Creditors and debt collectors sue consumers on all types of delinquent debt, including credit cards, medical bills and auto loans. Honestly, very few people like to be involved with a lawsuit. Bringing an action in court is time-consuming and can be both frustrating and emotionally exhausting.  If a collector escalates a delinquent debt into a lawsuit many times it is because the consumer fails to respond to attempts to collect or cuts off any collection action with a cease and desist letter. Unfortunately, it is not always possible to avoid a lawsuit. When the consumer is properly served (with notice of) the lawsuit papers, a response to the complaint is the best course of action.

Debt collectors (and creditors) file many more lawsuits each year against the consumer than consumers file against the collector. Statistics compiled by data and analytics firm Web Recon, LLC reveal that consumers filed 15409 lawsuits under three consumer protection statutes nationally for the entire year in 2017. These lawsuits were filed under the Fair Debt Collection Practices Act (9784 times), the Fair Credit Reporting Act (4346 times), and the Telephone Consumer Protection Act (4392 times).

For comparison, during that same timeframe in Texas, and only Texas, creditors and collectors filed over 160,000 lawsuits against consumers. That’s right, in 2017 lawsuits filed against consumers to collect a debt in Texas were ten times the number of lawsuits filed nationally by consumers against collectors. The ugly truth is that a recent Consumer Financial Protection Bureau Debt Collection Survey found about 1 in 15 consumers with a debt in collections was sued in 2017. Scary numbers, but consumers have rights in these suits, and often do not assert them. The purpose of  the rest of this article is to provide the steps a consumer can take to ensure their legal rights are protected. 

First and Foremost Consumers Should NEVER Ignore a Lawsuit

Depending on where a consumer lives, a response to the complaint will be due back to the court quickly, typically within 20-30 days. If the consumer (now the defendant) does not respond, they can lose their right to defend themselves in court. If the debtor ignores the lawsuit the collector can get a “default judgment” against them, meaning the plaintiff collector will get an order from the court saying the consumer owes the money without needing any evidence to prove it. The collector wins automatically because the consumer didn’t show up to the court hearing. With that default judgment in hand, the collector has a legal right to collect the money awarded by the court, often with additional collection and attorney fees. Collectors can take that legal order and attach the consumer’s bank accounts, garnish wages, etc.

Consumers Should Seek Legal Assistance Pronto

Contact an attorney or local legal aid program. It can be a result of a consumer’s shame or fear that will stop them from contacting a lawyer. Most legal aid programs offer legal help either free or for a reduced cost. There may be debt defense options available to the consumer, such as having the creditor prove the amount of the debt owed and even that they have a legal right to collect the debt. With the recent proliferation of “debt buyers” which are debt collectors who buy debt accounts from other companies, often the original creditor, who has already written off the debt. Many times the creditor who sells the account databases with the list of debts does not guarantee the accuracy of the accounts they sell to debt buyers!

Some of the accounts that debt buyers receive are inaccurate, or too old to sue on, or may be already paid off, but weren’t cleared from collections before they were sold. Yet, these debt buyers will aggressively attempt to collect on these mistakes, or file suit. It doesn’t really hurt the collector to file a suit with the anticipation that the consumer won’t show, and they will get a default judgment. If the consumer responds and appears in court, they may even drop the suit right then. If the consumer ignores the suit because they were scared, or believed the suit was a mistake, when they don’t respond the collector wins. Every consumer who receives notice of a lawsuit should at least speak with legal counsel.

If You Find a Judgment by Checking Your Credit Report

Sometimes a consumer will only learn about a lawsuit from their credit report. A default judgment was entered under “public records” and the consumer never even received notice of the lawsuit! This tactic is affectionately known as “sewer service” and is used by some unscrupulous organizations to secretly file suits to get default judgments on debts. And this tactic is illegal. Consumers must be personally served the with the lawsuit. In our system of justice, the party being sued has the absolute right to notice and must have a chance to respond to a lawsuit.

In Part II of this series, I will discuss the steps consumers can take as plaintiffs under a number of consumer protection laws. These statutes cover areas such as debt collection and consumer credit reports. There are instances where the consumer may have to bring a lawsuit under one of these federal statutes to stop illegal and unlawful actions taken against them.

 

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