C. D. Book

Why You Should Not Pay Debt Collectors Part 2

In Economy, Uncategorized on March 27, 2011 at 12:11 pm

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Read Part 1 here

Part 2

The FTC titled a report issued in July 2010 Repairing A Broken System: Protecting Consumers in Debt Collection Litigation and Arbitration. The agency responsible for administrating the Fair Debt Collection Practices Act (FDCPA) cited several reasons for their assessment:

  • Very few consumers defend against debt collection litigation.

In 2009 the 16th Circuit Court in Jackson County, Missouri disposed of 122 lawsuits filed by one third-party debt collector, CACH LLC alleging Breach of Contract. Of those 122 cases, 49 or 40% ended with a default judgement for CACH because the consumer didn’t appear in court.  The remaining 73 cases were dismissed by the court or CACH for various reasons: the defendant couldn’t be located, had died, filed bankruptcy or had moved to another jurisdiction. Notably only 3 (2%) of the 122 defendants appeared in court to participate in their defense.  All three of those cases were dismissed by CACH; none of the three defendants hired an attorney.

Source:  Missouri State Courts Automated Case Management System

  •  Frequently information regarding the alleged debt is incomplete: the petitions and attachments offered as proof of debt by the collector aren’t sufficient.

When third-party collectors purchase debt they do so in bulk. The debt portfolios don’t include the original contract,  most of the time the only information included in a petition is a computer printout that offers no real proof of debt. The FTC acknowledges the little  information that is offered by the collector could be incomplete, incorrect or out of date and recommends that states require collectors to include additional information regarding the debt in their petitions. Debt collectors like to intimidate consumers with a slew of affidavits that profess to validate the debt however the signatories to these affidavits probably have no personal knowledge of the debt.  So called robo-signing is as prolific in the debt collection universe as it is in the mortgage foreclosure business and has been occurring for years.

See this link detailing a JPMorgan Chase former employee’s SEC complaint that Chase commits “grotesque and illegal practices involving its credit card debt processes, including robo-signing”.

  • State statutes of limitations on filing a lawsuit to collect debt is often complex and not understood by most consumers.

 State statutes regarding the collection of time-barred debt varies. Many consumers aren’t aware that a collector can’t legally sue to recover a debt that has passed the statute of limitations. The FTC recommends that states take steps to make it less likely that collectors will sue on time-barred debt and that consumers are made aware of their rights in these cases. States should develop more uniform statutes of limitations, debt collectors should have to prove that debts are not time-barred and should disclose that they can’t lawfully sue the consumer when a debt is time-barred. Furthermore, in many states if a consumer makes a partial payment on a time -barred debt the entire debt becomes eligible for a new statute of limitations: collectors in these states should disclose this information to consumers.

  • Frequently consumers suffer hardship when assets in personal bank accounts that are exempt from garnishment under the law are frozen pending a court decision  as to their exemption.

The FTC recommends that federal and state laws should be changed to prevent the freezing of funds in consumers’ personal bank accounts that are exempt from garnishment (for example Social Security payments).

 Part 3 coming soon

copyright 2011 XtraOpinion C.D. Book

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