In the first article of this series, I discussed the consumer lawsuit from the perspective of the consumer as defendant, meaning the consumer received a lawsuit from a creditor, debt collector, or debt buyer. In this article, Part II, I want to discuss when a consumer might consider suing a creditor, debt collector, or even credit reporting agency (Equifax, Experian, or Trans Union).  I want to say what I said last article, very few people like lawsuits, they can be time consuming and emotionally draining.  Consumers file suit against collectors at a far lower rate than collectors sue consumers. Unfortunately, there are times where a lawsuit may need to be filed by a consumer to stop abusive practices against them or to correct inaccurate information causing serious consequences. Here are two instances when a lawsuit may be the consumer’s only real option.

1. If after the consumer has tried all of the self-help strategies available and the collector or credit agency is refusing to comply with the law, a lawsuit may be necessary to protect the consumer’s legal rights. There are many, many steps a consumer can take to try and work with a collector or credit reporting agency, whether the debt is owed. Here are some resources for different types of consumer problems that outline what the consumer can do on their own, without legal assistance:

A. Identity Theft. If the consumer is a victim of identity theft there are steps to dispute debts and credit reporting items that do not belong to the victim. If the consumer follows these steps, and the collector or credit reporting agency refuses to comply with the law, a lawsuit may be necessary.

B. Collector Harassment. Even when a consumer owes the money, there are federal laws that protect consumers from misrepresentation and abuse by collectors. A great resource describing the limitations on debt collectors, what they are allowed to say or do, and not allowed to say or do is available on the Consumer Financial Protection Bureau Website. If the collector continues to violate the law, a lawsuit may be necessary.

C. Credit Reporting Errors. If the consumer has already disputed mistakes on their credit reports with Experian, Equifax, and TransUnion. The steps for consumers to order a free report from each of the bureaus and dispute any items on the report is found on this Federal Trade Commission Link. It is important to note that the credit reporting agencies are just that, reporting information provided by the “furnishers” of information- creditors, collectors, debt buyers, the IRS, bankruptcy courts, etc. If there is an issue with the organization that granted credit, the consumer must make sure to address the dispute with the furnisher as well.

2. If the Consumer is sued by a collector, creditor, or debt buyer, violations by these organizations may be grounds for a counter-suit (cross-complaint) at the time the consumer is sued. When the consumer has suffered frustrating months leading up to a lawsuit by a collector who does not follow the law, the consumer may bring a counter claim against the collector. In the last article, I talked about when a consumer receives a lawsuit, but if the consumer has been a victim of abuse, harassment, misrepresentation, etc, these claims can often be brought in court even when the consumer has been served.

 A collector or creditor does not get a pass on following the law just because the consumer is sued to collect a debt.  If a consumer receives a lawsuit, they should speak with an attorney. Look to local legal aid societies or find a “debt defense” or “consumer law” attorney for help. The consumer must respond to any lawsuit quickly, and if counter-claims are available, they must be filed with the answer.  If the consumer is represented by an attorney, the collector can only talk to the attorney, and no longer contact the consumer directly.

State Laws for Consumers and Other Protections for the Military
It is also important to note that most states have consumer protection statutes, many that are similar to the federal statutes. For Example, In California there is a body of law under the Unfair and Deceptive Acts ad Practices (UDAP) that protect consumers.  This means that the collector may have violated state law, and there may be a lawsuit in state court available to the consumer to protect their legal rights.   If the consumer is a military member (or dependent in some cases) there are specific laws such as the Servicemen’s Civil Relief Act (SCRA) and the Military Lending Act (MLA) that may be available to a military consumer. The military consumer can contact the local Judge Advocate General’s (JAG) office for assistance.

The Consumer Must Preserve Their Rights by Keeping all Letters and Starting a Call Log.   First, the consumer should save EVERY piece of correspondence received from a debt collector or creditor. If a law firm sends a letter trying to collect, save it. Start a folder and save everything. Second, start a call log. Texts, calls, and email messages. There are rules about identifying themselves as a collector, and a requirement to let the consumer know they are calling to collect a debt.

Note when a phone call is received or when the consumer makes one, who they talked to, any promises made, and what the outcome of the call was. In this day and age, we have caller ID, and we can note the date and time of calls, voicemail messages, and hang ups. It is critical that the consumer preserve this proof that they are receiving calls in violation of the law. And many collectors call in violation of the law. Either too early in the morning, or too late, or at work, or even after the consumer requests they stop calling.

Also note the outcome of the conversation. Did the collector promise to send something? Promise to remove the consumer form the auto-dialer?  Promise not to call because the consumer made a promise to pay, “next Friday?” Write it down. And as frustrating as it may be, dealing with the collector, the consumer must not BREAK THE LAW themselves. The collector will advise the consumer that the call is being recorded, but depending on state law, the consumer may not record the conversation. Write it down. 

Part III of this series on the Consumer Lawsuit will address what the consumer should expect (in most instances) if they decide to file a lawsuit against a creditor, collector or credit reporting agency.  Unlike the collectors who often have teams of lawyers (or are lawyers), many consumers do not have an advocate, know where to get one, or are afraid of the costs involved. These are all real concerns, particularly if the consumer is already in financial trouble.   

 

 

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.