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Who or What is a Debt Collector

The definition of “debt collector” became a lot less clear in 2018 when the Supreme Court ruled that owning a debt made one a “creditor” regardless of the status of the debt at the time of purchase. But there are still ways to prove that the company suing you is a debt collector. Doing so means they have to follow the FDCPA – or more particularly it means that if they don’t obey it you can counterclaim against them or file suit yourself.

The Company Suing You

The company suing you, if it’s one of the big debt collectors, probably still is a debt collector. As far as I’ve heard, these companies don’t really do anything other than buy debts and collect on them. But I doubt this situation will persist. After there is some litigation quantifying what makes an activity a “principle purpose” of the business, the debt collectors will likely buy subsidiaries or engage in some other business to an extent necessary to exempt them from the FDCPA. I would, and in this area of business and law, these guys are more knowledgeable and smarter than I am. Expect them to take steps to reduce their liability.

What Is a “Debt Collector?”and When Are You being Sued by One?

So who is a debt collector? Well, there is the classic debt collector – the company that a creditor hires to hassle debtors to pay bills to the creditor. In that situation, the debt collector is an agent of the original creditor and is supposed to follow certain rules (the Fair Debt Collection Practices Act).

There’s another kind of debt collector, though. This is a business or person whose “principle business” is the collection of debts. Just what percentage of business makes the activity the “principle purpose” of the business is not clear – I would suggest it is very significant, at least 90%. But that’s just a guess at this point, as there has been very little litigation on the point. It seems clear that a bank that makes lots of money on regular banking services and also has a junk debt buying subsidiary is probably NOT a debt collector.

There is a tremendous amount of confusion of who is suing you. People will tell me that they are “being sued by a debt collector, but the name on the suit is Capital One,” for example. They think that because the lawyer signs the pleadings, or a lawfirm shows up in court, that it is the lawyer who is suing them.

And in a very limited sense – but only in a limited sense – that is correct. For most purposes, the entity suing them is the one named as “plaintiff” in the lawsuit

Lawyers who Regularly Collect Debts Are Debt Collectors

The lawyer and law firm representing the company suing you are probably debt collectors within the meaning of the FDCPA. That means that their personal actions may bring them within the law, but it isn’t always clear when they will, though. It appears that if the pleading asks for something, the lawyer signing it will be liable (on the hook) personally (and his or her lawfirm, also) for the violation. But the company won’t always be liable for the actions of the lawyer – its agent – as would normally be the case for most things.

If the company was an original creditor, and the lawyer threatened you with suit, and you sought verification of the debt, would the company be unable to sue you using the same lawyer? Not likely. Because the company – not a debt collector – has no obligations to you under the FDCPA, and that’s where the right to verification comes from. If you filed a motion to dismiss the lawsuit based on the company’s failure to verify the debt, it should be denied.

The Name on the Lawsuit Is the Important Name

If your lawsuit says “Cap One vs. You,” you are being sued by an original creditor and not a debt collector. They don’t have to play by the rules that apply to debt collectors. That means they don’t have to verify the debt, and they can do some of the things debt collectors are not allowed to do. You need to direct you Answer, Defenses, and any Counterclaims with the awareness that the other party is the original creditor and not a debt collector. It means, for example, that they needn’t verify the debt before or after suit, and that an attack by you on the ownership of the debt is not going to work – their name is on the debt. There’s no “chain of title” issue where title has never passed to another company.

But how they act when they sue you may bring the lawyers within the FDCPA.

Making it Look Hard to Defend

Debt collectors make most of their money by scaring, or tricking, people into forfeiting their rights to defend themselves. That’s far, far cheaper and faster than actually litigating. So debt collectors spend a great deal of time and effort learning how to make people give up. They’re good at that, but if you fight back anyway, you have an excellent chance to win.

Remember that most of what debt collectors are doing with their petition is trying to scare you into giving up. They’re trying to make things scary and inconvenient for you so you won’t protect your rights. Here are some of their more common tricks and some things you can do about them.

One of the most common complaints I hear from people pursued by debt collections is that debt collectors have deceived them into not going to court.Then they get a default judgment and start collecting. Don’t let that happen to you!

Here’s how to spot this one coming– and what to do about it if it’s already happened to you.

The way it comes up is that the defendant (person being sued) receives the summons and petition only a relatively few days before the date given on the summons for showing up to court. The person being sued panics either because the date set is extremely inconvenient or because they do not have the resources to fight the suit regardless of which day is set for court.

They Trick You into Staying away from Court

So you call the debt collection law firm and asks to speak to the lawyer suing you. The lawyer will not speak to you (normally), and so you are forced to speak to some clerk, actually a skilled collection agent. The law firm then plays a “good cop, bad cop” routine, where the person speaking to you takes a message and agrees to get back to the defendant with the words of the lawyer. Or they play “tough but fair” and outright refuse to agree to move the court date.

They routinely move court dates for lawyers.

Either way, they want you to be maximally inconvenienced because they really, really, really don’t want you to show up or defend yourself! They say they will, however, agree to come to an “arrangement” that makes going to court “unnecessary.” Isn’t that nice

Then they either create an agreement and send it to you—or not. But if you think that going to court is unnecessary and don’t go, then the debt collector often “calls for default” (asks the court to give them a default judgment) whether you have an agreement or not.

But the agreement is usually a complete giving up anyway.

NO NO NO NO!

Don’t let this happen to you. If you can’t go to court on the date specified on the petition, think about filing an answer denying the allegations of their suit–and add a counterclaim for unfair debt collection by refusing to “move” (it’s called “continue”) the court date for you when they would do so for a lawyer.

Then you might file a “motion to continue” your court date with the court, telling it that you tried to work out the continuance with the other side but that it would not cooperate. Ask the court’s clerk for the “continuance date” and put that into your motion.

See, courts will almost ALWAYS continue a case if a lawyer asks for it. And if you file an answer first and then your request to continue, they’ll do it for you, too.

If the debt collector has already tricked you and gotten a default judgment, all is not lost. But you must act quickly. You should know that the law does not “favor” default judgments. This means that they lean against allowing them to stand if you make a decent argument against them.

The way you would do that would be to start with a motion to vacate the judgment.