Pennsylvania Court of Appeals affirms dismissal of debt buyer lawsuit

February 17, 2011 by Todd Murray · Leave a Comment 

One of the main defenses available to consumers when defending a debt buyer lawsuit is to argue that the debt buyer’s evidence is inadmissible hearsay. Most people understand that hearsay is not admissible in court. Simply defined, hearsay is any statement–oral or written–that was made outside of the courtroom. So, for example, credit card billing statements or a credit card contract, which were created outside of court, are considered hearsay.

There is an exception to the general hearsay rule that allows business records to be admitted into evidence, despite being created outside of court. But there’s a catch. Before the court will admit the business records, the party offering them has introduce testimony that the records were created in the ordinary course of business by someone with personal knowledge of the event in question. The reason for this requirement is to create a safeguard that ensures that the business records are authentic.

Providing the required foundational testimony is pretty straightforward for the original creditor to do. Capital One, for example, should have no problem producing a witness testify about the process it uses to create its billing statements. But what happens when the lawsuit is brought by a debt buyer? It’s unlikely that the debt buyer as any knowledge of Capital One’s business practices. And without the required testimony, the business records hearsay exception shouldn’t apply and the court should not consider the billing statements or contract as evidence. Without this evidence, the debt buyer can’t prove its case and the consumer should win.

At least that’s the theory. The problem for consumers is that there’s very little existing case law about this issue because it’s not often that garden-variety debt collection cases end up being appealed. And without black and white appellate case law in front of them, most trial judges are going to have a hard time ignoring a stack of billing statements. So I definitely took notice when a Pennsylvania appeals court recently upheld the dismissal of a debt buyer’s collection lawsuit. The Pennsylvania court held that the credit card agreement and account history could not be admitted under the business records exception to the hearsay rule because the debt buyer could not testify that the credit card account records were made contemporaneously and in the regular course of the issuing bank’s business. Without this testimony, there was no way for the Court to know that the evidence was authentic, which, you know, is pretty important. Because it couldn’t provide any admissible evidence to prove its claim, the Court held that the debt buyer could not prevail as a matter of law.

It would be nice if this type of decision became a trend, rather than a rare occurrence.

If you live in Minnesota and want help answering a debt collection lawsuit, feel free to contact me by using the contact form in the upper right corner of this page. I offer a number of flexible representation options, so even if you can only afford to pay a few hundred dollars, I might be able to help you.

Debt Buyer Dismissed | Consumer Law & Policy Blog | February 15, 2011

Photo: http://www.flickr.com/photos/adactio/2018086675/sizes/l/

Star Tribune story on debt buyer lawsuits

June 30, 2010 by Todd Murray · Leave a Comment 

The Star Tribune just ran an in-depth story about the surge in debt buyer collection lawsuits. The article does a great job of highlighting the major problem with debt buyers’ lawsuits: their lack of information and evidence to prove that the consumer actually owes the debt. As the story explains, the problems created by this lack of information are magnified when combined with debt buyers’ aggressive litigation practices and the guilty-until-proven-innocent attitude that they treat consumers with.

To me, the important thing for people to take from this story is to understand that the debt buyer industry is built on the premise that consumers will not answer their lawsuits, which results in thousands of default judgments for them. By obtaining the overwhelming majority of their judgments by default, debt buyers can get away with not having sufficient–or any–evidence that the consumer owes the money. But as the story shows, if the consumer fights back, many debt buyers will either walk away from the case or get roundly defeated in court.

If you live in Minnesota and want help answering a debt collection lawsuit, feel free to contact me by using the contact form in the upper right corner of this page. I offer a number of flexible representation options, so even if you can only afford to pay a few hundred dollars, I might be able to help you.

Phantom debts, real anguish | Star Tribune | June 30, 2010

New report on debt buyer lawsuits

June 14, 2010 by Todd Murray · Leave a Comment 

Last month, a team of organizations that provide legal help to low-income people issued a report on debt buyer lawsuits in New York City. The study draws on a sample of debt buyer lawsuits brought by 26 different debt buyers from 2006 to 2008. The study refers to this as the “Court Sample”.  The study also draws some data from a sample of callers to New York City’s Neighborhood Economic Development Advocacy Project. The study refers to this as the “Client Sample”.  Here are some of the study’s key findings:

  • Debt buyers won more than 90% of the lawsuits they filed, most of them by default judgment.
  • Not a single person in the Court Sample was represented by a lawyer. Overall, only 1% of people sued by debt buyers were represented by an attorney.
  • Only 10% of the people sued by debt buyers answered the lawsuit.
  • At least 71% of the people in the Client Sample were either not served with the lawsuit or were served improperly.

The first three findings don’t surprise me in the least. It’s long been known that debt buyers have a difficult time obtaining evidence for their case from the original creditor. They get away with filing so many lawsuits only because most of the people that the debt buyers sue can’t afford to hire a lawyer and don’t know enough to answer the lawsuit. So they win the case by default, not because they have strong evidence. And while I suspected that there were frequent issues with bad service in debt buyer cases, I’m a little shocked by how high the rate in this study actually is.

Based on its findings, the study makes the following recommendations:

  • Prohibit debt buyers from filing suits without evidence.
  • Ensure judicial review of default judgments
  • Increase legal representation for people sued by debt buyers.
  • Aggressively monitor and regulate process servers.

These are all excellent suggestions. Here in Minnesota, the state legislature is currently working on a bill that would require debt buyers to provide certain documents proving their claim before the court grants them a default judgment. But because of state budget shortfalls, it’s unlikely that Minnesota will see judicial review of default judgments or increased state funding for legal representation for low-income people any time soon. I strongly believe that someone needs to introduce a bill that calls for greater oversight and tougher regulations for Minnesota process servers. One of the fundamental tenets of our judicial system is proper notice to all of the parties, and based on the findings in this study, many people that are sued by debt buyers don’t received proper notice. It remains to be seen whether this is deliberate or sloppy, but I have my suspicions.

Debt Deception: How Debt Buyers Abuse the Legal System to Prey on Low-Income New Yorkers (PDF) | May 2010

If you live in Minnesota and want help answering a debt collection lawsuit, feel free to contact me by using the contact form in the upper right corner of this page. I offer a number of flexible representation options, so even if you can only afford to pay a few hundred dollars, I might be able to help you.