Posts

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.

Tip 7 of Uncommon Common Sense

Tip 7: You won’t believe the tricks the other side will play in discovery until you see them

Today’s tip is about the games lawyers play. If you’ve never seen them in action, you wouldn’t believe it, and so you should consider this an extension, sort of, to tip 2 (Always know the rules of the game you’re playing). In order to stay on top of things, you need to create and send discovery to the other side as quickly as possible. If at all possible, you must make them respond to your discovery before yours is due to them so you can see how the game is played.

I’ll give you a preview.

Games Debt Collectors Play

The rules of discovery – the rules that say how you ask for information from the other side – and how they are supposed to give it, are designed to make the opposing sides of a lawsuit cooperate. The rules set specific times for responding, and the other side is not supposed to make bogus objections or try to swamp you with everything but what you’re supposed to get. Then, if there are objections, the parties are supposed to “work things out” in a cooperative way without requiring the court to step in.

In reality, the debt collector will most likely not provide you the material you want on time, and when they do give you stuff, they will give you a set of objections that simply defy reason.

In short, they will play games with you.

Take Advantage of What they Do

You could get frustrated – it is frustrating to try to get things from the other side when they won’t follow the rules and act as if they can do anything they want to. And they do think they can, and the courts pretty much let them get away with anything.

Instead of being frustrated, though, you must see this as an opportunity for you to use time to your advantage. If you act with energy and persistence, you can use their tactic of trying to waste your time to your advantage. You are the one with more time – and you do not have to justify every action you take at a value of $200 per hour. Chase them with energy, therefore, and exploit your advantage: as you keep after them, you will be pushing them to spend time on a fight that will not bring them any money and which you will eventually probably win.

If you can make the lawyer for the debt collector spend anything like 2 hours per every $500 at stake in the lawsuit, you will simply make the suit unmanageable for them – and deeply unprofitable. When you do that, you make it likely they will give up. They’ll have to put of suing dozens of other people if you do this.

When they do Their Discovery

And when they send their questions for you, you will have a better idea how to proceed, although I do recommend that you be careful about this. The materials in the Debt Defense System could help you with this.

Tomorrow we will send Tip 8.

Novation Reaging and Reviving Old Debts

Novation, Re-aging and Reviving Debt

This article is a companion article to Reviving Expired Debt through Trickery. Together they discuss a major hazard to pro se litigants and other persons dealing with debt collectors and banks without legal representation, namely the revival of debts that have (or would) expire due to statutes of limitations.

If you are troubled by debts – and specially if you are being troubled by debt collectors, you no doubt are aware that law and the passage of time eventually will put an end to most of those troubles. The debts themselves have statutes of limitations regarding collection, and there are other legal mechanisms that limit the time liability exists. Bankruptcy can also instantly expire a debt, of course, under certain circumstances. In addition, the FDCPA and Credit Reporting Act limits the length of time, and the circumstances under which, bad news can be reported to the public. If you sit tight long enough, then, and do not do anything regarding specific unpaid debts – while at the same time taking certain other, beneficial actions, you will eventually restore your credit rating.

Debt collectors hate all that. They do a lot to try to patch things together to keep it from happening.The result is a Frankenstein for the consumer.

Small Payments

Have you ever wondered why debt collectors are often willing to accept small, token payments from you in response to a collection call? There are at least three good reasons for this willingness. First, they know that if you accept responsibility for the debt and make a payment, however small, you will be much more likely to pay more at a later time. In his book, Influence, Robert Cialdini calls this the pressure of “consistency,” and its power to affect you should not be underestimated. Second, they know that if you accept responsibility for the debt and pay it, you are making a legal admission, of a sort, that the debt is yours. They will argue – likely with considerable effect – that you would not have made this payment if the debt was not yours, and some courts have admitted this as evidence of a debt’s legitimacy. And third, sometimes the payments can be used to extend the statute of limitations of the debt.

The FCRA prohibits deliquent accounts that are charged off or place for collection from being reported to the credit bureaus beyond 7 years plus 180 days from the date of first delinquency. Of course, if this delinquency is erased, it will start the clock running again. Under certain circumstances, your agreement to make a payment to a bill collector can restart the clock again in probably every jurisdiction. That is, if you and the bill collector agree that your payment will be accepted in lieu of any other penaties or payments for a certain time, this arrangement probably amounts to a “novation.”

Novations

Novations are agreements that supercede and replace previous agreements. They can refer to an agreement that transfers a debt to someone else and eliminates the original party’s liability (as in certain subleasing arrangements, for example), or they can refer to an agreement that substitutes on form (or amount) of debt for another one (as in court settlements, for example). If you agree with the debt collector that your payment will somehow wipe out or satisfy other debts, you may have worked a novation by the terms of any state’s laws. Notice that there should at least be some conscious give and take between debt collector and consumer under this approach – the agreed payments have to wipe out the delinquency.

Other forms of novation are a little more questionable or state-specific. Debt collectors will always argue that any payment made changed the nature of a delinquency and resulted in a period of “working things out.” They argue from this that – at least for some period of time — the statute of limitations is or should be “tolled” (put on hold) while the parties see whether they will be able to work things out. The law generally favors parties being able to settle their differences, and so this interpretation of the law, which takes some of the time pressure off the debt collector and allows it to be more flexible in negotiating, can be persuasive. Statutes of limitations are frequently tolled under various “equitable” conditions (meaning the courts have some ability to create and enforce these conditions). See, Estoppel, Claim and Issue Preclusion, for a more detailed discussion of this power and its uses.

And there is another, very questionable type of novation that has been accepted by many courts – the “account stated” theory of liability. In this theory, persons with an account to a creditor where they regularly receive statements are considered to be agreeing to the statements and accepting them as accurate unless they actively disagree with them. Failure to pay this amount then breaches a “new” agreement and has a statute of limitations independent of the charges that may have gone into that amount. In California, among other places, this can extend the statute of limitations considerably as well as reducing the burden of proof. (As an aside, I have developed a product that helps people being sued under this theory of account stated, which I consider an unjust and unwarranted misreading of the law). It is, in other words, a form of novation.

Re-Aging Debt

In addition to re-aging debt through novation or various equitable principles as discussed above, there is also a more devious, and blatantly illegal, method of changing the debt to extend the time for collection. That is simply to rewrite the date of first delinquency of the debt using a later date. This allows collection efforts to continue longer than legally allowed, and it also allows reporting to the credit bureaus to continue beyond the allowed seven years. This practice is apparently wide-spread, and it may be more effective than one would expect because consumers are sometimes not aware of statutes of limitations and reporting cut-off dates, and they are frequently not aware of their “first delinquency” dates.

Reviving Debt

After a debt has been discharged in bankruptcy or expired by a statute of limitations, it cannot be collected through the legal process. At least some courts have held, however, that a “moral” duty to pay remains and allows debt collectors to continue to pursue the debt (through extra-legal methods) presumably till doomsday. As anyone who has read my materials should know, I do not believe there is any “moral” duty to pay a debt collector – the duty is purely legal, and when this duty expires, so should the right of the debt collectors to pursue it. But at least some courts don’t see it that way, and this supposed “moral” duty is allowed to empower the debt collectors to make new agreements that revive old debts. Any attempt to make new deals that extend the life of a debt should be looked at with a dim view.

Beware this Rule of Evidence – You Could Lose Your Right to Object

Hey there! This content is available to MEMBERS only! Consider registering for an account.

Three Things the FDCPA Makes Illegal

The Fair Debt Collection Practices Act (FDCPA) is a source of many protections against “unfair” debt collection practices. It enumerates many of these practices but leaves room for more general use of the law, too. This article discusses three specific violations as examples of what the law can do.

The Fair Debt Collection Practices Act (FDCPA)

The Fair Debt Collection Practices Act (FDCPA) is a source of many protections from ruthless debt collectors for people who owe money. As I often point out, what makes the Act so powerful is that, in addition to making certain specific actions illegal, the FDCPA also more generally makes <i>any unfair, oppressive or deceptive collection practice illegal.</i> At the focus of this article, however, are three specific forms of communication designed to embarrass debtors

Debt Collectors Must Identify Themselves to You

Debt Collectors have particular rules when trying to find you to bug you for money.

Under 15 U.S.C. Section 1692b,  a debt collector looking for a debtor must identify himself  by name but not mention his employer unless specifically requested. He cannot state that the consumer owes any debt, and he cannot communicate more than once with any person unless requested to do so or unless the debt collector reasonably believes that the earlier response of that person was erroneous or incomplete, and the person now has correct or complete location information.

This portion of the law was obviously intended to end the practice of collectors harassing and annoying the people around the debtor for purposes of damaging relationships and creating social pressure on the debtor.

Debt Collectors Cannot Communicate at Unreasonable Hours

Collectors are not allowed to communicate with consumers <i>“at any unusual time or place”</i> or at a time or place known to be inconvenient to the consumer. Unless the debt collector actually knows that the consumer has unusual hours, he cannot call before 8:00 a.m. or after 9:00 p.m., local time of the consumer. 15 U.S.C. Sec. 1692c(a).

If you are being contacted at work, therefore, you should tell the collector that this is “an inconvenient time and place” for communications. It is also specifically illegal for a collector to call at place of work if he knows or has reason to know that the employer prohibits the consumer from receiving personal communications. If you work on a late shift, you should tell the debt collector what hours are inconvenient to you. It obviously makes sense to communicate with the debt collector in writing,  although the law doesn’t require it, and to make records of any communication that comes outside of the specified hours.

Debt Collectors Cannot Communicate with Third Parties Except under Limited Circumstances

Collectors are not allowed to talk to other people in connection with their collection efforts other than as specifically allowed (regarding finding you) unless you give your prior consent, or unless a court gives that permission. However, they are permitted to talk to your attorney, a consumer reporting agency, and the creditor and its attorney. The big exception involves “post-judgment judicial remedies.” If the debt collector obtains a judgment, it may seek garnishment of wages or bank accounts, and it is permitted efforts that are “reasonably necessary” to obtain these remedies. 15 U.S.C. Sec. 1692c(b).

I believe this section prevents debt collectors from harassing people who refuse to give them information about your whereabouts or to cooperate in other ways. Again, the prohibition exists to prevent the wanton damage of a consumer’s relationships with other people.

Your Right to Sue Under the FDCPA

If debt collectors are engaging in any of the above-mentioned prohibited acts, they are violating the Fair Debt Collection Practices Act, and you can either sue them for it or, if they have filed suit against you, make a counterclaim against them.