Defending Junk Debt Collection Lawsuits Q &A

Question: I received a Summons and Complaint from the Court which says I owe money on an unpaid credit card. What should I do?

Answer:  First and most importantly, don’t ignore the lawsuit. Don’t toss it onto that growing pile of papers you have somewhere and tell yourself “I will deal with it later.” This is exactly what the Debt Collector who filed the lawsuit against you hopes and expects you will do.

Question:  I never borrowed money from the Creditor who filed the lawsuit against me or even heard of them.  Can I just contact the lawyers who filed the lawsuit about the mistake.

Answer:  NO!  Most likely the lawsuit that was filed against you was filed by a law firm which represents a ‘Junk Debt Buyer’. * A Junk Debt Buyer buys the  debt from the original creditor after the debt has been written off because of non-payment. Junk Debt bundles of junk debt which contain thousands of debts are purchased by Junk Debt Buyers for about two cents on the dollar.   For example, in one case we are presently litigating, the Junk Debt Buyer purchased a 67 million dollar  bundle of defaulted debt for less than two million dollars.   Sometimes the defaulted debts are sold and resold many times.  fn1

The information provided by the original creditor is limited. The lawyers who represent a junk debt buyer use this limited information to file hundreds of  thousands of junk debt lawsuits.

Because over 90% of the time, the Defendants don’t answer the junk debt buyers’ complaints, Default Judgments are often entered based upon insufficient or erroneous information which have enabled Junk Debt Buyers to collect hundreds of millions of dollars for their junk debt clients. fn2

Question: OK – But the Question was what should I do?

Answer:  GET LEGAL ADVICE NOW.  Read and follow the Two Rules that defendants should ALWAYS FOLLOW.

Rule 1.  Very promptly consult an attorney about the legal rights and remedies that may be available to you. If you do not respond to the complaint you received within 35 days, default will be entered against you and the attorneys for the creditor can then obtain a Default Judgment against you.  The Default Judgment will allow the attorneys for the Junk Debt Buyer to garnish your wages and to levy on your bank accounts to pay the judgement.  Although the entry of a default judgment may not prevent you from using the legal rights and remedies that may be available to you, it is much more difficult to do so.

Rule 2.  After you have consulted with an attorney, very promptly make a decision about how much time and money you are willing and able to devote to opposing the claim of the Junk Debt Buyer. This decision is by no means an easy one, but keep in mind at all times that the worst possible decision is to make no decision.

Only a lawyer who has fully reviewed the complaint you received and your personal circumstances can provide you with an answer to that question. 

*Largest Junk Debt Buyerss

  • Asset Acceptance (AAC)*
  • Sherman Acquisitions/Sherman Financial Group/Alegis
  • NCO Group*
  • Portfolio Recovery Assoc.*
  • Asta Funding*
  • Palisades Collection,
  • New Century Financial
  • Encore Capital Group (parent of Midland Credit Mgmt)*
  • Allied National/Interstate Risk Management Alternatives (RMA)
  • JBC & Associates Arrow Fin. Svcs. (majority interest acquired by Sallie Mae 9/04)
  • RJM Acquisitions
  • CAMCO (Capital Acquisitions & Mgmt Co)*
  • Excalibur
  • Cavalry Portfolio Services
  • Unifund Group
  • Phoenix Asset Acceptance
  • First Select Corporation (part of Providian)
  • Collins Financial Services
  • Oliphant Financial Corp.
  • OSI Portfolio Services

fn 1

Like the current mortgage problem that dominates the headlines, these debts are packaged from the original owner and sold to debt collectors in a portfolio; if the portfolio is large enough, sometimes it’s split among several debt collectors. And sometimes, the debt is packaged again and sold to a second or third debt collector— Palisades was the fourth successive assignee of O’Rourke’s debt. This poses difficulties for everyone. The packaging and re-packaging of the debt can keep the debt collector from ever being able to verify the original debt. It can also affect the debtor: as in this case, the same debt is sold to multiple parties with each attempting to collect on it, sometimes at the same time. ”  O’Rourke v. Palisades Acquistion , 635 F. 3d 938.

fn2 “The errors in credit card suits often go undetected, according to the judges. Unlike in foreclosures, the borrowers typically do not show up in court to defend themselves. As a result, an estimated 95 percent of lawsuits result in default judgments in favor of lenders. With a default judgment, credit card companies can garnish a consumer’s wages or freeze bank accounts to get their money back.”

“Problems Riddle Moves to Collect Credit Card Debt”, New York Times, August 12, 2012, By Jessica Silver-Greenberg.