An overview of a typical debt collection lawsuit in Minnesota (and some tips for how to deal with it).
Dealing with a debt collection lawsuit can be a scary and confusing process, particularly in Minnesota where the initial stages of the case often take place outside of court oversight. My hope is that this post can shed a little bit of light on the debt collection litigation process and allow you to make a more informed decision about how to get your case resolved as quickly and painlessly as possible.
Before we begin…
First, reading things on the internet is not a substitute for consulting with or hiring an attorney. A blog post must necessarily be generic, but your case involves specific facts and circumstances that require specific legal advice. Don’t rely on this, or any post, on the internet when faced with a collection lawsuit. It’s best to consult with an attorney with experience defending debt collection lawsuits in your state at the very beginning of your case. I know this advice sounds self-serving, but I’ve been handling debt collection lawsuits for over 7 years–3 years on the creditor side, 4 plus years on the consumer side–and it’s extremely, extremely rare for a consumer to win in court without hiring an attorney. I know that money is a concern, but many consumer attorneys offer flexible payment options to make it affordable for consumers to get help for a debt collection lawsuit.
Second, this post describes the basic steps of a collection lawsuit in District Court in Minnesota. Every state has different laws and procedures and what happens in a Minnesota lawsuit may be very different from what happens in a collection lawsuit in another state. If your collection lawsuit is not in Minnesota, then this post will not help you at all and you shouldn’t rely on anything I’ve written here. And if your case is in Minnesota Conciliation Court, or small claims court, then the steps are different than what I’ve described here.
Step 1 — Service of the Complaint
In Minnesota, a debt collection lawsuit begins when the consumer is served with a copy of the Summons and Complaint. The Summons is a notice that a lawsuit has started and contains basic instructions about what to do next. The Complaint details who the parties are and what claims are being made. The Summons and Complaint are not required to be filed with a court and most debt collection lawsuits will not be filed with the court at the time they are served. Accordingly, the Summons and Complaint will not have a court file number on them. There is a lot of information on the internet that suggests that a Complaint without a file number is not valid. This may be true in other states, but it isn’t true in Minnesota.
I’m often asked what it means to be “served.” Served essentially means “notified.” In Minnesota, the most common way to serve a defendant with a Summons and Complaint is to personally hand it to the defendant. Another common method of service is to hand the Summons and Complaint to a person of “suitable age and discretion” that lives with the defendant. This is usually a spouse, older child, or roommate. In Minnesota, it’s possible to serve a Summons and Complaint by mail, but the defendant must sign an acknowledgment that they’ve received the complaint or it’s not effective service. It’s also possible to serve a defendant by publishing notice of the lawsuit in a newspaper or similar publication, but this is very rare in collection cases.
Step 2 — Answer the Complaint
Once a lawsuit is served, the defendant has 20 days from the day he was served to respond with an Answer. An Answer is a formal, written, legal document that specifically responds to each of the allegations in the Complaint and lists any defenses that the defendant has. Phone calls or letters are not considered Answers under the court rules.
If the defendant does not answer a lawsuit within 2o days of being served, then he is in default and a judgment may be entered against him. In a debt collection case, a default judgment is a final court order that the consumer owes the money. A default judgment is granted not because the creditor has better evidence or arguments, but because the consumer didn’t participate. It happens administratively and no judge will ever see the case. If you want to protect your rights and force the creditor to prove its case in front of a judge, then you must answer the lawsuit within 20 days of being served.
Step 3 — Discovery
Assuming that the consumer answers the Complaint properly, the next step in a debt collection lawsuit is discovery. If the case has not been filed with the court, there is no explicit time frame for discovery to happen and the parties are free to serve discovery whenever they wish. Once the case is filed with the court, the court will issue a deadline for discovery to be completed by.
Discovery is simply an opportunity for the parties to exchange information about the claims and defenses involved in a case. Discovery is not compulsory and a party is only required to provide information if they’re properly asked. The most common forms of discovery in a debt collection case are Interrogatories, Request for Production of Documents, and Requests for Admission. Interrogatories are basically just questions that one party asks of the other. Requests for Production of Documents, as the name implies, requires that certain documents related to the case be produced. And Requests for Admission are essentially true or false questions about the claims or defenses in the case.
To request discovery, a party has to properly serve their Interrogatories, Requests for Production of Documents, or Requests for Admission. Written discovery is usually served by mailing the requests to the other side. The other party then has 30 days from the day the discovery was served to respond fully. Simply mailing a letter to the other side asking them to provide information about the case is not sufficient and doesn’t trigger the other side’s duty to respond.
Requests for Admission are probably the most critical part of discovery, because if they are not responded to within 30 days, they are considered admitted. Creditors write their Requests for Admission carefully so that if the consumer doesn’t respond to them, they will end up admitting each element of the creditor’s claims. I’ve seen cases where the only evidence that the creditor put in front of the judge was the consumer’s failure to respond to the Requests for Admission.
The bottom line: if you receive discovery requests, you must truthfully respond to them in writing within 30 days. If you don’t, you risk losing your case on a technicality and being penalized by the court. And if you want to ask questions of the other side and see what documents they have, you must mail them proper discovery requests. If they don’t respond within 30 days, you can ask a court to make them respond and penalize them if they don’t.
Step 4 — Summary Judgment Motion
The next step in the majority of collection cases is the creditor’s summary judgment motion. This is a hearing in front of a judge where the creditor will offer all of its evidence and legal arguments and ask the judge to give them a judgment. Defending a summary judgment motion is a complicated and involved process, but essentially it requires the consumer to file a brief with his legal arguments, any written testimony that he wishes the court to consider, and any documents that he wants the court to review. There is a hearing where the judge will have an opportunity to ask questions of both sides. The judge then considers all of the arguments and evidence and decides whether the creditor is entitled to a judgment. If the judge rules in favor of the creditor, a judgment is entered and the case is over. If the judge rules against the creditor, then the case will proceed to trial.
Defending against a creditor’s summary judgment motion is probably the most difficult thing for a consumer to do himself. There are a myriad of rules, procedures, and deadlines that must be strictly followed. Many summary judgment motions are won by the creditor on a technicality rather than on the merits. For this reason, a consumer faced with a summary judgment motion should strongly consider hiring an attorney. If you want to hire an attorney to help you at this point, you should hire one immediately after getting notice of the creditor’s summary judgment motion. There are strict deadlines to file your response and an attorney will need as much time as possible to get up to speed. Don’t wait until the week before the hearing to call an attorney.
Step 5 — Pre-Trial and Trial
If you’re fortunate enough to defeat the creditor’s summary judgment motion, the case will proceed to trial. The judge will issue detailed instructions about the time leading up to trial. There are so many variables at this point that it’s difficult to describe all the potential scenarios. If you get to this point, you would benefit greatly from discussing your case with an attorney. You have a great deal of leverage to get the case resolved if you defeat the summary judgment motion and an experienced consumer attorney can help you maximize that leverage to get the best possible outcome.
A word about settlement
At any point in the process described above, the parties may agree to settle the case. Usually, this means that the consumer will pay an agreed-upon amount of money and, in exchange, the creditor will dismiss the lawsuit. The amount of money that the creditor will agree to settle for depends on many factors, but generally speaking, the better your legal defenses, the better deal you can get. An experienced consumer attorney will be able to advise you about what a reasonable settlement is in your case.
Virtually any attempt to collect a debt that isn’t owed violates the FDCPA. The Fair Debt Collection Practices Act is a federal law the regulates what debt collectors can and can’t do when collecting a debt. Broadly speaking, the FDCPA prohibits a debt collector from saying anything false or doing anything that is unfair. Whether you’ve already paid the debt off, or didn’t owe the debt in the first place, nearly every attempt to collect a debt that isn’t rightfully owed will involve either a false statement, unfair collection conduct, or both.
You can sue a collector who talks to third parties about your debt. There are five main benefits to suing a debt collector that has violated your rights under the FDCPA:
1. Up to $1,000 in statutory damages. If you bring a successful FDCPA case, the court will award you up to $1,000 in statutory damages. These damages are provided by law as a penalty against a debt collector that violated the FDCPA and you don’t have to prove that you suffered any actual harm to be awarded statutory damages.
2. Provable actual damages. If a debt collector’s abuse has caused you to cry or lose sleep or if the collector’s harassment has affected your relationship with your loved ones or your performance at work, you may be able to recover actual damages. Not every consumer will suffer actual damages due to a collector’s conduct, but if you can successfully prove that you’ve suffered tangible harm, you’re entitled to compensation for that suffering.
3. A free attorney. If you win your case, the collector has to pay your attorney fees. Because of this, most consumer attorneys take FDCPA cases on a full contingency fee, which means that you don’t have to give your lawyer any money up front. Your attorney gets paid by the debt collector or gets a percentage of any out-of-court settlement.
4. Your litigation costs are covered. The costs for filing fees, service fees, deposition transcripts, etc. can quickly add up. But if you win your FDCPA case, the debt collector has to pay all of your court costs.
5. Hold the debt collector accountable. Debt collectors love to lecture consumers about taking “personal responsibility” for paying their bills. An FDCPA lawsuit is a chance to turn this argument right back around at the debt collector and force them to take responsibility for their illegal debt collection tactics.
If a collector violates the FDCPA, it’s time to talk to an attorney.If you live in Minnesota and would like to discuss whether a debt collector has violated the FDCPA and what you can do about it, please use the form in the upper right of this page to fill out my online case evaluation form or call me directly at 612-284-4141. If you live in another state, click here to find a consumer attorney in your area.
Federal lawsuit alleges that collection law firm Gurstel Chargo told disabled veteran that he “should have died.” (Updated)
A Minnesota-based collection law firm, Gurstel Chargo, is in the news after allegedly making some incredibly insensitive and offensive remarks to Michael Collier, a disabled military veteran. According to a lawsuit filed in U.S. District Court in Arizona, Gurstel Chargo garnished the bank account of Collier’s wife. The lawsuit alleges that the garnishment froze the veterans benefits that Collier’s wife received as a result of Collier’s disability, which a judge later ruled were exempt from Gurstel’s garnishment. But according to the lawsuit, when Collier called Gurstel to get the money back, an unidentified legal assistant allegedly told him that “he would have to sue in order to get the funds back.” When Collier tried to explain that the funds were exempt veteran disability payments, the lawsuit alleges that the legal assistant told him
F— you! Pay us your money! You can’t afford an attorney. You owe us. I hope your wife divorces you’re a–. If you would have served our country better you would not be a disabled veteran living off social security while the rest of us honest Americans work our a- – off. Too bad; you should have died.
The lawsuit further states that after hanging up the phone, Collier–who suffered head and spine injuries while serving in the U.S. Army–became very distraught and upset. Collier hired attorney Floyd W. Bybee and sued Gurstel for violating the Fair Debt Collection Practices Act and other related laws.
As you can imagine, allegations of a debt collector telling a disabled veteran that he “should have died” has created a backlash. The story has been picked up by a number of news outlets and bloggers, including prominent legal bloggers Mark Bennett, Scott Greenfield, and Sam Glover. And it’s 2012, so no controversy would be complete without people taking to Twitter to denounce Gurstel Chargo. The uproar was significant enough to prompt Gurstel to issue the following statement on its website
We learned late last week of the lawsuit filed by Michael Andrew Collier and Kim Collier-Dingman. Gurstel Chargo takes the allegations made in the lawsuit very seriously and we have immediately launched an internal investigation to determine the facts. We are extremely disturbed by the allegations stated in the Complaint, as they are contrary to the policies, practices and values of our firm. We expect that all Gurstel Chargo employees fully comply with all state and federal laws, and we thoroughly train our employees to perform their job in a lawful and respectful manner. Under no circumstances does our firm tolerate the type of conduct alleged in the Complaint.
The Complaint states that the wrongful remarks were made during a telephone call. We have requested from the attorney that filed the Complaint the phone number of the phone that Mr. Collier was allegedly on, an approximate date on which the call occurred, whether the person who made the alleged wrongful comments was male or female, all in order to help us to get to the truth about what occurred. We have been informed by Mr. Collier’s attorney that he is unaware of any of this information. To date, we have discovered no information to substantiate the allegations, but our investigation continues. Should these allegations prove to be true, we will take immediate corrective and disciplinary action.
Before I weigh in with my thoughts on the situation, I should offer a little background. I worked for Gurstel Chargo as a collection attorney for about three years. I found that I didn’t have the stomach for collections, so in February of 2009 I resigned and started my own law firm dedicated to helping consumers dealing with debt collectors. In my consumer rights practice, I have represented dozens of consumers in collection cases brought by Gurstel and have sued Gurstel twice under the FDCPA. I don’t have any particular axe to grind against them and am on good terms with a number of their attorneys and employees. I haven’t worked there in well over three years so I don’t have any inside information about Collier’s allegations or any actual knowledge of the firm’s current culture or atmosphere. My comments, therefore, are based on my observations about the collection industry in general, rather than about Gurstel specifically.
I should start by noting that the allegations in Collier’s lawsuit are just that–allegations–and Collier has the burden of proving that Gurstel actually made those inflammatory comments. Given my experience suing collectors under the FDCPA and working with consumers nearly every day, I’m inclined to believe Collier’s story, but as an outsider to the situation I obviously don’t know what really happened.
Much of the commentary on this situation has focused on the irony of Gurstel’s silly “Accountability Matters” marketing campaign. Bennett, Greenfield, and Glover all justifiably picked up on this theme. But I want to focus on what motivates a collector to say such horrible things to another human being. I think it’s overly simplistic to demonize all collectors as heartless or sadistic. I personally know a number of collectors who are caring and who follow the letter and spirit of the FDCPA at all times.
Instead, I believe that the root of the problem lies in the way a modern collection outfit is structured. Individual collectors are paid on a commission-type arrangement. Their livelihood depends upon how much money they collect. Collection law firms set monthly collection goals for each of their collectors and are ruthless in holding their collectors to those goals. A collector’s paycheck and continued employment are directly related to how much money he collects. Collectors are fired every day for not meeting their goals and it must be demoralizing to be part of this revolving door of employees. Given this cut-throat environment, it’s not surprising that some collectors would resort to the type of inhumane tactics that Collier alleges Gurstel used. When you put tremendous pressure on someone to produce or be fired, it’s only a matter of time before some people respond by breaking the rules. We’ve seen this dynamic play out countless times in professional sports with the various steroid and PED scandals. As one of my consumer rights colleagues has said, compensation drives conduct.
So while I don’t condone an individual collector’s harassment or abuse, I believe that the majority of the blame needs to go to the collection owners who set up the dog-eat-dog system in the first place and then insulate themselves from the day-to-day collection operations. This structure creates plausible deniability and allows them to expres shock and disbelief when one of their collectors is accused of doing something illegal. And as long as the money continues to roll in, there is no incentive for agency owners to change their collector compensation model. But any collection agency owner that truly wants to clean up his organization would be wise to take an honest and thorough look at how he’s treating and paying his collectors.
On October 19, 2012, Gurstel issued the following statement on its website:
This is an update to Gurstel Chargo’s previous statement dated Oct. 15, 2012, regarding the Michael Collier case. According to plaintiffs’ attorney, a Gurstel Chargo employee made the telephone call referred to in the Complaint to a cell phone owned by Mr.Collier. Yesterday, plaintiffs’ attorney provided the cell phone number on which Mr. Collier claims to have received the call and indicated that the call was made after the May 24, 2012 hearing referred to in the Complaint. As a matter of standard procedure, Gurstel Chargo records and retains record of all phone calls placed from the firm to consumers. A thorough review of the Gurstel Chargo phone database reveals that no call from Gurstel Chargo to the number provided by plaintiffs’ attorney was made at any time from the hearing date through the filing of this lawsuit.
In addition, the persistent reporting by the media that the Collier’s funds were illegally garnished is not accurate. The funds were properly and legally garnished. Only upon documentation being provided by the consumer, Mr. Collier, indicating the funds in his account were exempt, did it become proper to extinguish the garnishment. Gurstel Chargo did not and could not have known the funds were exempt in the absence of this documentation.
Gurstel Chargo has filed its Answer to the Collier federal court case denying the allegations of wrongdoing. In particular, Gurstel Chargo’s Answer states that the despicable phone call allegedly made to Mr. Collier by a Gurstel Chargo employee did not occur. Since Gurstel Chargo filed its Answer, the plaintiffs’ attorney has walked back plaintiffs’ allegations by filing an Amended Complaint correcting errors made in the initial set of allegations.
Now that the truth is beginning to emerge, Gurstel Chargo is concerned that false claims and statements about the firm and its employees are being wrongly perpetuated. The allegations in the Complaint are simply not true. Gurstel Chargo consistently and continuously trains its employees, and stresses its expectation that all of its team members conduct the firm’s business in a respectful and professional manner at all times. Nothing to the contrary occurred in this case.
Gurstel’s statement is correct, Collier’s lawsuit has been amended. The amended complaint removes a description of a conversation that Collier allegedly had with a Gurstel attorney following a court hearing, as well as an allegation about how Collier’s wife reacted to the situation. The most serious allegation in the original complaint, the alleged remarks quoted above, remain in the amended complaint. Based on Gurstel’s October 19, 2012 statement, it’s clear that they deny Collier’s allegations and intend to contest his lawsuit vigorously. We’ll just have to wait for the litigation to play out to see what really happened.
One prominent defense against a debt buyer collection lawsuit is to challenge the admissibility of the debt buyer’s evidence. Credit card billing statements and other account documents are generally considered hearsay under the rules of evidence. Although there is an exception for business records, a debt buyer must first provide specific testimony–from someone with personal knowledge–that demonstrates that the business records are accurate and reliable.
Debt buyers are very good at providing the precise testimony required to trigger the business records exception. But admissibility shouldn’t be about whether a debt buyer has recited verbatim the requirements of the exception. These requirements have been cheapened to the point of meaninglessness by debt buyers’ boilerplate affidavits that are robo-signed by low-level employees who don’t know the first thing about the legal concepts that they are testifying to. Rather, admissibility should be about whether the evidence is actually reliable.
Although a few judges focus exclusively on whether the debt buyer has met the technical requirements of the hearsay exception, in my experience the overall reliability of the evidence is the primary concern of most judges. Fortunately for debt buyers, many judges (not unreasonably, perhaps) believe that credit card billing statements are inherently reliable and are therefore willing to overlook technical deficiencies in a debt buyer’s evidentiary foundation.1 But alarming evidence has recently surfaced that suggests that these judges’ perception of the inherent reliability of credit card statements might be misplaced.
A March 2012 story by American Banker reported that
JPMorgan Chase & Co. took procedural shortcuts and used faulty account records in suing tens of thousands of delinquent credit card borrowers for at least two years, current and former employees say.
In a similar story on Bank of America, AB discovered that
In the “as is” documents Bank of America has drawn up for [sales to debt buyers], it warned that it would initially provide no records to support the amounts it said are owed and might be unable to produce them. It also stated that some of the claims it sold might already have been extinguished in bankruptcy court. B of A has additionally cautioned that it might be selling loans whose balances are “approximate” or that consumers have already paid back in full.
Read the American Banker stories for yourself. They offer detailed, on-the-record information the provides a glimpse into the profit-at-all-costs mentality that plagues some banks’ legal collection departments. At the very least, there is enough in the stories to cast serious doubt on the reliability of the banks’ records. And debt buyers rely heavily on the perceived reliability of the banks’ records because they don’t have any way to independently verify records that they didn’t create.
So what’s the solution? Courts and legislators should resist the temptation to create a more comprehensive list of factors a debt buyer must establish to admit business records into evidence. It’s far too easy for debt buyers to create another self-serving, boilerplate affidavit to meet any new requirements and have them robo-signed by the thousands. Instead, debt buyers should be required to provide specific testimony about why the records are accurate and reliable. This needs to be more than a vague and unverifiable statement that the debt buyer is familiar with the records, has reviewed them, and that they’re accurate. To truly evaluate reliability–especially in light of the troubling allegations uncovered by American Banker–courts need much more specific testimony. What type of software is used? How often is it audited? When was the last audit? What was the error rate? What is the industry standard for acceptable error rate? This testimony should come from someone with actual knowledge of these systems–not a robo-signer who claims to have such knowledge–and the affiant should explain in detail how they came to possess such knowledge.
Sure, this heightened reliability analysis may slow down the freight train that is legal debt collection. But debt buyers, and the banks that they buy debt from, have earned the additional scrutiny after cutting corners with relative impunity for so long.
- I’m not blind to the other challenges that judges face when handling collection cases. In many contested cases, the consumer doesn’t have an attorney and may not even challenge the admissibility of the debt buyers’ evidence. When the consumer does raise the issue on his own, it’s often in a poorly researched and incomprehensible brief obtained from a questionable source on the internet. Judges probably can’t raise the reliability issue sua sponte, because then they risk veering from impartial decision-maker into the consumer’s advocate. I also understand that budget challenges have placed enormous pressure on judges to get cases off their docket. An busy trial judge can be forgiven for holding her nose and granting a debt buyer’s summary judgment motion, despite its evidentiary shortcomings, rather than scheduling a $2,500 collection case for a trial. ↩
It’s an unfortunate reality that many consumer credit reports contain errors. Here’s what to do if you discover an error on your credit report:
1. Write a letter to the credit reporting agency explaining what information you believe is inaccurate. When the credit reporting agency gets your letter, they must conduct an investigation and remove any information that cannot be confirmed as accurate. The CRA is required to send the furnisher (the business providing the information on the report) all of the information that you provide. Your letter should contain the following:
- Your full name and address. You may also consider including your social security number to ensure that the CRA locates your file.
- Identification of every single item that you believe is inaccurate. One way to do this is to include a copy of your credit report and circle each of the items you dispute.
- An explanation of why each disputed item is incorrect. Be detailed and describe your dispute as if you were explaining it to a young child. CRAs may disregard your dispute if it isn’t sufficiently detailed.
- Attach copies of all of the proof that you have that supports your dispute.
- Tell the CRA if you have previously disputed these items, provide the details of these prior disputes (including any phone disputes), and explain how the CRA’s failure to correct the errors is harming you.
- Most importantly, tell the CRA what you want them to do (ie. delete the incorrect entry; modify it, etc).
2. Mail the letter certified, return receipt requested, and keep a copy of the letter and green card for your records. Address the letter to the credit reporting agency whose report contains the error. Some experts advise sending a copy of the dispute letter to the furnisher. This isn’t a bad idea, but you’re not required to do so. The CRA is required to send the furnisher all the information that you provide them with.
3. You may have to write several dispute letters. The CRA may not fix the error after your first letter. Be persistent and write follow-up dispute letters until you get the mistake fixed. Avoid the shortcut of just sending the CRA another copy of your first dispute letter. Read their response to your previous dispute letter and do your best to address the reasons they denied your dispute in your follow-up letter. Don’t be afraid to detail your previous attempts to fix the error and to describe the harm the CRA’s failure to correct the mistake has caused you in these follow-up letters. And be sure to keep copies of all the letters that the CRA sends you in response to your dispute letters.
4. If you’ve written multiple letters and the CRA still hasn’t fixed the error, it’s time to talk to a consumer attorney. If you’ve followed all these steps and the error hasn’t been fixed, contact a consumer attorney with experience handling cases under the Fair Credit Reporting Act.
5. Finally, a few words of caution:
- It’s perfectly acceptable for a CRA to report accurate negative information. Don’t abuse the dispute process by seeking removal of accurate negative information. Similarly, be very wary of any credit repair “specialist” that promises to improve your credit score by using repeated and shallow dispute letters or similar questionable tactics.
- It’s much better to write dispute letters than to dispute over the phone or to use the CRA’s internet form. Writing letters creates a paper trail for your records and it allows you to attach proof of your dispute. It’s also possible that a CRA’s internet dispute form might require you to waive some of your rights when submitting your dispute electronically.
- Avoid using sample dispute letters that you find on the internet. Many of the sample letters you will find on the internet are shallow, deceptive, or even fraudulent. There is no magic language for writing a good dispute letter. Just adequately identify yourself, identify the account you’re disputing, and provide a detailed explanation of the error. It’s much better to use your own words than to rely on boilerplate language from a possibly untrustworthy source on the internet. If you must look at a form letter before writing your own, there’s a sample letter on the Federal Trade Commission web site.