Tag Archives: counterclaim

Requiring Verification of the Debt – Secret Weapon against Debt Collectors

Verification is not difficult for debt collectors, but it can be a key right for people with debt problems.

When a debt collector first contacts you, it should notify you of your right to “dispute and request verification.” That right is provided by the Fair Debt Collection Practices Act (FDCPA). This video explains why you should dispute the debt and require the debt collector to verify it.

In other words, always seek verification  Often a debt collector will either disappear completely once you seek verification or will fail to provide verification but still harass you – a violation of the FDCPA.

But remember this does not apply if they file suit against you – if you don’t answer a lawsuit when it is filed, you will lose the case. See Bogus Right to Verification on Petition – Dirty Trick! If you have already sought verification but not received it, you might file a motion to dismiss based on their failure to verify.

Your Right to Dispute a Debt

If a debt collector contacts you in an attempt to collect a debt, you have a right to dispute the debt. To be precise, you should receive written notice of that right within five days of the first communication. And the notice should tell you that you have a right to demand verification within thirty days. That is, you must make your request to them within thirty days.

If you do, they must verify the debt before taking any further actions to collect it from you. They don’t have to do anything within thirty days – they never have to verify the debt if they don’t want to . It’s just that until they do so, it’s illegal to try to get you to pay it.

If you have disputed the debt.

What IS Verification?

What constitutes verification is a gray area in the law. The FDCPA does not specify what it is.  The courts have taken a pretty non-demanding view of verification. It is intended mostly to prevent clerical-type errors leading to suing or harassing the wrong person. So in reality it takes very little to verify the debt. Debt collectors often offer nothing more than copies of old statements. Absent some sort of more specific challenge to the debt, that seems to be enough.

What could be a more specific challenge? Suppose you wrote and disputed a debt to you, Tom Jones. You say, “my middle name is Jim, and I never sigh without including my middle name.” In that case, sending you statements with the name “Tom Jones” on them might not be enough. They probably would not be. Likewise, a challenge to address or some other specific would probably need to be addressed by the verification. Does that make sense?

What Good Does Demanding Verification Do?

There are three good reasons to demand verification. Sometimes they go away. Sometimes they give you helpful information. And sometimes they ignore the law.

Sometimes they Go Away

Surprisingly, giving how easy it is to verify a debt, demanding verification often causes debt collectors to go away.  Perhaps it is only because you have signaled a willingness to assert your rights. Possibly in some transactions the debt collector lacks even this much evidence. Or more likely the debt collector is playing a simple numbers game and any friction whatever causes it to punt. For whatever reason, though, it seems to happen often enough to justify making the demand every time.

Sometimes they Give you Helpful Information

Rarely, a debt collector will simply give you everything it has in response to a verification demand. This allows you to think carefully about whether they could prove the debt. Usually you will see that they cannot. In any event, in some cases you can get what they have without a fight, whereas when you seek discovery in a lawsuit you will have to fight for everything. So it can be easy discovery.

Sometimes they Ignore the Law

Debt collectors used to ignore verification demands quite often. It seems that they don’t do that as much anymore, but this could simply be my limited observation. In any event, if they ignore the law and continue to harass you, you have the right to sue them under the FDCPA.

If they are suing you, you have a right to counterclaim against them under the FDCPA. This is the same right you have to sue them, only it happens differently because they have sued you first.

You probably have a right to move to dismiss the case as well. The point of verification is to prevent wasteful and harmful lawsuits. If they ignore the law and bring suit without verifying, a court should be willing to dismiss the suit until they obey the law.

Conclusion

If a debt collector is bugging you, you should demand verification. It costs little effort and might gain you something.

 

How to Answer the Petition When You’re Sued for Debt

How to Answer the Petition When You’re Sued for Debt

When you’re sued for debt, one of the first things you have to do is write and file an Answer. This is your formal response to the lawsuit. You could lose the case very easily usually automatically –  until you do. Luckily, it isn’t hard, and this video and article  will show you how. For more detailed information and help on fighting and winning your suit against the debt collector, get the Debt Defense System.

 

Answering a petition in a debt law case is actually very simple. Keeping in mind that it is up to the plaintiff to prove its case if you deny a part of the petition, there is little incentive to admit anything.

Should you Admit or Deny?

Pro se defendants also frequently overestimate the things they should admit. For example, you may know that you borrowed some money or used a credit card, but do you really know how much you borrowed or whether all the charges were legitimate? Do you know for sure that you did not pay some of the debt or that you truly, legally, owed every amount claimed? And do you know with certainty even that the company suing you owns the debt at all?

In most cases, the answers to these questions is legitimately “no.”

Most people do not keep careful enough track of their credit card bills (or other bills) to need to admit either the fact or amount of debt. And there’s really no way you could know whether you owe anything to a third-party debt collector.

With those things in mind, answering the petition is easy. It will usually go something like this:

  1. Deny.
  2. Deny.
  3. Deny.

The reason an Answer is so easy is that the pleadings stage – the petition and answer – really exist just to tell the court what issues need to be proved. Since you want the debt collector to prove its whole case, you deny every allegation.

There’s Much More to Pro Se Defense

Of course that’s just the first step in the process of defending yourself. You will also need to consider whether you have a counterclaim. If so, you should submit that as part of your Answer. And then you need to try to win the case. The Answer frames the issues, and you will need to conduct discovery and do some legal research to win the case. It isn’t always easy, but putting up a legitimate fight is within the ability of anyone. And fighting is often all you need to do to win.

 

Who is a Debt Collector after Santander Case

Debt collectors are governed by the Fair Debt Collection Practices Act (FDCPA). If you are able to make a counterclaim under that Act, you will improve your defense. Thus the questions are, who is a debt collector, and how do you show that the person suing you is one.

The Supreme Court  issued rulings in 2017 that will make it more difficult for debt defendants to obtain legal representation and will cause debt collectors to engage in more deceptive, dishonest and abusive behavior. Nevertheless, most people will still be able to sue debt collectors. We discuss how after our discussion of the Santander case.

Fair Debt Collection Practices Act

When Congress passed the FDCPA, debt collectors were such a problem that they were a threat to the American way of life. The FDCPA was therefore designed to prevent fraud, deception and unfairness in general in the collection of debts. Congress named numerous specific actions as “per se” violations of the Act and also included the more general description of “unfair” debt collection practices.

It wanted to prevent debt collectors from changing the forms their actions took without changing what they were basically doing.

The Supreme Court has just reduced that Congressional intent to a farce, applying just half of the statutory definition of “debt collector” to a case and finding that, under that half of the definition, junk debt buyers were not debt collectors.

Real-Life Debt Collection

In most debt cases, creditors sell charged-off debt to debt buyers who exist to collect that money by hook or crook. They used to hire debt collectors to collect on debts and paid them from the proceeds, Creditors now get their money first and let the debt collectors take theirs from the debtors. All that has happened is that nominal ownership of the debt has changed. In other words, debt collectors have assumed a different form to pursue the very same activities.

Henson et al. v. Santander Consumer USA, Inc.

The Supreme Court has repeatedly said that it would not allow parties to elevate form over substance to evade the impact of laws . Santander does exactly that.

One could also characterize the Court’s ruling as dishonest. It only analyzed half of the definition of “debt collectors.” In looking at Section 1692a(6), the court examined the defining language as “any person… who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.” The court’s decision then repeatedly referred to and emphasized the words “due another,” arguing that companies were only debt collectors if they fit that traditional form of collectors.

How the FDCPA Defines “Debt Collector”

Look at the part of the definition preceding the language in question to get a truer view of the statute’s clear intention.

The term “debt collector” means any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.

Section 1692a(6) (underlined portion is the part ignored by the Supreme Court in Santander, italicized word “any” is for emphasis)

Doesn’t it seem reasonable to read “any debts” literally, so that if the principal purpose of a business is to collect debts, they’re a debt collector? Of course it does, and that would obviously include businesses that exist to purchase debts and collect on them.

Supreme Court is AGAINST Debt Defendants

The Court opinion glibly slides over that, saying that “the parties haven’t much litigated that alternative definition of debt collector and in granting certiorari we didn’t agree to consider it, either.” Santander, Slip Op. at 5. In other words, the Supreme Court agreed to hear only so much of the case as allowed them to shove a dagger into the apparent heart of the FDCPA – not enough of the case to show what the FDCPA actually intended or to do justice.

In theory, the decision in Santander leaves open the possibility that this “alternative” definition would extend the meaning of “debt collector” to junk debt buyers. On the other hand, the decision looks like a court in search of a justification for a desired outcome, and is a negative indication for the Court’s integrity. Particularly in the context of its decision in Midland Funding, LLC v. Johnson, No. 16-348 (Slip Op. 5-15-17) (see my article, “Opening the Floodgates of Bad Claims”), it shows actual hostility to the laws that protect consumers from debt collectors and a willingness to engage in intellectually dishonest games to destroy them. As a practical matter, it will likely be several years before the Supreme Court revisits the definition of “debt collector.”

Pleading that a Junk Debt Buyer is a “Debt Collector”

The Supreme Court limited its decision to the “regularly collected” language. Why? Probably because debt defendants have normally found it easy to prove a company “regularly collected” debts. In the Eighth Circuit, law firms representing collectors in three to five cases per year are“regularly collecting” debts.

Under fact pleading rules, one must plead facts constituting a basis for your legal conclusion. So debt defendants routinely allege something like the following:

Heartless, Ruthless and Merciless, represent debt collectors in dozens of lawsuits attempting to collect debts per year. They are, therefore, debt collectors, and

Heartless Debt Collector, Inc., regularly sues persons for debts purchased after default…

Use of “Regularly Collects” Debts Language

Debt defendants have typically used “regularly collected” because it is easy to demonstrate as a matter of public record. Establishing a business’s “principal purpose” will now be much more difficult. My attempts to find an authoritative definition for “principal purpose” of a business turned up zero cases. No doubt there are some cases that address the issue, but certainly not many.

Many court decisions include the term “principal purpose.”  But they use it generically, as a synonym for “main” or “major.”

I found no cases quantifying the term in any way. So it isn’t clear how much of any other purpose would be enough.

Debt buyers who purchase billions of dollars of debt for no other purpose than to collect it. But they will argue that their “principal purpose” is to “service” that debt. In their lexicon that really means extort payment in as many ways, over as long a period, as possible. But they will claim all manner of beneficial purposes for their activities.

This will alter the nature of the proof required to establish that the company is a debt collector. Information regarding a business’s “principal purpose” will be in the possession of the debt collector. Thus parties attempting to obtain that information will encounter the usual tricks when they try to get it. Expect the same series of stone walls, delays and unethical and oppressive litigation strategies debt collectors usually use. (Fortunately, this can be a double-edged sword. We train our members at Your Legal Leg Up to use this to their advantage.)

Debt defendants must now allege and attempt to prove the debt collector’s main business is to collect debts.

What Debt Defendants Should Do

Debt defendants have all the same defenses to debt lawsuits they ever did – or almost all of them. Santander applies very little to the defense of debt suits.

To state claims under the FDCPA, you need to allege the company’s principle business is the collection of debts. You should probably allege they buy debts from others for the purposes of collection. And that they provide no significant service to the debtors.

Counterclaim When Sued for Debt: Important for Your Defense


Filing a counterclaim is probably the single most important thing you can do in defending yourself from a lawsuit brought by a debt collector. In this article and video, we discuss the importance of filing a counterclaim in general and whether you can do so in your case.

Counterclaim – Why So Important?

In most jurisdictions, which is a fancy way of saying most courts and places, the person bringing the lawsuit is allowed to drop the case  if it want to. And usually at any time it wants to. This isn’t true of federal court, where you have to get permission, but in most state courts it seems to be true. And debt cases are pretty much always brought in state courts.

That means that the debt collector could get tired of you and just dismiss the case at any time.

That’s cool! That’s just what we want and what I’ve been saying you should go for, right?

Yes, but if the debt collector simply dismisses your case, it could also sue you again later. Or it could sell the debt to someone else who would sue you later, and that is definitely not cool! You need the case dismissed “with prejudice” to keep it from coming back. You also need it dismissed with prejudice if you want to repair your credit report.

Counterclaims Give you Some Control

So how do you keep them from dismissing the suit and refiling the suit later? You do this by filing a counterclaim against them. A plaintiff can dismiss its own claim against you, but not your claim against it.

Unless you agree.

If you have a counterclaim, if they want to dismiss the case against you they either have to settle the case with you, or they’re still left defending your counterclaim. They never do that, because then they’d be bound to lose money one way or another. They’d either have to pay you or their lawyers (or both) — without the chance of collecting anything from you. They won’t do that. Instead, they’ll settle the whole case with you.

So a counterclaim gives you power over the plaintiff and lets you keep it around till they agree to destroy the debt (or “extinguish” it, as it is called). A counterclaim means you can put the harassment to an end. And sometimes your counterclaim can be worth a lot more than their lawsuit against you was in the first place.

Who Can File a Counterclaim

Counterclaiming became more complicated in 2017 thanks to an important Supreme Court ruling. Two things are necessary for you to file one: some legal wrong, and a “debt collector.” The legal wrong under the FDCPA is pretty broad and includes fundamental unfairness or deception. But whether the person suing you is a debt collector under the Act is more complicated.

To help figure out whether you have a counterclaim against a debt collector, go here. Who is a Debt Collector after Santander.