A victim of abusive debt collection practices was recently awarded $311,000 by a federal jury in Montana. The debt collector, the North Dakota law firm of Johnson, Rodenburg & Lauinger, sued the victim, who had a disabling brain injury, beyond the statute of limitations. The jury awarded the victim $1,000 in statutory damages, $250,000 in actual damages, and $60,000 in punitive damages. The court will next determine the appropriate amount of attorneys’ fees. This is one of the largest jury awards ever under the FDCPA. The attorney for the victim, John Heenan, did a remarkable job handling the case.
Under the FDCPA, a consumer is entitled to $1,000 in statutory damages for violations of the FDCPA, plus actual damages and attorneys fees. If the conduct is especially egregious, as in the Montanta case, the consumer may be entitled to punitive damages as well. If you live in Minnesota and have been a victim of abusive debt collection tactics and want to fight back, please contact me.
Lack of a signed contract
Consumers often believe that credit card companies must produce a copy of the contract that the consumer signed to prevail in a debt collection lawsuit. But there are alternative theories used by debt collectors, such as account stated, that may allow them to prevail by merely introducing credit card billing statements. Account stated is an equitable theory where the debt collector must show that the consumer “assented” to the account by receiving billing statements and not objecting to them within a reasonable period of time. But there are numerous defenses to this argument, particularly if the debt collector is a debt buyer.
Unfortunately, the fact that you cannot afford to pay the alleged debt is not a defense to a lawsuit. The issue in a debt collection lawsuit is not whether you can actually pay the alleged debt, but whether you are legally obligated for the debt. That fact that you are unemployed, receive public assistance, or are otherwise “judgment proof” may mean that the debt collector will never collect any money from you. But it is not a legal defense to a lawsuit.
Attempted to pay
While frustrating, the fact that the debt collector refused to work out reasonable payment arrangements with you is not a legal defense to a debt collection lawsuit. Courts do not have the authority to force the debt collector to accept the payment arrangement you proposed.
Ex-spouse responsible for payment under divorce decree
Just because your divorce decree ruled that your ex-spouse is solely responsible for payment of a joint debt, doesn’t mean you cannot be sued for the obligation by a debt collector. Divorce courts do not have the power to modify contracts between you and a third-party debt collector. You may, however, be able to sue your ex-spouse to repay you for any money you are ordered to pay the debt collector.
Potential defenses to a debt collection lawsuit
Now that you know how not to defend a debt collection lawsuit, here are some good potential defenses: statute of limitations, unauthorized and/or fraudulent use of the account; identity theft; incompetent or insufficient evidence; and lack of valid assignment of the debt (usually only applicable in debt buyer lawsuits). This is not an exhaustive list and these defenses may or may not apply to your particular case. Consult with a consumer lawyer in your area for specific advice about your case.
If you live in Minnesota, feel free to download my free Answer form and instructions. And if you want help defending yourself against a collection lawsuit, feel free to contact me.
(photo: Picture Perfect Pose)
Minnesota Lawyer recently published an article about the increased need for consumer lawyers in the current economic climate. The article discussed the rise in debt collection lawsuits being initiated and some of the problems this has caused for consumers.
I was quoted several times in the article, which also featured quotes from fellow consumer lawyers Nick Slade and Sam Glover:
Minneapolis consumer attorney Todd Murray is fielding a lot of calls as well, many relating to issues surrounding garnishment. “There are a lot of people out there who the economy has hit pretty hard and who are having problems with debt collection.”
According to Murray, garnishment statutes tend to favor creditors, particularly the statutes involving exemptions. “A lot of times exempt funds are seized…and the process to resolve it is sort of this ping-pong process,” he said. “This often can take weeks to resolve and meanwhile the account is frozen and overdraft fees pile up.”
Murray added that while creditors are pushing hard to keep the arbitration process in place, many consumer advocate groups have targeted mandatory arbitration as “No. 1″ on their list of things to change.
If you’re in Minnesota and have been sued or garnished by a debt collector and need help defending yourself, please contact me.
Michelle Lore, Consumer lawyers keep busy as creditors push for payment, Minnesota Lawyer, April 13, 2009, at 3.
Recently, the Federal Trade Commission issued a report recommending changes to the Fair Debt Collection Practices Act. The FTC’s primary conclusions are:
Major problems exist in the flow of information within the debt collection system.
The FTC ’s first main concern is the lack of information debt collectors have about the debt when they seek payment from consumers. As a former debt collection attorney, I agree with this conclusion wholeheartedly. For the majority of accounts, all the debt collector receives from the creditor is the alleged debtor’s name, address, phone number, social security number, outstanding balance, and interest rate. Often the contact information is several years old. With this sparse information, its difficult for the debt collector, assuming they were so inclined, to verify they are collecting the correct amount from the proper person. This lack of information also creates a problem when the consumer requests verification under the FDCPA. Currently, many debt collectors are simply verifying that the amount in their file matches the amount in the creditor’s file without actually verifying that the amount itself is correct or that they are seeking payment from the right person. To remedy these problems, the FTC recommends that debt collectors provide the name of the original creditor and an itemization of the principal, interest, and other fees that make up the outstanding balance in their validation communications. To me, this is a no-brainer. The FTC also recommends that debt collectors be required to conduct a “reasonable” investigation when the consumer disputes the debt. This is a good suggestion, but “reasonable” needs to be defined.
The FTC’s second main concern is the lack of notice that debt collectors are required to provide to consumers about their rights under the FDCPA. Specifically, the FTC recommends notifying consumers that if they dispute the debt or request validation, then the debt collector must cease all collection efforts until they validate the debt. The FTC also recommends that consumers be notified that if they notify the debt collector to stop contacting them, the debt collector must honor this request. These are already requirements under the FDCPA, but because debt collectors are not required to notify consumers of these rights, few consumers know about them.
Debt collection laws need to be modernized to account for changes in technology.
The FTC points to three technological trends that require updates to the FDCPA: (1) the widespread use of cellular phones; (2) the ease of recording collection calls; and (3) the use of electronic payment methods. The FTC recommends amending the FDCPA to prohibit debt collectors from calling or text messaging a consumer without their express consent, changing federal preemption laws to allow consumers to record calls with debt collectors without the debt collectors knowledge or consent, and changing the FDCPA to require the consumer’s express consent before the debt collector can access the consumer’s bank account electronically. From the consumer’s perspective, these are good suggestions, particularly the possibility of recording calls without the collector’s consent. In many states, including Minnesota, both parties are required to consent before a call can be recorded. Because many debt collectors will not consent to the consumer recording the call, consumers have a difficult time proving abusive conduct that occurs over the phone. Allowing consumers to record collection calls should help deter abusive conduct and lead to a more efficient resolution of FDCPA claims of abuse.
Certain debt collection litigation and arbitration practices appear to raise substantial consumer protection concerns.
While the FTC recognized the problems with some debt collection litigation and arbitration, it refused to recommend any changes to the FDCPA, citing a lack of sufficient information. This is disappointing. The problems with mandatory binding arbitration are well-documented and the FTC’s failure to recommend changes will lead to continued abuses of the judicial and arbitration systems by debt collectors.
The amount of statutory damages allowed under the FDCPA needs to be increased.
The FTC recognizes that the amount of statutory damages under the FDCPA has not been changed since the FDCPA was enacted in 1977. Currently, the FDCPA allows for statutory damages of $1,000 for violations of the FDCPA. The Commission recommends increasing this amount to adjust for inflation and to provide a more effective deterrent for debt collectors. This would be a very beneficial change for consumers. Too many debt collectors view the $1,000 penalty as merely the cost of doing business. Accordingly, the prospect of having to pay $1,000 in damages rarely results in changes to their collection practices. Higher statutory damages would provide a stronger deterrent for abusive behavior.
If you live in Minnesota and believe a debt collector has violated your rights under the FDCPA, please contact me.