows are easily found just by googling the act. But sometimes you need the actual statute. And here it is free to download fdcpatext.
Creating a Motion or Cross Motion for Summary Judgment
When you’re being sued by the debt collector and have brought a counterclaim, you might bring a motion for summary judgment motion as to both parts of the case. They’re treated just a little differently differently. If they file a motion for summary judgement before you do, your motion would be called a “Cross-Motion,” and if they file first, you need to include your cross-motion with your response to their motion.
Just as we said about defending against a motion for summary judgment, these motions are first – and far more importantly – about the facts. Only secondarily do the arguments about what those facts might mean come in. Prove that they can’t show the facts to win their case – or that they can’t defend against your case – and you will win.
Filing a Motion as to the Debt Collector’s Case
The plaintiff has the burden of proof, and that makes a lot of difference in motions for summary judgment. It means that you can prove your defense against the debt collector either by showing that and one part of its case against you cannot be proved.
If the debt collector cannot prove ownership of the debt it is asserting against you, for example, its whole case must fail. Likewise if it can’t prove the amount of the debt or that you owe it. If any part of the plaintiff’s case fails, all of it does. And you can prove that it fails either by proving—remember,
you must show that there is “no dispute” about the things you are proving—that the debt collector is wrong (it isn’t your social security number or name, for example), or that the debt collector will not be able to prove the debt.
How Can You Know What You Need to Know?
How could you prove the debt collector can’t prove something? Well, a simple example could be an old Mastercard account. Let’s say the debt collector has no admissible evidence that the account was ever yours. And this is not rare, by the way. It was hoping to get you to admit that it was (or not to defend yourself at all). But you testify that it was not or that you do not remember one way or another.
That leaves it with no evidence on this crucial issue.
Or suppose it wants to prove an amount owed, but all it has is an inadmissible computer tape (or nothing but bills it sent you) and you deny owing the amount. That leaves it without evidence. You want to prove that the debt collector is without evidence, and if you do, you should get a summary judgment.
How do you know in advance that it doesn’t have any admissible evidence on these things? Because you will have asked by interrogatories for everything they have. When they give it all to you, you will be able to say what they can or cannot prove.
Or what if one of the things they give you shows that the debt is owed by someone else? Or owned by someone else? All these things are possible, and they sometimes happen.
When Do You File?
Consider what the debt collector must prove in order to show you owe it money. This is called its “prima facie” (pronounced in a wide variety of ways!) case. When you have the evidence you need that the debt collector cannot prove at least one part of its case against you, you will file your motion.
Motion for Summary Judgment on Your Counterclaim
Your motion for summary judgment as to your counterclaim is somewhat different. As the plaintiff in that claim, you have the burden of proof. That means that you must prove every part of your case, and they only have to prove one is missing. It means that instead of attacking on just one point, you must show undisputed facts as to all of them.
Summary Judgment on FDCPA Claims
Luckily, the FDCPA really lends itself to motions for summary judgment. The FDCPA lends itself to summary judgment because you don’t need to prove that the debt collector intended to do anything wrong. You don’t have to prove that you believed anything it said. Or that you suffered any particular damages.
Plus, if the violation occurred in the legal process (by using a false or deceptive affidavit, for example) or by a deceptive or threatening letter from the debt collector, the proof is right there in written form.
Almost undeniable. Or completely undeniable.
You Can Prove Them, Though
You can prove those things, but you don’t have to. If you have a claim for emotional distress, for example, your actual deception or intimidation, their intent, and any harm to you could very well make a difference. You often don’t want them determined on summary judgment, though, because you want the jury to get the full impact of all the testimony, and a judgment on the issue might cause the judge to curtail some of it.
That means that all you have to do is prove that the affidavit was deceptive—which may be obvious on its face. Or the letter threatening. Or whatever. And remember that you will have done discovery to find out whatever wasn’t obvious. If you have any other claims against the debt collector this will probably be more important.
Again, you will follow the rules regarding summary judgment very, very carefully. Numbered paragraphs, attached memos, exhibits correctly marked, etc. Do all that, and you should have your summary judgment.
Partial Summary Judgment
What if you prove that the debt collector violated the FDCPA but not that the debt is no good? What then? Well, it is possible to get what is called a “partial” summary judgment, where the court decides part of the case and leaves the rest for the jury to determine. You can prove they violated the FDCPA, but not how much they should pay, for example. And this is called “partial summary judgment as to liability but not damages.”
How to Create Good Faith Letter
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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.
Statute of Frauds
How the Requirement of a Written Contract Can Affect Your Case with a Debt Collector
Everybody has heard of the statute of limitations, which refers to the amount of time a company has to bring suit against you, but have you ever heard of the “Statute of Frauds?” That can be equally important for some debt disputes in rare circumstances.
What is the Statute of Frauds?
The statute of frauds is a law – a written statute – that every state legislature has passed, as far as I know, requiring that certain claims can only be brought if there is a written contract. You will be able to find the statute for your state by googling “statute of frauds” and your state name. In plain English, the statute of frauds means that you cannot sue on an oral contract if the amount in dispute is over a certain limit, or if the performance of the contract was not to be completed within a certain amount of time. A promise to repay $10,000 at some undetermined time, for example, or to repay a certain sum over a period of time greater than five years (i.e., $10,000 in $100 payments until the balance is zero), would almost certainly violate the statute of limitations.
This is not an issue that comes up directly in most credit card cases, obviously, as the credit card application – if they can find it – or other supporting documentation which they often have, would take the case out of the statute of frauds.
Unilateral Contracts
Another reason the statute of frauds rarely applies to debt cases is that use of a credit card creates what is known as a “unilateral” contract to repay the money borrowed (to pay for the purchase). A contract is made when there is an offer and an acceptance, and use of a credit card, sent under certain conditions, is an acceptance that creates a contract. And this is so whether you sign an agreement to follow the terms and conditions of the contract or not. Debt collectors love to use this because they almost never have the contract, however you should remember that they must still prove you used the card, and they must prove the terms and conditions – all with competent evidence.
Settlement
Another way the statute might come up in the credit card context is a debt collector harassing you and then, supposedly, claiming that you have agreed to settle the case over the phone for monthly payments of $200 for the next six years. That sort of agreement would probably violate the statute of frauds.
Statute of Frauds Applies to Either Party
It cuts both ways, too: if you think you have an agreement to settle a case brought by a debt collector for payments of some amount of money extending over more than five years (in some states – check on yours for the time limit that applies to you), but you do not have it in writing, then you do not have a settlement. Understand: this does not mean that payments that would occur after the five years are up do not have to be made, it means that the entire contract… is no contract. None of the payments have to be made – and none of the actions for which those payments would be made (like dismissing the case against you) have to be done.
Remedy for Violating the Statute of Frauds
There is no “remedy” for violating the statute of frauds. If you make an oral contract that does violate it, that contract is unenforceable. That is, you can’t sue or be sued, for breaking the contract – there is no contract. The fault can be “cured,” of course, in certain ways. Obviously putting the contract into writing would cure it. “Partial performance” sometimes will do it, too. That is, if the person who has something left to do starts to do it, that might cure the contract. Thus if someone claims you owe them money under something you think breaks the statute of frauds, a partial payment might have disastrous consequences for you.
Integration Clause
Most written contracts have something very much like a statute of frauds built into them – and you should be aware of this, again, in the settlement context of any debt on a written contract. It’s called an “integration” clause. It’s the thing that says “this contract is the complete agreement between the parties and cannot be changed unless both parties sign any modification” [or words to that effect]. Most contracts have an integration clause, and every credit card contract I’ve ever seen has one. In most situations this part of the contract means that you must have a written and signed agreement before you take any action on a contract. An oral agreement will not change any part of a written contract with that integration phrase.
In your normal life, this also means that if you have an oral agreement with someone and then you create a written contract to “get it in writing,” the written contract will likely wipe out the complete oral agreement – so you have to get everything in writing, not just part of it.
Memberships with our site
Memberships with Your Legal Leg Up
Our membership is a tremendous value and an effective way to level the playing field between you and a debt collector.
After years of providing debt defendants what they need to beat the debt collectors, I have figured out a way to make beating the debt collectors less stressful and time-consuming. If you’d like to save time and stress while improving your chances of victory, keep reading.
How do you “Level the Playing Field” with the Debt Collectors?
As I have often pointed out, the debt collectors rarely have the evidence they need to win a case when they file suit. Instead, they rely on people defaulting or giving up. That’s how they get away with adding illegal fees so often or suing people who never owed any money – or suing for debts they don’t own.
The debt collectors have designed their litigation process to make it more likely that people will give up – they “tilt” the playing field so that fighting them to obtain justice and fair play is always up hill for you. From Petitions alleging the same debt three or four different ways (making it look like you might owe three times as much as they even say you do) to “fake” affidavits of robo-signers swearing to things about which they have no knowledge, to fake account statements and bogus notices – all these things are designed to trick or intimidate people into giving up. Many of these illegal or immoral tactics have been “business as usual” for the debt collectors. They’re notorious for dirty tricks.
And the debt collectors also start with some “institutional” advantages when they sue people for debt – they do this all the time, you know. The debt collectors have associations of other debt collectors and lawyers who provide them the latest information and court decisions nationally, or just contacts to help them strategize how to deal with your case. They have “document banks” – computer files of petitions, motions, discovery, etc. that they know have worked in cases before. These give them a big advantage: they can draft a petition and serve discovery with a few keystrokes by a paralegal, whereas you are left to spend hours responding. They know what works because they know what is happening in the hundreds of thousands of cases like yours that get filed every year.
How do you neutralize the debt collectors’ advantages and level the playing field?
Introducing Your Legal Leg Up Memberships
In order to counteract the advantages of the debt collectors I have created two types of membership with Your Legal Leg Up: Gold and Platinum. These memberships will allow me to provide you more and better service, give you expanded access to helpful materials, and keep you updated on the latest strategies and techniques that people are using to beat the debt collectors. You will have your own “document banks” where you will be able to download documents that have been used successfully by other people in fighting debt collectors so you don’t have to spend ten times as much time as the debt collectors do on simple documents. And you will special access to me and – more importantly – to other people like you who are actually fighting the debt collectors.
Benefits of Membership
As I mentioned above, there are four main features of membership: expanded access to materials, keeping up to date, connecting with others, and creating and building a document bank of documents you can convert to your own use without a ton of trouble.
Expanded Availability of Services
Through the newsletter and members-only homepage, you will receive updates, alerts, and reports and the tried-and-true, easy to understand materials in the ever-expanding “members-only” section of our website. Members will have access not only to the free access videos, but also to our extensive members-only video collection and the Your Legal Leg Up Video Series–now available ONLY to members, previously sold for $149 and available online.
Keeping Current
With the new membership comes a free subscription to Fightdebt!, official newsletter of Your Legal Leg Up. Every month it will give you the latest news in debt litigation as well as special tips on debt litigation, consumer issues, and credit repair. This is another benefit that is available only to members, valued at $49/year. You will also get new videos, reports and alerts as they happen.
Connecting with Others
Although some of the other benefits of membership may be more tangible and obvious, I actually think this benefit is going to be one of the most important benefits of membership. We will start with a members-only blog (which I will mediate), and this will allow more freewheeling contact between members. It is also my goal to connect those who want to be connected to other people who are from the same state. It’s hard to overestimate the advantage that comes with being able to talk to someone else going through the same thing, and working on pleadings and motions (for example) together could even make the process fun. Monthly teleconferences are free for members so callers can benefit from hearing one anothers’ questions and experiences, and a teleconference connections webpage also provides a forum on which participants may share and connect.
Software
Some people do not have a word processing program that will help them create professional documents or cut and paste documents from the document bank. Members will receive a link to a free word processor which will fill that need. Likewise, for ease of viewing, members will be provided a link to a video player that will let them play or download videos from the site.
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.