Tag Archives: debt lawsuit

Assignment Contracts – the Holy Grail of Discovery

Making the debt collector give you the actual Assignment Contract is BIG

We say that there are “no magic bullets” in debt defense, but every so often 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 like writing the word “refused” on the summons or claiming that it is illegal to use your name, or that using all capital letters matters in some way. Some people think these things have magical attributes that will bring you easy victory. In fact, they really have no legal significance,[1] and 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, the agreement assigning the debt in question from the original creditor to the debt collector. In many cases, winning the fight to obtain discovery of the assignment contract will win the case outright.

What is an Assignment Contract?

An assignment contract is the contract between the original creditor and the debt collector whereby the original creditor sells debts to the debt collector. 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, 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.” 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.

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 to be drawn from that 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 also extremely important to the pro se movement as a whole, and to everyone in it individually, 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 would simply 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 are among the many who use credit damage as a collection tool, you can start the ball rolling even faster than through formal discovery. If you get your credit report, find them on there, and dispute the debt under the Fair Credit Reporting Act, they will have thirty (30) days to “conduct a reasonable investigation” into the dispute. Since they can’t get access to information in most cases in less than 60 days, they will either have to withdraw the negative information or you will have a lawsuit against them. Since the FCRA gives you attorney fees if you win that suit, you could get a lawyer to do a lot of the work for you.

And if they do withdraw the reference, you can use that against them in your defense in their suit against you.

Press – Hard – for the Assignment Contract

Under all the circumstances, it makes a lot of sense for pro se defendants (and everybody else being sued for debt) to use the discovery process to get the assignment contracts. The debt collectors do not want to provide this to you, and they will lie about its existence, deceive you if they can, and stonewall you to the limits of their ability if you push for it.  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 are unable to point to a respected authority (like a court opinion) that backs them up, but this doesn’t stop them.

Verification or Validation – Using Both FDCPA and FCRA to Protect Your Rights

A smart person disputes and requires verification
A smart person disputes and requires verification

Verification under the FDCPA and FCRA – Use Both to Protect Your Rights

The information in this article and video is designed to help people being bothered or sued by debt collectors, or who are concerned about their credit reports and wish to take action to protect their rights.

Two Kinds of Verification and How to Use them to Protect Your Rights

We have spent much of our time talking about “verification” on our site and videos, and what we have meant in most of that has been the “verification” process provided by the Fair Debt Collection Practices Act (FDCPA). But there is another kind of validation you can use – validation as permitted by the Fair Credit Reporting Act.

We talk about that below and discuss how you can use both forms of validation, together or separately, to your advantage in defending yourself from the debt collectors and in repairing your credit.

The two kinds of verification are different rights. They apply in different circumstances, to possibly different “persons” under different circumstances, give different rights, and have different time requirements.

You can use them both, but they are completely separate. It is important to keep them straight.

Make sure you keep track of everything you do under either statute, and make sure that the response you get is appropriate for the statute you used for the specific right you invoke.

Rights under the FDCPA

Under the FDCPA, when a debt collector first contacts you on a debt, it is required by law to notify you of your right to dispute the debt and require “validation” or “verification.” The two words are used interchangeably, and the requirement is quite simple in general:

  • First, the debt collector must notify you of the right to dispute within 30 days (along with giving you the “mini-Miranda” warning – that anything you say may be used for collection of a debt) within five days of first contacting you.
  • And then, the debt collector must “verify” the debt if you ask within the thirty days provided.

Just to make clear, it is YOU who have 30 days to dispute after getting the notice of your rights. The debt collector does not literally even have to do anything at all and also has no time limit. It’s just that, if you dispute and request verification, it cannot make further attempts to collect on the debt until it has verified it.

Exactly what verifying it is, is not exactly clear.

It would appear that contacting the original creditor and “establishing” that the debt is yours would be enough. That’s because the purpose of the requirement is not to require a separate lawsuit, but just to protect consumers from harassment based on typos or mistaken identities. The debt collector has to take some action to connect you to the debt if you dispute it under the FDCPA.

Even this low burden often seems to be too much, and possibly that is because the second owner of the debt (if there is one) has no relationship to the original creditor and simply cannot get the debt verified.  Whatever the reason, asking for verification is often enough to make them go away. If they try to collect without having verified, that violates the FDCPA. And that in turn might allow you to stop a lawsuit brought against you.

Remember, however, that when the debt collector immediately files suit against you, this is not a “first contact” which triggers your right to notice and dispute. If you get served, you have to answer (or move to dismiss). It is not enough to request verification.

Disputing under the Fair Credit Reporting Act

There is another kind of validation, and it is completely different from the FDCPA, although you can use it to fight debt collectors, too. It is the validation provided for by the Fair Credit Reporting Act (FCRA).

This is your right to “dispute” an item on your credit report.

You do this after looking at your credit report and seeing something that is not positive. Let’s say you see a debt collector reporting that you owe a debt. Remember your right to verification under the FDCPA comes when the debt collector first contacts you to try to collect the debt. You can dispute a line item on your credit report at any time.

There are rules, and there are better and worse ways to do it. But it does not depend on the other side being a debt collector or having tried to collect the debt. It simply requires that they have put some bad information on your credit report.

When you seek verification under the FDCPA, the debt collector has to verify the debt before making further attempts to collect. When you “dispute” the debt under the FCRA, it doesn’t affect collection. Instead, you are forcing the company to “investigate” the debt and show that what it is saying to the credit reporting agencies is true.

If the company reporting you cannot validate the debt, it is just required to withdraw the offending credit reference. But it could still try to collect the debt.

If it does keep trying to collect the debt after withdrawing a bad credit reference, that might be a type of admission that it can’t prove the debt if the case goes to a lawsuit.

But it probably isn’t controlling on the case because “validation” of a credit report is not

the same thing as proving that the debt is valid.

A Helpful Strategy

Here’s a strategy that might be helpful. If you receive a bill from a junk debt buyer – a company that bought your debt from the original creditor, in other words – you should

send a request for verification under the FDCPA right away. Then you should and get your credit report and look at it.

If the debt collector is reporting your debt on your credit report, you will want to dispute the credit report and seek validation under the FCRA. Separately.

Remember these are completely different rights. Your sending two different disputes may confuse the debt collector, but remember that under the FDCPA it must provide proof as to your identity and its right to bug you, while under the FCRA it must explain why the information it put on your credit report was correct. The debt collector may not verify under the FCRA, in which case you can clear your credit report.

If it DOES try to validate, it will probably give you information that it would object to having to provide if it were suing you for the debt – so it’s a shortcut to some discovery in that situation.

You should not try to do the FCRA verification first because it takes too much time.

To do the credit dispute right you have to get your credit report and dispute it with the credit bureau before you dispute it with the debt collector under the FCRA if you want to protect all your rights. You don’t have time to work your way through the FCRA before asserting your FDCPA rights.

On the other hand, if the company does not verify under the FDCPA, that would be worth mentioning as a basis for your credit dispute.

We should add that when you get the first letter from the debt collector you may not even know whether it is reporting you on your credit report. They often do not, so you won’t know whether or not you will have anything under the FCRA. But if they are contacting you, you have the right under the FDCPA. Since it only lasts for 30 days, you need not to delay in disputing.

We always recommend sending your disputes by certified mail (and keep all the proof). You don’t have to do this legally, but these things often come down to a question of what you can prove, and having proof from the postal service is a very good investment.

If you would like a free copy of this article, click here to download: Two Kinds of verification article.

If you would like to get a personalized evaluation of your situation, follow this link: https://yourlegallegup.com/pages/evaluation. (Note that this link takes you to our “home” site, YourLegalLegUp.com, which has many more resources on these issues.

For further help, consider our Manuals and Memberships. We have materials on debt negotiations and settlement, forcing debt collectors to leave you alone, credit repair, and many other issues that arise when you are facing debt trouble.

Click here to sign up for our free newsletter, Fightdebt.

 

Credit Reporting Act: Repairing Credit after Debt Litigation Part 1

Life after Debt Litigation

You probably know that I am a big believer in the importance of filing a counterclaim. As I mention in the featured question section this month, having a counterclaim gives you some very important control over the lawsuit itself and whether you get sued or harassed again by the same, or a different debt collector. If you do not have a counterclaim, the debt collector is free to drop the case at will in most jurisdictions. Your counterclaim prevents this.

There is also another reason relating to your life after litigation: Repairing your credit after the lawsuit.

gotthat.jpg

Holding the Collector in the Suit

Our Life after Litigation section here is related to the featured question: “How do you keep the debt collector from just dropping the case and selling your debt to someone else?”

If you’ve read my articles or watched some of my videos, you probably know that I am a big believer in filing a counterclaim. As I mention in the featured question section, having a counterclaim gives you some very important control over the lawsuit itself and whether you get sued or harassed again by the same, or a different debt collector.

Protect Your Credit Report

There is also another reason relating to your life after litigation. Let’s consider your credit report. You may not know it, but when a creditor or debt collector sells your debt to someone else, it should report that information on your credit report. That way, if the next company down the line reports you, it is clear that they are doing so on a debt that someone else previously owned. And this in turn prevents one “bad debt” from looking like several apparent bad debts. After reporting you initially and up to the point of charge off, the original creditor should not be adding information to your file. That is the right of the next person who obtains the debt. Another way of putting this is that only the person to whom the debt is currently owed has a right to report information about that debt.

Why is this important?

It’s important because if you force the debt collector to settle a debt as a dismissal “with prejudice,” you terminate the debt collector’s right to collect. You also end its right to report the debt as a debt. That is because it, and any subsequent owner of the debt, is bound by what is known as “res judicata” (or more commonly now called “collateral estoppel”). Basically what that means is that once a court has ruled on the validity of the debt – that ruling will apply no matter who later owns the debt.

What do you do with that?

We’ll discuss how you can use the Credit Reporting Act (also called the “Fair Credit Reporting Act) to force debt collectors to remove negative credit references from your record once you’ve beaten them in a debt lawsuit in Part 2 of this article. You can get the rest of this article by clicking here: Using the Credit Reporting Act.