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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.

Debt Buyers vs Debt Collectors

“Debt Collectors” and “Debt Buyers”

I often talk about debt collectors, but many, and perhaps most people being sued for debt are being sued by people (or companies, usually) that have purchased the debt from someone else and are suing to collect the money for themselves. These are sometimes called “junk debt buyers.”

So What is the difference between a “debt collector” and a “debt-buyer?”

There are some companies that collect debts for other companies, taking a percentage of the collections as their fees, and most people think of these companies when they think about “debt collectors.” But the term “debt collectors,” in its legal sense, is broader than that. There are also debt buyers, who buy the debt from the original creditors and collect on their own behalf, and these companies can also be “debt collectors” in the law.

If a company’s “principle business” is the collection of debts, it is a “debt collector” whether it is a debt buyer or (just) a collector. So the company that bugs you on behalf of the original creditor is a debt collector, and so is the company that bought the debt and began harassing you in an attempt to collect for itself. And so, usually, are the lawyers suing you and their firms. All must obey the Fair Debt Collection Practices Act.

“Debt collector” used to be more conveniently determined as a matter of when a company purchased a debt – if it buys a debt that isn’t being paid solely for the purpose of collecting it, it is obviously functioning simply as a debt collector. But our distinguished Supreme Court – distinguished mostly based on its hostility to working people and its favor to the rich – sees otherwise. It ruled against common sense in 2017. So now one must look to the status of the company – what its “principle business” may be – rather than its actions.

One problem with using the “principle business” standard is that the term has rarely, if ever, been actually quantified. That is, no one really knows what percentage of a company’s business needs to be a certain thing before that thing is its principle business. More fundamentally, all the debt buyers are doing is changing the name of the person allegedly owed. They make exactly the same amount of money they ever did (or they can if the deal is structured that way because there is no real risk of ownership), and their business is exactly what a third person debt collector’s is: they collect money owed to someone else. This should not be changed if the company incidentally happens to have some other operations that are other than collecting debts.

For example, a law firm that buys debts and sues on them (as many do) will almost certainly no longer be a debt collector, whereas Congress has been pretty clear that it wanted them to be. And the standard wrongly seems to focus on the overall business of the business rather than the nature of its operations vis a vis the debt in question.

Nevertheless, to prove a debt buyer is a debt collector under the FDCPA, you will now have to prove that is it’s principle business, and that will make bringing a counterclaim more difficult.

However, for purposes of defense this will not make any difference. The important thing about debt buyers, from our perspective, is that they are suing on a debt which they did not generate. This means they probably won’t have, and won’t be able to get, the records that would legitimately support the debt at trial. You should be able to beat any debt collector or debt buyer in court.

Our materials work on both debt collectors and original creditors.