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Debtors Rights

Dealing with debt collectors

False Statements and Fraudulent Debt Collection Practices

A federal statute known as the Fair Debt Collection Practices Act (often called the "FDCPA") gives you specific legal rights to sue debt collectors who unlawfully threaten, berate, intimidate or harass you; call you during odd hours, make false representations about the the debt or their intentions, or otherwise act in ways proscribed by the act (and their are many). False statements may include threats to:

Attach your wages when unlawful or not intended.

This includes threats to take more wages than is permitted by the federal limitation (wage attachment for a credit card debt, a non-student loan or for an obligation that is not support is generally illegal in many States, however, now that law has been expanded to rent and lease damages in some cases-you should check the statute to be sure);

Contact your employer about the debt;

Call you "everyday until the debt is paid;"

Sell the debt to another company for the purposes of continuing collection on a time-barred debt;

Contact neighbors about the debt;

Contact the Immigration and Naturalization Service about your alien status;

Threaten imprisonment or criminal punishment;

Report a financed vehicle as "stolen" because you missed one or more vehicle payments;

File or threaten to file criminal bad check charges on a post dated check that the collector solicited from you;

Immediate eviction (by an agent for a landlord); lockout, or seizure of personal property where such relief is limited by state law;

A disguised threat of suit e.g. A collector requested "settlement prior to possible legal action" where the collection agency had no authority to sue or to retain counsel was held by a Federal District Court in Connecticut to be deceptive and violative of the FDCPA.

Here's one you may not have anticipated: A threat implying that the collection agency has multiple employees or investigators working to collect the debt, where only one or two people work for the agency.

Threats to collect or sue for "collection costs," "attorney's fees," (see also below) interest not pre-agreed to in excess of that allowed by statute, "fines," or any other fee in excess of the actual amount due, unless the original agreement provides for the amount the collector threatens to collect. For instance, the collector cannot threaten to add attorney's fees or his fees where the agreement you signed does not specifically provide for them. Let's say you went to the dentist and just signed consent form and a medical history. You agreed to pay for all charges if your insurance did not. Nothing is mentioned about anything else. The collector cannot add any other fees or even and especially, his costs, late fees or other charges.

Threats adding "collection costs, attorney's fees" and similar additional charges have also been held to be deceptive and misleading, because they do not state exactly what debt is being sought.

Sue or bring any kind of legal action where the threat is not followed through (i.e. a scare tactic), or any number or other threats designed to demoralize, humiliate, degrade; embarrass or intimidate a debtor into payment.

Any threat where the collector says he is legal counsel or an attorney/lawyer when he is not;

The threat or attempt to mislead a debtor that a claim will be transferred to an attorney or separate department of a collector (e.g. "This will be transferred to our legal department for further action"). Letters misrepresenting that the account has been transferred to an attorney may include an attorney's letterhead with threats of legal action. Have you ever received a letter from a lawyer who purportedly collects for a major creditor? Has the lawyer been out-of-state? Has the lawyer threatened to sue if payment was not made?

Other Little-Known Tactics that are illegal:

It is unlawful under the FDCPA to threaten suit if no such action is intended. The attorney cannot sue you in a state that is not your home state, under the FDCPA. Therefore, the threat is an empty one. Empty threats are punishable under the FDCPA!

It is unlawful for such a letter to be sent unless the lawyer reviews the letter? Do you believe that when thousands of letters issued the lawyer reviews each one? Where the correspondence is not reviewed by counsel, the correspondence violates the FDCPA.

Look at the letters you receive from lawyers. Were they signed by hand? If not, perhaps they were not reviewed by a lawyer. You may have a case under the FDCPA.

The collector's threat to "make this go legal" or to "turn the matter over to the legal department" may violate the FDCPA where the collector has no legal department. Do you think that the collector may be a collection operation only? If so, perhaps they have no legal department, i.e., the legal aspect is handled outside of the company. In this scenario is another violation of the FDCPA.

It is also a violation to send a letter stating that the collector will "recommend litigation" or "advise the creditor to sue." Some of such correspondence has been found to violate the FDCPA because it, in essence purports to give legal advice to the creditor. The collector is not permitted to give legal advice, unless, of course, if the collector is an attorney himself.

The Least Sophisticated Consumer Standard:

Did you also know that it does not matter if you believed the threats or that a person of your intelligence would not have believed the threats (i.e. the collector threatens to have you arrested for not paying the creditor. You as an intelligent consumer believe the threat is ridiculous since the U.S. Constitution prohibits such actions). The FDCPA's standard is the "least sophisticated consumer standard." That is, would anyone believe the threat.

This would be enough to sustain the standard and your burden of proof if the court believes that the threat occurred.

Supporting Case Law

The concept of deception protects even the ignorant, unthinking and the credulous, least sophisticated consumer. See Jeter v. Credit Bureau, Inc., 760 F.2d 1168 (11th Cir. 1985)

It is also unlawful to sue a consumer in a jurisdiction that is not the jurisdiction where the consumer resides or the one in which the contract was made. Example: PA R&D Enterprises, Inc. and their sister corporation Judgment Busters, Inc. (pretty despicable sounding name, huh?) seems to be in the business of purchasing uncollectible judgments. In one case, PA R&D purchased a judgment for rent against a consumer in Delaware County, PA. PA R&D exported the judgment to Luzerne County, some 115 miles away from the consumer. PA R&D then added $1,000 to the judgment as "attorney's fees." There was a slight problem: Neither PA R&D nor its officer was an attorney. In effect, they gave themselves a pay raise, just like Congress! PA R&D decided the judgment should be higher than it was, so it just put it in the Luzerne County judgment! Wow, neat trick PA R&D! PA R&D also took the judgment to a remote location which also violated the FDCPA 1692i PA R&D and executed on the consumer's wages for the greater amount. The employer balked (luckily), but the matter became moot when the consumer left the employment of the employer. This case was recently filed as an adversary proceeding (a civil action) before the Bankruptcy Court for the Eastern District of Pennsylvania. The matter is pending and awaiting an Answer from the defendants, which include PA R&D, Judgment Busters and certain officers of the corporations. The complaint alleges violations of the FDCPA, Pennsylvania Fair Trade Practices Act, and common law fraud.

For the Fair Debt Collection Practices Act list of false statements, see: FDPCA  1692e. False or misleading representations.

The courts have decided thousands of cases on the subject and it is impossible to list all prohibited types of threats. Suffice it to say that if it seems wrong, it is worth speaking to a consumer protection lawyer in your area.

We have seen may instances of this type of conduct and can help you recover money. There are literally dozens of ways in which a debt collector can break the law. Each time a collector breaks the law, you may be entitled to damages in an amount commensurate with the gravity of the violation (however, most courts limit the liquidated damages to one instance in each case-see your lawyer about this). Some collectors have gone so far as to threaten arrest, jail, or harm to loved ones, including informing friends and work associates of the debtor's financial embarrassment. Any threat to do something that is not allowed by law is grievous and actionable (you can bring suit).

The "Mini-Miranda Warning"

Each time a debt collector contacts you, he must give you what is known as a "Mini-Miranda Warning" This warning received that name because it is reminiscent of the warnings that police should give you if you are arrested, however, "Mini-Miranda Warnings" have nothing to do with criminal law. A "Mini-Miranda Warning must contain the following words (or words imparting this meaning): "Hello, I am _________(name of collector). I am (or this office is) a debt collector representing____________(creditor). Information obtained during the course of this call will be used for the purpose of collecting the debt."

If the creditor has not been advising you as above, you may have a right to sue.

Letters you receive in the mail from collectors also must contain similar warnings such as:

"This is an attempt to collect a debt. Any information obtained will be used for that purpose. Unless within 30 days of your receipt of this notice, you notify us that you dispute the validity of this debt, it will be assumed to be correct. If you notify this office within thirty days that you dispute the validity of the debt, we will obtain verification of the debt or a copy of the judgment. If you request it within 30 days, we will provide you with the name and address of the original creditor (if different from the current creditor)."

If the letter does not state the above, or words similar or close to the above, you may also have a right of action. Furthermore, did you know that no bill collector or creditor has the right to contact any third person about your debt, except to get information solely to locate you? This means that if a bill collector or a creditor tells any except you that you owe them money, they too can be sued.

Debt Collector's Calls at Work

The FDCPA states:

Without the prior consent of the consumer given directly to the debt collector or the express permission of a court of competent jurisdiction, a debt collector may not communicate with a consumer in connection with the collection of any debt"

Simply put, anyone can stop collectors from harassing them at work by putting the collector on notice that the employer of the consumer does not permit him or her to receive the calls.

Do you think your employer allows you to be harassed at work?

Is this why you are paid? Probably not! Tell the debt collector this and confirm it in a letter! Then make notes as to each time the collector violates this warning. Bring your notes to your attorney and have him use it against the collector in court.

Your Rights to Stop Harassment by the Debt Collectors

Insofar as collectors are concerned, there is no reason why:

You need to discuss anything with a collector if you know you cannot pay;

You have to answer a phone for a collector (this works with caller ID).

You have to speak with the collector if you do answer.

You have to answer any questions at all posed by the collector.

You have to say "good-bye" before you hang up.

You have to be truthful about your personal and financial affairs (you do not have to disclose private information about assets or income).

Important: There is no reason you need to acknowledge that you owe the money! This is very important if the debt is old. By acknowledging the debt, you may actually extend the time the creditor can sue on it.

All states have statutes of limitations on debt collecting. A few states are more than six years. Many are less.

You can extend this limitation by acknowledge the debt or even by making a partial payment!

In fact, you do not even need a lawyer to stop collectors from calling you (although one is very helpful)! All you need to do is to mail the creditor or collector a "cease communication" letter. This request can be made any time, but it must be made in writing. It is always preferable to send the request by certified mail and keep a copy. This copy will be proof of your request should you need to sue the creditor. Once the collector receives your letter, they can only contact you to inform you of any action it intends to take or to tell you that it is terminating its efforts to collect the debt. This letter is enough you to legally stop further contact or dunning letters.

Validation of debts and Sample Validation Request Form

The FDCPA provides that debts that are pursued by a debt collector be validated. Validation of the debt is every debtor's right. You don't need a reason. The fact that you request validation is quite enough to evoke to protection of the FDCPA. The Act provides that (paraphrasing, within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall (unless already provided in the initial contact), send the consumer a written notice containing -

(1) the amount of the debt;

(2) the name of the creditor to whom the debt is owed;

(3) a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector; and

(4) a statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt is disputed, the debt collector will obtain verification of the debt.

This means that if you write a debt validation request, a sample of which is available upon request, all communications and enforcement must stop until the debt is validated. Yes, that means lawsuits also.

What happens if the collector refuses to validate the debt?

You should only be so lucky. If after a validation request under the FDCPA, the creditor refuses to cooperate, then the creditor may not legally collect the debt. If the collector does, then the law is violated and a suit for damages may be brought.

Such a suit was brought in federal court in New Jersey against MRS Associates, debt collectors for a company going by the name of Lake Cook Partners. Lake Cook engages in, what is known in the business as, "bottom feeding." Bottom feeding is a term used to mean the acquisition of "dead" or written off debts. Lake Cook purchases the debts from credit card companies (and perhaps other companies) for pennies on the dollar. Lake Cook then uses MRS Associates to make a debtor's life a living hell.

What if the debt collector ignores the request and collects the debt anyway?

That happened with MRS Associates. MRS was requested to validate a debt alleged owed by a husband of a client who received a bankruptcy discharge. The husband claimed that his wife had applied for the card, not him. Not that it would matter anyway; the husband was entitled to validation under the law. If validation was not forthcoming, too bad for the collector. MRS believed that the burden was on the debtor since the card had been open for "21 years."  

Note: MRS stated that the debtor had the account for 21 years, the fact that it "is highly improbable" that MRS would have been able to get a copy of a document that the debtor signed 20 years ago did not excuse MRS from obtaining what validation that they could get. In this case, MRS did not even attempt to get anything. Perhaps MRS did not want to be bothered to comply with federal law. I guess it's easier that way.

Outcome: The foregoing message was in large part the reason that MRS settled with the debtor for $4,500. Needless to say, the debt was never validated. The debtor would have been forced to pay over $10,000. You can see a copy of the complaint here.

Lake Cook (continued)

Not even two weeks after the $4,500 payment, the same client was contacted by Creditor's Interchange, Inc., ("CI") a debt collection outfit in Buffalo, NY. The collector calls this office and this is what transpires: A collection agent by the name of Richard Kerns who says he works for CI calls.

We answer the phone saying "law offices" as is called for by our business procedure.

Kerns asked for the debtor (name withheld for privacy).

I identified myself as "Mr. (debtor's) attorney.

Kerns says, "I did not know he had an attorney."

Kerns is assured by me that I represent the debtor for all purposes.

Kerns asks if I am an attorney.

I tell him that I am and ask for debt validation.

Kerns then demands payment from the client.

l say, "we are requesting validation of that debt." Kerns states, "Validation? What validation? He owes a debt!"

Kerns then states, "Listen smart guy. You know what? I'm going to call your client!"

He does.

I learn that Kerns is collecting the same debt that MRS was trying to collect. As a matter of fact, the same creditor, Lake Cook, is now collecting under a different corporate name, Hilco Receivables.

Outcome: CI & Hilco settle the next case for $5,000 for one phone call. That is $9,500 in settlements paid to the same client on the same debt.

Damages Under the FDCPA

The FDCPA provides for a private right of action against violators. This means that you can get a lawyer and sue for damages. A partial list of damages that are awardable are:

Statutory damages up to $1,000 for each case. This means that the violator can be charged even though there are no other damages (see below).

Attorney's fees. You can make the violator pay for your lawyer. This is big advantage; lawyers are expensive!

Actual damages including Stress related injuries:

Monetary damages:

Payment of a debt barred by the statute of limitations;

Taking one's property unlawfully or intimidating a debtor to return property by violating the Fair Debt Collections Practices Act, e.g. "If you do not return your DVD player to the store, we will bring criminal charges!"

Long distance telephone charges for phone calls to a collector who states that you must call him back.

Attorney's fees to defend a prior suit brought in violation of the Fair Debt Collections Practices Act;

Damages for intentional infliction of emotional distress generally (see above).

Your attorney may use medical (psychiatric/psychological) testimony, but does not need to. Damages for emotional distress can be claimed even without medical support. This does not mean they will always be believed, of course. It is up to the judge or jury to decide if the plaintiff is telling the truth. Anyway, the plaintiff in the Fair Debt Collections Practices Act lawsuit starts with a tremendous advantage.

Free Cease Communication Letter

Still are not sure what to do? You're in luck. Just go here (this form will be generated in a new browser window, so come back here when you are done) edit with personal and the relevant and print out the form, sign it and mail it to the debt collector. Be sure to keep a copy and mail your form certified mail.

Sample Fair Debt Collections Practices Act Cases, Complaint Forms and Their Results

The law states that Fair Debt Collections Practices Act cases can be brought in any court of competent jurisdiction. This means that you can bring actions against harassing collectors, and under some state laws, creditors as well, in small claims court even without an attorney. You do not need to use a small claims court; Federal District Courts are the natural "home" for this type of litigation. It is not recommended that you start an Fair Debt Collections Practices Act lawsuit without an attorney because it takes some fluency in the act to know what to ask of the court.

Many magistrates or small claims court judges are unfamiliar with the act. If you want to go ahead despite this warning, you can see how a typical action was brought in a District Justice Court in Pennsylvania. "DJ" Courts are generally small claims in PA, having jurisdiction up to $8,000. This case was brought against a collector in New York for violations of the Fair Debt Collections Practices Act verification and cease communication provisions. A copy of the complaint can be inspected here in PDF (Adobe) format. The case settled for a gross sum of $975.00 which included counsel fees of an unspecified amount.

If you are in PA and need a similar (blank) form (this can be used in any type of civil action), go here. This page has filing instructions as well. Be careful though. Be aware that if the creditor has a claim against you on a debt, the creditor may counter sue you on that debt. This means that it may be better to bring this action as a counterclaim and not as an independent action if you owe more than the claim!

In most cases, it is better to bring the case in U.S. District Court. This office recently sued a national law firm in the District Court in Philadelphia. The name of the firm is withheld out of courtesy, since the case was settled within four days after suing; at least the firm had the integrity to admit the error and correct it. This firm is engaged in debt collection practices on a national scale. They are based in Long Island, NY and has offices in Philadelphia and elsewhere. Their website claims they have "national ability." In reality, this "national ability" previously led to a previous class action against this firm (not brought by this office) which settled for more than $453,000! (E.D. Pa. 2000). This firm, among other things, threatened have an agent of theirs come "come to [the plaintiff's] house" and inventory all of plaintiff's personal property for sale! Jeez! What power! What abuse! Of course, this made plaintiff's wife panic. It also did not sit to well with the plaintiff's nerves, either.

Case outcome: The defendant paid plaintiff $1,500, plus $2,000 in attorney's fees (the best part) and also paid off those nasty guys at Ford Motor Credit. Value of settlement all together? About $7,500 +/-. Not bad for a few phone calls and a letter.

FDPCA Statute of Limitations See: FDCPA 1692k(d)

(d) Jurisdiction: An action to enforce any liability created by this subchapter may be brought in any United States district court without regard to the amount in controversy, or in any other court of competent jurisdiction, within one year from the date on which the violation occurs.

Auto Repossession Notes:

Note #1 When a debt collector (actually this is a repossession outfit) is attempting to repossess a vehicle.

The collector or creditor cannot, "issue a warrant to the sheriff for your arrest."

The collector cannot employ criminal process to collect a civil debt (owing money and refusing to pay it is not a crime.

The collector cannot threaten to do something he knows he cannot legally do (see above).

The collector cannot leave threats on an answering machine where others can hear it.

The collector may not imply that there is some legal duty that the debtor must call back (..."must hear from you"). There is no legal duty to return a collectors phone calls.

The collector may not threaten something he does not intend. The collector does not intend to "make this thing go legal," he only intend to scare the debtor into surrendering his car. The collector has probably not even consulted counsel; his job is to collect the vehicle only.

Again, the collector cannot threaten to harass the debtor every day ("I'm never going away..."). The collector intends that the debtor fear that the collector will come to his home every day (the collector says this, in so many words).  "I will be at your door every evening...." You wouldn't put up with this nonsense even from a relative; why should you stand for it from a goon from a repossession outfit? The last time I checked, people do not keep motor vehicles in their living rooms. There is no reason for this man to threaten that he will come to the debtor's door "every evening." The creditor / debt collector has no right to harass the debtor "every evening." Further, a threat to behave like this is itself a form of harassment and is actionable.

"You must call here...." As stated above, the creditor or collector may not infer that the debtor has a duty to call back.

"This is not a threat..." What is it then? This guy knows he is not supposed to be doing this.

Note #2 A Chase Bank collector threatened "fraud" because the debtor had been in bankruptcy, discharged the debt therein, and then had the unmitigated audacity to have been born in Portugal! *gasp!* The collector tried to get at the debtor by saying that she had left her mother "holding the bag." Of course, this was a lie. There was no intent to prosecute for a fraud because there was not debt.

Lawsuits under Fair Debt Collections Practices Act allow for counsel fees, damages, and costs. Each Fair Debt Collections Practices Act violation can net you up to $1,000 plus attorney's fees and actual damages. Repeated conduct will usually receive greater damages and is less likely to a succumb to a defense of "innocent mistake." You should be diligent in protecting your rights. The statute of limitations for bring most federal actions of this nature is only one year unless used as a defense to an action brought against you. Therefore, you should protect your rights before they become unenforceable.

Note #3 From Chase Bank. This woman sounds like she has the emotion of a collection terminator. "I'm tired of playing games with you (so I guess she is starting one of her own here). I'll call every neighbor on your block to make sure you're in the right place." Wow! How intimidating! How illegal. Collectors are allowed to obtain locator information. Once the collector knows where you are, which obviously Chase did, after all she was calling her phone, any further calls to neighbors are no longer locator information. They are just unlawful communications with third parties intending to humiliate and embarrass the debtor, which it did. Furthermore, this debtor had just received a discharge in bankruptcy! Not only are these tactics barred by state law, and the Fair Debt Collections Practices Act, they were also barred by bankruptcy law. The caller then refers to "attorney fees, " which also is misleading and unlawful unless the actual amount if stated. The only help you will ever get from a debt collector, is that collector helping itself to your bank accounts or motor vehicle.

More on creditor/debt collector protection:

Certain states, such as Pennsylvania, may have laws protecting consumers from harassment even though the Fair Debt Collections Practices Act may not be applicable. These laws may even expand (e.g. Pennsylvania) on the Fair Debt Collections Practices Act, broadening its scope and applicability. To see if your state has such a law, you should consult with a local attorney of see if you can find the information by researching your State laws.

Law Offices of Lawrence S. Rubin, Atty. www.pennlawyer.com 610-565-6660 Fax 610-565-1912

See Federal Trade Commission Publications

Federal Trade Commission Publications and Links

To contact a Debt Collector Defense Specialist for a Free Consultation click here



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