If debt collectors can almost never make money on a case if you fight intelligently, then why don't they just give up when you file an answer and counterclaim? This article discusses why and explains why you should keep fighting.
If you have read my articles or watched my videos, you know that I believe the debt collectors rarely if ever start out with what they need to win a case. And they can almost never get what they need in a cost-effective way if you defend yourself intelligently (i.e., if you know a little bit about what you're doing). In other words, I believe that in most cases if you defend yourself—with a little help that my site and materials are designed to provide—the debt collectors cannot win their case against you in a way that makes money for them.
So here's a question: why don't they just drop your case as soon as you begin defending yourself intelligently?
That's a good question for people who are making stuff and selling it, or for people providing valuable services to customers. In that sort of business, you try to develop a profit margin that makes profit. And ultimately, the debt collectors must follow that principle, too, but their profit is measured by more than just your case. Think of the blackmailer who exposes his victim for “nothing” rather than accept a payment lower than demanded. Think of a gambler betting on a losing hand.
Sometimes it is good business to lose money.
The debt collectors are operating a “scam” on an essentially heroic scale: I'd venture to guess that they couldn't win ten percent of their cases on a profitable basis if the people they were suing would resist intelligently. That isn't to say that the debt collectors couldn't win the cases, or even shouldn't win them (sometimes), but the model of their business is such that they buy huge amounts of debt without really knowing what sort of proof exists to support that debt. And proving cases in a court of law, in the face of intelligent and determined opposition, is an expensive and risky proposition even when all the documents exist—and in debt law, they often do not. Even where there are lawyers on both sides of big-time commercial disputes, cases very rarely go to trial—they almost always settle at a significant discount to what one side demanded.
That's life in the real world. Lawyers are expensive, and lawsuits are wasteful and bitter.
Not so in the make-believe world of debt litigation. There, the debt collectors get judgments for everything they ask for something like 80 or 90% of the time they serve the lawsuit on the defendants. And this, as I've pointed out before, is all the more bizarre because their business model suggests that they would seldom if ever actually win the cases! What gives?
Pain. Pain and fear.
The debt collectors are very much like extortionists in that they strike terror into the hearts of their victims. People rightly fear lawsuits, and people without money fear them more than people with money.
So what could mess up a blackmailer or a debt collector? A reputation as a “soft touch.” Imagine what would happen if a blackmailer gave in to every victim claiming a lack of money! The same thing that would happen to a debt collector who dropped every case where someone filed an answer and counterclaim. They'd get a reputation for giving up, and that would ruin the business. In the case of the debt collectors, it would eventually reverse the strange numbers that make the whole business so profitable.
They can't let that happen. And that is why debt collectors rarely just drop your case, although they do sometimes. If you fight your case with determination, though, they will seldom feel the need to go all the way to trial. They want to manage their reputations, but they don't want to lose a lot of money while they're doing it, especially since losing a lot of cases after trial might be as bad for them as settling too easily. That means they will almost always eventually either drop your case or offer you the kind of settlement you could actually afford to pay. Pennies on the dollar. There's a good chance they'll drop the case entirely if you refuse to settle, but there may come a time and price where it makes sense to settle just to end the fight.
That's what happens in the real world of law.