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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.

Getting the State to do the Dirty Work

There is a disturbing trend in debt collection these days: getting the state to do the dirty work of intimidation and collection.

In some jurisdictions, notably Illinois, debt collectors are actually managing to get people who supposedly owe them money thrown into jail. This is obviously a dirty trick and happens primarily because the debt collectors are managing to set cases for trial where attendance in mandatory; whereas in most civil cases failure to show up for trial results in a default judgment, in these cases the judge issues a warrant for arrest.

The subject of this Scam Alert, however, is a little different. A scam involves trickery and deception, and that is what is happening in Missouri and elsewhere. In some places, Payday loan companies and other vulture companies are issuing short-term loans. What they do is require a post-dated check for the repayment.

Of course if you have a job – and keep it – and the post-dated check is made with that in mind, then when the money rolls in, you just pay off the debt.

Of course you do it at heart-breaking interest rates, but at least theoretically that is what you bargained for, and there’s no real confusion about what the deal is costing.

The problem comes in if something keeps you from getting that money you expected. In most loans, if you fail to make a payment you can be sued, and generally it is not a fun thing to be sued. If you have written a post-dated check, however, if you fail to make the payment (and cover the check), you are immediately subject to a civil penalty doubling the value of the check (in Missouri), and you may also be prosecuted to passing “bad checks.” Many lawmen are willingly allowing themselves to become the hitmen for these loan companies.

This is a “scam” because no one tells the people borrowing the money that failure to pay could result in an instant doubling of the loan or criminal prosecution, so payday loans, which charge such a high rate to account for the fact that people so often cannot make the payments, gets an extra level of security against default. And foists the risk of criminal enforcement onto people who don’t know what is happening.

It is also a perversion of the law.

Bad check laws were created to protect people who trusted the people writing them checks – writing a check is, legally, a sort of guarantee that the check-writer has the money to pay for the check in the bank at the moment the check is written.

Writing a check without the money in the bank is a type of fraud. But when a payday loan company accepts a post-dated check in exchange for a loan, they know the money is not there. There is no fraud when the check is written – and fraud requires that the intent to rip off the victim be present at the time the action which does rip them off (writing the check) is done. What’s happening here is that people who made a mistake about having money at a certain point in the future are being thrown into jail for that mistake. And the people on the other side of the transaction – the payday lenders – are perfectly aware that their customers have trouble with money – that’s who they target.

It is morally totally wrong for this to happen. But it is happening. So the lesson is, never pay for a loan – any loan under any circumstances – with a post-dated check. If the money isn’t in the bank, do not use a check.

Discovery – Requests for Documents

This is going to be a brief article. For a fuller discussion and samples, look in the Litigation Manual and Forms. Still, you should be able to create your own after reading this. If you do not already own the Debt Defense System, you should consider it. Membership with us allows us to help and guide you every step of the way.

As with other discovery, Requests for Documents are controlled by the rules of civil procedure for your jurisdiction. And there are two sets of rules you must consider: your state rules in general and, if you are in some sub-court of the state, the rules regarding your court; and your “Local Rules” if your court has them.

Sub-Courts

An example of what I mean by “sub-court” might be what we have in Missouri, Associate Circuit courts. These are courts that are designed to handle smaller amounts of money. Or small claims courts (even less money). Many states have similar types of arrangements, and these sub-courts will have their own special rules, and these rules always control when and how much discovery you can conduct. I normally suggest that people avoid these courts because the can be a little too relaxed about the rules. Relaxed rules may seem “easier” for you, but in reality what they do is let the debt collectors get information in that they couldn’t otherwise – and your best chance of winning is to keep that evidence out.

Even if you’re not in that sort of sub-court, your court may have “local rules,” which are rules designed to elaborate on your state’s rules of civil procedure. The rules of civil procedure will create the general structure of discovery and set the penalties for not cooperating – the local rules will establish certain limits: only a certain number, for example, or that they must be in a certain format (not “compound,” usually, meaning without sub-parts).

Whatever the situation, you must find the rules controlling your discovery, or you may do something wrong, giving the debt collector an easy out. To find your rules of civil procedure, follow this link. Any special rules may be mentioned in your rules of civil procedure or in your court’s web-page. I am not aware of these rules – but you must be.

Content of Requests for Documents

The term “document” for purposes of requests is very broad and contains things like electronic records, facsimiles, any non-identical copy of a record, etc. The term is usually defined in the rules of civil procedure, and the way you would define it is to refer to that rule: “by requesting documents, defendant intends all documents as defined by Rule ___, ____Rules of Civil Procedure.

What You Request

You want everything thing the debt collector could use to support its case or attack yours. At a minimum you should ask for any document in their possession or control which you signed or which they contend applies to you in any way. You want all documents relating to the amount or terms of any alleged debt, every document showing or relating to any agreement you made with them, including any notes or comments. You want every document showing or relating to anything you said. If you have a counterclaim, you’ll want to create requests that get everything they have related to that.

Standard

The standard for requests for production is that you are asking for documents in their possession or control. Possession is obvious, but control includes documents that other people have created for them or in support of their business: accountant’s records, for example, or account records (of your account) if the original creditor agreed to provide them if requested. If these documents are not provided or objected to, but then they try to use them at court, you should request to have them excluded from trial.

Objections

When the other side objects – as they will, to everything you ask – you will, eventually, have to eliminate those objections so that you can be sure you have everything they have. Just because they deny having something you would expect them to have, though, does not mean you can file a motion to compel. Rather – once they have answered, you pretty much have to take them at their word for not having stuff they say they do not have. That is, unless you have evidence they are actually hiding something.

Four Sneaky Tricks of Debt Collectors

Debt collectors make their money by scaring or tricking, people into forfeiting their rights to defend themselves. Often they will let you think you have come to some sort of agreement with them to avoid court (and judgment), they won’t work with you to accommodate your schedule, and in general try to trick, intimidate and scare you into staying away from court. Then they get default judgments. Here are some of their more common tricks. Check out the Litigation Manual and materials for things you can do if debt collectors try these on you.

Don’t let them trick you out of your right to defend yourself. If you fight, you have an excellent chance to win – if you don’t show up and they get a default judgment you may find your wages or bank accounts garnished before you know it.

Doing Things Right When Sued or Threatened with Debt Suit

When it comes to talking with debt collectors, Silence is Usually Golden.

The biggest risk you face when dealing with debt collectors – especially when sued for debt – is that you will do or say something wrong. Be careful when talking to debt collectors, and know that anything you say could come back to haunt.

But if you have something it is in your interest to say, then say it – and hang up afterwards.

The Nature of the Debt Collection Beast

Debt collectors and their lawyers are not, of course, all the same, but the process of litigation, and the relationship between debt buyers and the people they’re chasing for money are pretty similar. It will help you to know the nature of the beast that is debt law.

Debt Collectors and Debt Law – The Nature of the Beast

What you’re facing when you take on the debt collectors

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This video was originally part of a tutorial on what people facing debt trouble should do.

Seven Steps to Take if Sued for Debt Part 2

This is the second video in this short series. In the next letter we are going to discuss the actual mechanics of answering the petition and the importance of counterclaims and possible counterclaims you may have. For the first video in the series, click here.

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.