Don’t be a Verification Sucker – Request for Verification is NOT a Substitute for an Answer
Verification of your debt is an important right, but demanding it will NOT prevent a default judgment if you get sued.
People in debt trouble hear a lot about debt validation, and that is a good thing. Even though verification requires little from the debt collector, it’s still good to make the demand when you’re first contacted by a debt collector trying to harass you into paying. Requesting validation sends a signal to the debt collector that you will defend your rights.
If you get sued by a debt collector, however – even if that’s the first you’ve ever heard from them – you must do more. You must answer the lawsuit by filing your answer in court.
If you don’t answer, the debt collector usually gets a default judgment. That effectively ends your rights to fight the debt.
When a debt collector (or creditor) files suit against you, you will have to file an answer in court to avoid a default judgment. Many people think all they have to do is “dispute the debt and request verification.” The right to verification, however, applies only to collection efforts that are not part of a lawsuit. Don’t be a verification sucker – file an Answer and defend yourself.
Making excuses in debt law cases is a good way to lose your case.
The “iron law of cause and effect” applies to everything. What this means is that, for every action, something happens as a result. No matter why it happened, if it does happen, there are consequences. There are no free lunches. Ever.
You know that. But it’s easy to forget when things get tough.
We pretend the iron law of cause and effect does not apply to us all the time. If we’re late, we apologize, and that’s usually enough to get past the other person’s anger or hurt feelings. If we apologize sincerely enough or give enough good reasons, it seems like we get away with it. But it isn’t called the “iron law” for nothing. Even if the other person excuses us, he thinks we are less dependable. And if the other person doesn’t, we think of it ourselves. Consequences.
Sincerity means not intending to do harm. Integrity means not doing it. Know the difference.
Substantive Law of Debt
If a debt collector can prove you borrowed money and didn’t pay it back, it should get a judgment against you. And if you don’t make them prove their case, they will get their judgment. Simple as that. They call that “strict liability,” which means that WHY you didn’t pay does not matter.
On the other hand, there are events that can destroy a debt. Showing payment, that it was based on fraud, or settlement to name a few, will attack the debt. But if the debt isn’t destroyed, no amount of sincerity will get you off the hook. It doesn’t matter how much you wanted to pay. It doesn’t matter how much you tried to pay. Or whether you tried at all.
It’s surprising how often people get mad at debt collectors for trying to collect debts they (the people involved) can’t afford to pay. Just because the debt collector has a ton of money doesn’t mean they won’t or shouldn’t get a judgment against you. Don’t think that way.
Instead, fight and make them prove their case if they can. Require them to prove the debt and their right to it. Luckily, they aren’t so good at that.
Excuses in Litigation
We’ve been talking about the substantive law of debt, which is almost absolute,. It’s a little murkier when you talk about procedures such as responding to motions and the like. There, excuses CAN make a difference – sometimes. If you make a mistake in doing something, this can sometimes be excused. Likewise, if you make a mistake, you should certainly try to get it excused. The sincerity of your excuse will matter then, so make it good and say it with feeling. And you might get away with it.
But even if you do get away with it, every mistake has consequences. As a pro se defendant, you work mighty hard to get the judge to take you and your words seriously. You want the judge to apply the law fairly and consistently – that’s really all you need in most debt cases to win.
Follow the Rules – Don’t Ask for Breaks
Any time you ask the judge for something special or make some kind of excuse, you will hurt your chances of the court taking you seriously and holding the debt collector to the rules. And all too often, the court will not give you the break it probably should. Thus you should always work your hardest and do your very best to understand the law and rules of your court. As much as possible, you NEVER want to ask the judge for anything she isn’t supposed to do.
And to get your best, you must give your best. Never make excuses for yourself, and never accept them from yourself. It’s impossible to be perfect, but try not to make any mistakes you don’t have to make. That isn’t a cliche or boring old saying – it’s encouragement to you to work your @ss off. The only way to avoid making mistakes is by figuring out things ahead of time and always going the extra mile. You can get away with doing less in some parts of your life, but you often cannot in litigation.
If you would like us to take a look at your case and give you a sort of road map to what you need to do and how, take a look at our Personalized Evaluation product. If a debt collector is suing you and you already know you want to defend yourself without spending a lot of money on lawyers, then get our Debt Defense System.
Protect Your Rights
Even if you are reading this article late in the game, shortly before trial, and you are not already a member, you should consider doing so. We have materials helpful to last minute defense and trial preparation even if you are facing this rule.
If it’s a little earlier in the lawsuit, or if no has filed suit yet, you have many other options. Membership can present you many benefits and help you win your case. Or you could check out some of our e-courses.
Hiring a lawyer might be the “gold standard” of defense, but lawyers are expensive. If you’re being sued by a debt collector and can’t afford a lawyer, all is not lost. You CAN represent yourself. This is not complicated law, debt collectors are not innovative or particularly energetic. And the debt collection system is a “factory” approach not designed to work against people who defend themselves intelligently. You can do it.
Okay – maybe debt defense isn’t always very fun. In fact, most of the time it isn’t exactly fun, but it is easier than you expect, And winning is great. Going from worrying about having to pay from $1,000 to $50,000 to some debt collector, to having them drop the case – or to settling with you for pennies on the dollar IS fun. It changes the way you look at debt and debt law forever.
Pro se legal means representing yourself rather than hiring a lawyer to do it for you. You have the right to do that in essentially any court proceeding, whether as defendant or plaintiff.
Pro se is a Latin phrase meaning “for oneself.” You will sometimes see it called propria persona (abbreviated to “pro per”). In England and Wales, the comparable status is called “litigant in person.” Not that it matters, right?
Some Think It’s Scary
Although many people fear the thought of representing themselves in court, pro se representation is not rare. According to National Center on State Courts in 1991-92 71% of domestic relations (family law) cases had at least one unrepresented party. In 18% of the cases both parties were pro se. It is a growing trend in debt collection law as well .
People have long had the right to self-representation in the United States. That right predates even the ratification of the Constitution. Section 35 of the Judiciary Act of 1789—enacted by the first Congress and signed by President Washington, states that, “in all the courts of the United States, the parties may plead and manage their own causes personally or by the assistance of counsel.” Most states have a similar constitutional provision.
Will the Courts Protect You from Mistakes?
The California rules of Civil Procedure explicitly prefer resolving every case on the merits. This applies even if doing it requires excusing a mistake by a pro se litigant that would otherwise result in a dismissal. The Judicial Council says that “Judges are charged with ascertaining the truth, not just playing referee.” And the Council suggests “the court should take whatever measures may be reasonable and necessary to insure a fair trial.”
Most states and the federal courts officially share this bias in favor of hearing courts on “their merits,” (based on what is actually fair). Pro se litigants cannot rely on any special treatment, however. Some courts explicitly will not extend favorable treatment to non-professional litigants. Our position has always been that you should know the rules. Knowing the rules means you can use them. And one secret of debt law is that it is the debt collectors who rely on leniency. You need to prevent that if possible.
Pro Se Litigants Often Do Very Well
Pro se litigants usually do not need extra help. According to Erica J. Hashimoto, an assistant professor at the Georgia School of Law, criminal defendants are “not necessarily ill-served” by the decision to represent themselves. In state court, pro se defendants charged with felonies probably fared much better than represented defendants.
Of the 234 pro se defendants studied by Ms. Hashimoto, “just under 50 percent of them were convicted on any charge….for represented state court defendants, by contrast, a total of 75 percent were convicted of some charge.” And just 26 percent of the pro se defendants ended up with felony convictions, whereas 63 percent of represented defendants in Ms. Hashimoto’s study did. In federal court…the acquittal rate for pro se defendants is virtually identical to the acquittal rate for represented defendants.
Of course there could well be other important variables that the Hashimoto study did not include, but it seems clear that there is not an “automatic penalty” for daring to represent yourself.
There are certain types of cases and situations where pro se representation may actually be an advantage. In debt collection cases, for example, the economic factors often outweigh legal issues. A vigorous pro se defendant can gain a significant advantage by taking energetic steps that a lawyer—always on the clock—would pragmatically be unable to take.
Courts are not always favorable to self-represented people for various reasons. But even with that bias, pro se plaintiffs have recorded some significant victories in civil courts.
Pro Se Representation in Debt Collection Cases
Defendants in debt collection cases have some significant economic advantages in conducting their cases. They also have fewer of the disadvantages that many other types of cases have. Debt collection cases tend to be document-intensive rather than witness-intensive. In the unusual case which actually goes to trial, there are not many things to prove or disprove, and the evidentiary issues are basic. Pro se defendants can argue whether the debt collector produces enough evidence. And whether that evidence is “admissible” in court for the court’s consideration. You won’t need much finesse.
This basic legal simplicity, and the fact that debt collectors drag defendants before the court against their wishes often seem to create a favorable impression on the judges.
If you would like us to take a look at your case and give you a sort of road map to what you need to do and how, take a look at our Personalized Evaluation product. If you’re in a lawsuit and already know you want to defend yourself without spending a lot of money on lawyers, then get out Debt Defense System.
Protect Your Rights
Even if you are reading this article late in the game, shortly before trial, and you are not already a member, you should consider doing so. We have materials helpful to last minute defense and trial preparation even if you are facing this rule.
If it’s a little earlier in the lawsuit, or if the debt collector has not filed suit, you have many other options. Membership can present you many benefits and help you win your case. Or you could check out some of our e-courses.
You may have heard of the Fair Credit Reporting Act, 15 U.S.C. Sec. 1681. This was a law initially designed to limit and reduce the abuses of the credit reporting agencies, which were running roughshod over consumer rights. In particular, the credit agencies would report false or disputed information which was damaging people in very real ways – and then ignore repeated requests to correct that information. The FCRA was an attempt to assert some kind of control over them. I will address this issue more fully some other time, but the law divides the reporting community into two groups: the agencies and “information suppliers.”
Debt Collectors Are Often Information Suppliers
The people who report debts to the credit reporting agencies are “information suppliers,” and while they have a legal duty to report that information truthfully, that duty is initially enforceable only by certain government agencies. In plain English – you can’t sue them for reporting information falsely. And, naturally, that is exactly what’s happening when you are falsely trashed in your report. But you do have a right.
Your Right against Information Suppliers
Your right against information suppliers is located in 15 U.S.C. Sec. 1681s-2(b). What this part of the law says is that:
1. In general
After receiving notice pursuant to section 1681i(a)(2) of this title of a dispute with regard to the completeness or accuracy of any information provided by a person to a consumer reporting agency, the person shall –
(A) conduct an investigation with respect to the disputed information;’
(B) review all relevant information provided by the consumer reporting agency pursuant to section 1681i(a)(2) of this title;
(C) report the results of the investigation to the consumer reporting agency; and
(D) If the investigation finds that the information is incomplete or inaccurate, report those results to all other consumer reporting agencies to which the person furnished the information and that compile and maintain files on consumers on a nationwide basis.
Your Rights under the FCRA
What this means in a practical sense is that if you win at trial and get the debt collector’s case dismissed, or if you force it to settle where its claims are dropped “with prejudice,” then you should consider following up with a request to the reporting agencies for your credit report. If the debt collector has reported you as owing, or if the original creditor has not reported the debt as sold, then you may want to file a dispute. It is the filing of the dispute that allows you to sue the information supplier for providing false information to the credit reporting agencies.
How it Works
Suppose you go through the litigation process and get the case dismissed with prejudice. Your next move might be to request a credit report from all the credit reporting agencies. Debt collectors do not necessarily provide information to all the agencies, and perhaps they provide different information to different agencies. In any event, get your report from each of them. Please check out this month’s scam report before you do this, however.
When you get the reports, you must read them carefully – do they reflect that the debt was sold? Has the debt collector filed reports saying that you still owe? If the answer to either or both of these questions is “yes,” then you can write to the credit reporting agency requesting that it reinvestigate and stating very specifically that you “dispute” the report and the debt. Don’t be coy about this – you get no points for style here – you need to dispute the report and insist on a correction.
This dispute is what triggers the responsibility of the credit reporting agency to conduct a reasonable “reinvestigation.” As part of this reinvestigation, the agency must ask the information supplier to investigate the information it is supplying. If the information supplier provides false information at this point, you can sue it under the Fair Credit Reporting Act as well as under “common law” (state law) theories like defamation. And this is where collateral estoppel comes back into play – because if they claim you owe the money even though they have dismissed the case with prejudice, they would be “estopped” from arguing that they were telling the truth if you sued them for defamation or false reports under the FCRA.
Sue the Credit Reporting Agencies?
I’ve never suggested that nonlawyers try to sue the credit reporting agencies. They’re hard to find and serve, hard to figure out and, at least at the last report I got, they almost never give up. If you decide to go after the credit reporting agencies, you should very strongly consider hiring a lawyer.
The Fair Credit Reporting Act establishes certain rules for the credit reporting agencies and outlines your rights against them if they fail. You’ve heard about having rights to a fair credit report. Here, in plain English, is a list and explanation of your most important rights under the Fair Credit Reporting Act (FCRA 0r sometimes, just CRA) in plain English.
The Importance of Credit Reports
Our country runs on credit and credit information and the credit reporting behind them. Of course there are the obvious uses of credit to purchase things, but as more and more people are finding out, credit reports are used for much more than that – they often impact employment decisions, housing decisions and rates, business equipment lease rates, and insurance availability and price, among other things. Bad credit has a high price in so many ways.
Credit Reporting Network
As important as all the interests affected by it are, the credit reporting network (the businesses which create and publish your credit information) is a vast and largely faceless bureaucracy. The federal Fair Credit Reporting Act (FCRA) was designed to create some accountability in this network and protect consumers from some of its abuses. The FCRA was designed to safeguard the accuracy, fairness and privacy of information in the files of consumers held by the reporting agencies.
Different Kinds of Credit Reporting Agencies
There are many different kinds of consumer reporting agencies – almost everybody knows about the credit bureaus, of course, and there are also specialty agencies that sell information about check writing histories, medical records and rental history records. The FCRA was directed primarily at these agencies, rather than the creditors or companies with which you normally do business.
Here is a partial list of your major rights under the FCRA.
This isn’t a complete, exact replication of your rights under the Fair Credit Reporting Act. As with most important laws, the exact rights and their limits change as courts interpret the laws. But this will give you an accurate overview – a place to start.
Access to Your Credit Report Limited
A consumer reporting agency may provide information about you only to people with a valid need – considering an application with a creditor, insurer, employer, landlord, or other business. The FCRA specifies those with a valid need for the information. And in most cases you must give your consent before the information is obtained or used.
Rights When Credit Information Used Against You
Anyone who uses a credit report or another type of consumer report to deny an application for credit, insurance, or employment – or to take other adverse actions against you – must tell you, and must give you the name, address and phone number of the agency that provided the information. You are entitled to a free copy of that report.
Right to Find out What Is in Your File.
You can find out all the information about you in the files of a consumer reporting agency. You must be offered a free disclosure if:
A person has taken adverse action against you because of information in your credit report;
You place a fraud alert in your file as a victim of identity theft;
Your file contains inaccurate information as a result of fraud;
certain other reasons.
All consumers will be entitled to one free disclosure every 12 months upon request from each nationwide credit bureau and from nationwide specialty consumer reporting agencies.
Right to Dispute and Correct Information
If you identify information in your file that is incomplete or inaccurate and report it to the consumer reporting agency, the agency must conduct a “reasonable” investigation, and it must report the information as disputed. If it is unable to verify the information after investigation, the agency must remove or correct the entry.
For practical reasons, this provision may actually provide more important rights against the businesses that report credit events (the debt collector reporting a debt as unpaid, for example) than against the reporting bureaus.
Time Limits for negative information.
In most cases, a consumer reporting agency may not report negative information that is more than seven years old, or bankruptcies that are more than 10 years old.
Next Step to Take
Sign up for your free copy of the Fair Credit Reporting Act on this page.
When people are being sued for debts, they often panic and look for the quickest, easiest, or least scary way out. And bankruptcy often occurs to them as the solution. I believe there are often much more effective ways to handle old debt, especially credit card or merchant account debt that has been sold to a debt collector, than bankruptcy.You can defend yourself without hiring a lawyer, and even if that doesn’t work out – which it usually does – you could still file bankruptcy. But if you can avoid bankruptcy, you will reduce the harm the debt does to you.
Panic is not necessary, and bankruptcy—at least at first–is seldom the best solution in a real-world sense. Here’s why.
Types of Debt
Debt is divided into two types: “unsecured,” and “secured.” Secured debt means that the debt has specific assets backing it. If you miss payments, you can have your house foreclosed or your car repossessed. These things “secured” the debt and can be repossessed and sold if you stop making payments.
Unsecured debt is debt that is not secured-it isn’t attached to any specific assets. Just because a debt is “unsecured” does not mean that you cannot be sued for the debt. On the contrary, it means you must be sued in person for the debt collector to collect any money. And it cannot repossess the thing. The creditor then “enforces” the judgment against you by garnishing wages or attaching accounts. But this can be difficult for various reasons.
Lenders on secured debts are in a much better position than those who are not secured. One of those advantages comes in bankruptcy.
In the bankruptcy law, the item securing a debt is really regarded as belonging to the creditor who lent the money if the payment is not made. Specifically, consider a mortgage on a house. The house “secures” the debt, and if you stop making payments the bank can take the house and sell it to pay the debt. In the bankruptcy law, it is considered unjust to allow someone not paying for the property to keep it from the rightful owner. So the lender typically asks for the bankruptcy “stay” to be “lifted” so that foreclosure can take place. Although this can sometimes be delayed, the courts usually “relieve” the lenders and allow them to foreclose on the house and kick the debtor out.
With unsecured debt, on the other hand, the debts are simply added up and paid according to how much money the bankrupt person has. Usually very, very little. And only at the end of the bankruptcy procedure.
Bankruptcy May Not Help When It Applies
What all that means practically is that if you have a large secured debt (mortgage) that you cannot pay, bankruptcy will offer you very little protection. If you have a large unsecured debt, bankruptcy will probably protect you, but it is slow, time-consuming and expensive compared to defending yourself against the debt collector.
Some examples may help make it clearer.
Consider the Smiths. The Smiths have a house and make payments of $2,500 per month. Mr. Smith loses his job and they fall behind in their payments. If the family seeks bankruptcy as their house payments add up, the lender will obtain “relief from the stay” and foreclose on the house. The Smiths are out of luck, and bankruptcy usually does not help.
Now consider the Joneses. If the Joneses have credit card debt of $25,000 and Mrs. Jones loses her job so they can’t make payments, they could seek bankruptcy help. It would probably cost them at least a thousand dollars or more to file, require them to disclose most or all of their finances over the past year or two, and fill out a vast amount of paperwork. At the end of the proceeding, at least a year later, their debts would be wiped out. But so, of course, would their credit reports. The bankruptcy filing will remain a mark against them for ten years.
An Alternative: Defense
The Jones could, however, simply defend themselves against the lawsuits brought by the debt collectors. For reasons I’ve made clear elsewhere, their chances of winning the suit would be excellent, and if the Jones do it right, they can simply get the debt eliminated. This does not usually mean completely cleaning their credit reports, but it can often mean canceling the debt and removal of the recent credit report damage. And it usually will happen in less than six months from the date the debt collector brings suit. They won’t have the bankruptcy on their credit report. They can do it themselves for almost no money at all, and if by chance it doesn’t work, then they could declare bankruptcy.
In addition, if you are facing debt troubles, chances are good the debt collectors have made some mistakes that violate the Fair Debt Collection Practices Act (FDCPA) and give rise to a counterclaim, which increases your chance of fighting the debt.
Better results, less cost. That’s why it’s often better to defend yourself against credit card debt than to seek bankruptcy protection. It’s also true that if for any reason the Jones lost their case against the debt collectors, they could still file for bankruptcy without having lost its protection.
The Fair Debt Collection Practices Act (FDCPA) is the centerpiece of legal protections for debtors against debt collectors. The law was passed in its essential form in 1977, and its goal was to protect debtors against the abuses of debt collectors. This article discusses what makes this law great, and some of its limitations.
The Fair Debt Collection Practices Act
The Fair Debt Collection Practices Act (FDCPA) was enacted to put an end to some of the worst practices of the debt collection industry. It’s been a very good law, but the debt collectors are still doing many of the things the law was designed to present. You may be able to sue them or prevent them from suing you.
The Debt Collection Industry
Before the act, the debt collection industry was routinely engaging in the most abusive sorts of behavior imaginable, from calling debtors at all hours of the day or night and subjecting them to streams of cursing and name-calling, to discussing their debt with children, neighbors, and employers. Debt collectors frequently misrepresented themselves as attorneys and often threatened legal action which they were powerless to initiate. And they often attempted to, and did, collect debts that either never existed or were long unenforceable because of statutes of limitation or bankruptcy.
Whatever the staid spokespeople of the debt collection industry may say, this is the background of their industry. The Fair Debt Collection Practices Act, 15 U.S.C. Section 1692, et seq., was enacted to put a stop to these extreme behaviors in 1977. Because the people intended to be protected by the act are underrepresented by lawyers, and because of the explosion of debt litigation over the past decade, many of the old abuses still continue, and as people increasingly defend themselves from the debt collectors, they develop new tricks all the time.
The FDCPA: A Pretty Good Law
Nevertheless, the FDCPA is in many ways a model piece of legislation. What makes the law so powerful is that, in addition to making certain enumerated acts illegal, the Act also more generally makes acts that are “oppressive,” “false or misleading representations,” or “unfair practices” illegal. This means that, whereas in most laws, the would-be wrongdoer is free to craft his actions around the specific language of the law and find “loopholes,” under the Fair Debt Collection Practices Act, at least, the consumer may argue that these actions are still unfair or oppressive. The Supreme Court has ruled that an “unfair” act can be shown by demonstrating that it is “at least within the penumbra” of some common law, statutory “or other established concept” of unfairness.
That’s pretty broad. The price for this flexibility, however, is that the remedies—what you get if you prove the case—are less powerful. And this may be why the practices are still occurring today.
As mentioned above, there are specific actions enumerated in the FDCPA, and these include most notably, suing on expired debts, filing suit in distant jurisdictions, publishing certain types of information regarding the debtor, calling outside of specified hours. And the list goes on. If the debt collector is acting in some highly offensive way, chances are he’s within the specific provisions of the Act. These can be found at 15 U.S.C. 1692c, d, e and f. You can find the specifics by Googling the Act or provision and determining whether the specific action you’re concerned about is within one of these provisions.