Assignment Contract – Holy Grail of Debt Defense

An assignment contract provides the “terms and conditions” of mass debt sales. If you can force the debt collector to give it to you, you improve your chance of defending yourself in a debt lawsuit. We discuss why in the video and text below.

The Actual Assignment Contract is BIG

The bill of sale is not an assignment contract. It is essentially a note (that could be many pages long) that refers to the sale of property. The terms of sale are important, but they are in the assignment contract rather than the bill of sale. They will help you decide what the debt collector has or could get for trial. They could also affect who the “real” owner of the debt is. Also, the debt collectors hate for you to get this document. Fighting for it may cause them to drop your case.

No Magic Bullets

We say there are “no magic bullets” in debt defense. Every so often, though, we find a few things that seem almost like they would or should be. However, the sort of “magic bullets” we refer to, and that don’t work, are simple, formulaic things. Think writing the word “refused” on the summons or claiming it is illegal to use your name.

If you think these might work, you are not using common sense. And if you think using all capital letters matters in some way, you are just wrong. But some people claim these things will bring you easy victory. However, spending energy on them is more likely to hurt your case than help it.

Certain things, however, can make a dramatic impact on your case. They won’t magically end the fight or reliably make the debt collectors go away all by themselves. But they can make a big difference if you know what to do with them. One of these things is the Assignment Contract. That’s the agreement assigning the debt in question from the original creditor to the debt collector. In many cases debt collectors would rather lose the case than give you the contract.

What is an Assignment Contract?

An assignment contract is the contract between the original creditor and the debt collector. The original creditor sells (large numbers of) debts to the debt collector according to certain terms. Selling debts is perfectly legal and is a widespread and commercially reasonable thing to do. Unless your contract with the original creditor prohibits transfer or assignment(very rare in consumer debt), there’s nothing wrong with doing it.

You don’t expect these things to be done on an individual basis, though, do you? No. Consumer debts are bought and sold by the hundreds of thousands at a time. The original creditors – often banks, utilities like phone companies, or gyms – create “portfolios” of debt which they sell to junk debt buyers according to certain terms. These terms are found in the assignment contracts, and assignment contacts are not little things. They are lengthy contracts of 20-30 pages that apply to all of the debts bought and sold in a given transaction.

The assignment contracts set the rules for what the debt collector can get from the original creditor if it needs to sue to collect the debts. I provides for how long the original creditor has to provide the material, and how much getting that information will cost. The contracts have many interesting features, and the debt collectors will assuredly NOT want you to see them. In fact, in many cases, the debt collectors would rather dismiss their case against you than let you see the contract.

Not Bills of Sale

Assignment contracts are not bills of sale. The bill of sale is a one-page document that says something “All the debts identified in Exhibit A, attached, are hereby sold and assigned to Company X.” It could also be a bit longer than that, but the main thing is that it does not outline the rules of the deal in detail. As we have often pointed out, debt collectors often hate to provide the bill of sale or, more often, the accounts subject to a bill of sale.

But they REALLY don’t want to give you the assignment contract.

What the Assignment Contracts Contain (that Debt Collectors Don’t Want you to See)

There are two main things the assignment contracts contain that debt collectors do not want you to know about. They don’t want you to know what they think of their own records, and they don’t want you to know how much time, and how much money, it takes for them to obtain records from the original creditors.

Debts are Sold “As Is”

As you will notice if you take the time to read through the assignment contracts, original creditors sell debts to debt collectors “as is” and without any warranty. Specifically, that means that the original creditor specifically disclaims any guarantee that the debts or supporting information they’re selling to the debt collectors are legitimate, accurate, or trustworthy.

The natural and intuitive conclusion is that the records are NOT reliably accurate. Nevertheless, some courts have ruled that they are sufficiently trustworthy to justify admission of the documents in question. The argument needed to use lack of warranty is therefore sophisticated.

Documents will Take Time and Cost the Debt Collector Money

Another important fact about the Assignment Contracts is that they usually establish that the debt collector can obtain certain specific documents from a certain, very small percentage of debts. And the original creditors give themselves a minimum of sixty (60) days to provide requested information upon receiving the request. Both of these facts are hugely important to people representing themselves pro se – and for the pro se movement at large.

Sixty days is longer than the amount of time permitted in any state’s rules of discovery of which we are aware. That means, in plain English, that if you request documents, the debt collector will never be able to provide you documents within the time permitted by law. They can get extensions – the courts are generous with time, normally – but even with extensions they may not be able to provide the documents within the required time. Therefore, you should push hard to get the information.

It may even be that in California this arrangement violates the California Rules of Civil Procedure – and you have an even more powerful weapon at your disposal to attack their case.

It is important that the original creditors charge for documents and only require themselves to provide documents in a small percentage of the debts. If EVERYONE asked for documents, the costs might bury the debt collectors. And the delays would likely make it impossible for them to answer discovery at all. They would have to change their whole way of doing business.

Another Way to Attack the Debt Collectors

You don’t have to have the Assignment Contracts to make life harder for debt collectors and better for you.  If the debt collectors after you use credit damage as a collection tool, this gives you an advantage. You can start the ball rolling even faster than through formal discovery.

Get your credit report. If you find them on there and dispute the debt under the FCRA, they get thirty (30) days to “conduct a reasonable investigation” into the dispute. They can’t get the information in most cases in less than 60 days. They will either have to withdraw the negative information or you can sue them for that. The FCRA gives you attorney fees if you win that suit, so you may get a lawyer for free.

If they do withdraw the reference, you might use that against them in defending their suit against you.

Press – Hard – for the Assignment Contract

Under all the circumstances, you should use the discovery process to get the assignment contracts.  Debt collectors do not want to provide this to you. They will lie about its existence, deceive you if they can, and stonewall you to the limits of their ability. We are developing tools for our members to use to make this fight a little easier.

[1] There are groups of people who energetically claim that things like this make a difference. They can’t point to a strong case opinion that backs them up, but this doesn’t stop them.