If you are being sued for debt, take a look at the petition. If it has the following statement on the bottom: “This is an effort to collect a debt...,” "this is a communication from a debt collector," or - specially - if it tells you that you have a right to verification of the debt, you should consider filing a counterclaim under the Fair Debt Collection Practices Act (FDCPA).
If you are being sued for debt, take a look at the petition. That's the document attached to the summons when you first get sued – the part that says what the debt collector wants and why it thinks it should get it. Check and see if this document have the following statement on the bottom: “This is an effort to collect a debt...” If so, you should consider filing a counterclaim under the Fair Debt Collection Practices Act (FDCPA).
I have mentioned before that debt collectors often attach some sort of “verified” statement, forms, or record to their petitions. Since these items are verified by people who cannot have direct knowledge of the truth or accuracy of the records to which they are swearing, I believe they are deceptive and unfair under the FDCPA. Including the “this is an effort to collect a debt” language on the bottom of the petition is a similar deception and also, in my opinion, gives rise to a counterclaim.
What's so wrong about including that statement? The debt collectors argue that they do it “just to make sure” they aren't violating the FDCPA's rule requiring that an initial communication include that warning or as a helpful reminder. Sort of as a public service, they would have you believe.
Don't buy it. The law is clear that a petition is not an initial communication and does not require the warning. And as a public service? Please. The debt collection industry is notorious for its willingness to take the last scrap off your table – if they could sell it. Their record of lying and deceiving is equally notorious.
So what is going on? Why do they really include the warning?
It is intended to trick people into the wrong belief that if they dispute the debt (via letter or phone call) they do not need to answer the petition. There is a widespread understanding by consumers that they sometimes have a right to request and require “verification” or “validation.” Specifically, the FDCPA provides at 15 U.S.C. § 1692g(a) and (b) that within five (5) days of the initial communication by a debt collector, the collector must inform the consumer of his or her right to dispute the debt and require verification before taking further action to collect the debt.
There is also a right in section 1692e(11) that a debt collector provide what debt lawyers call the “mini-Miranda” warning that “this communication is from a debt collector and any information provided in response will be used to collect a debt.” (Or words to that effect.) This right, too, must be provided within five days of the first communication and in other communications (except in the situations where that communication is in a formal legal pleading in connection with a legal action - i.e., a petition). People who are in debt trouble are used to receiving both warnings at the same time and in the same part of the debt collector's letter.
They therefore sometimes mistakenly equate the warning with the right to require verification and believe that if they require verification of the debt when they receive a lawsuit, the debt collector must stop pursuing the lawsuit until after verifying the debt.
The law may not be totally clear on this question, but almost. The FDCPA specifically states that the petition is not an initial communication and does not trigger the obligation to give the warning. Also, the Federal Trade Commission, in its opinions and commentary, states that debt collectors can continue to pursue legal action without verifying even where requested. And in every case of which I am aware, any defendant who has attempted to seek verification of the debt instead of answering the petition has suffered a default judgment.
This all makes sense from a legal point of view. If the FDCPA does require the warning and notice of the right of verification in some places, its failure to require (and the explicit exemption from any requirement of notifying of) the warning in other places should mean that there is no right to require verification.
At this point, that's obvious to lawyers. But obvious to lawyers and obvious to consumers are, in reality and in the eyes of the law, two different things. Consumers see the warning and believe there is a right to verify attached – why else would the warning be attached?
Consumers are being deliberately led astray.
Why do I say it's a deliberate attempt to confuse and mislead the consumer into seeking verification rather than answering the petition instead of some sort of good-natured mistake or an “excess of caution?” Isn't that cynical on my part?
Well, consider a few things. First, debt collectors start most lawsuits without the evidence they need to win. They don't need the evidence, and don't know if they can even get it, because most people default on these cases – my estimate is between 85 and 95 percent of the cases. That makes the petition by far the most important document the debt collectors will file. Doesn't it make sense to do whatever possible to keep the rate of default sky high?
Remember also that debt collectors file hundreds of thousands of these cases per year, and all this activity is concentrated in the hands of a very few lawyers. That means that even if a deceptive petition only fools a relatively small percentage of people, it will, if repeated hundreds or thousands of times, ultimately have a very large impact.
Many people have told me that they wrote letters requesting verification rather than filing an Answer to petition. It would appear to be an easy way out of the suit, and they have heard a lot about the right to seek verification. They have also been conditioned to see the right to verification wherever they see the mini-Miranda warning.
The debt collectors belong to associations and networks that share information among themselves. They compile records of default rates. Can you believe that they do not know that including the mini-Miranda – which is not required by any statute or realistically helpful to anybody – does not fool a lot of people into defaulting?
With the petition being so crucial, and with so much information on hand, what do you think is the chance that something like this would just be a “mistake?” Or put differently, if only 5% of the time they put these warnings on the cases people seek verification and allow the case to default, how much money would that “mistake” be worth to the debt collectors?
Let's do the math. Conservatively assuming – guessing – that there are 200,000 debt cases per year with an average amount in dispute of $1,000, that's a total of $200,000,000 dollars in litigation per year. That sounds like a lot until you realize that there is over a trillion dollars in “distressed” consumer debt out there. Five percent of $200,000,000 equals $10,000,000 per year. Not a bad mistake, is it? And those numbers were conservative. But even if it's only 1% of the defendants who default because of this, that's two million dollars per year. Can you remember the last time you made two million dollars per year from a mistake?
Remember that this is just a part of the debt collectors' machinery to cause people to default.
Even if you are not convinced it is intentional, that is not what the FDCPA requires for an action to be illegal. Rather, intention does not matter at all. The action is unfair if it can cause “unsophisticated” consumers to misunderstand their rights and act to their harm. There is no justification for including the warning, and it does lure a substantial number of people to believe they need not file an answer to the petition if they write a letter seeking verification. These people default their cases.
Including the warning is, in my opinion, a violation of the FDCPA. You might want to try the argument.
If your petition included the “warning” and you defaulted, I believe you could plead misconduct (the FDCPA violation) on the part of the debt collector as part of your motion to vacate the default.
If your petition included the warning and you have answered, you might consider amending to add a counterclaim under the FDCPA.
I have often written and spoken about the importance of a counterclaim. Very briefly, having a counterclaim will probably prevent the debt collector from simply dropping your claim at some point during the proceedings while keeping the right to sue you again. It will also add the risk of actual loss of money to the equation for the debt collector. They could lose the case.
The other advantage of any counterclaim is that it can expand the area of valid discovery. In plain English, it means you can ask about more things in your interrogatories and seek more documents in your document requests. And in this case, where you are accusing the debt collector of attempting to increase the default rate of their cases unfairly, it means you can inquire into their default rate and all the other tricks they use to increase it. You can ask about their associations and the ways they share information. Any information which reveals the heartless and depraved debt collection techniques of the collection industry is extremely sensitive. Merely pursuing it, all by itself, might cause the debt collector to drop your case.
For information that will radically change the way you see the debt law process and greatly increase your chances of winning, please see Ending the Debt Nightmare. For information on many issues that come up in debt litigation and materials you can use to defend yourself, go to YourLegalLegUp