Thursday, July 06, 2006

Debt Collection

Interesting story about some of the hardball tactics taken by debt collection agencies. From my experience working in the field, I'm not really surprised. Even locally, we have some practices that seem to be in violation of ethics and the Fair Debt Collection Practices Act. For example, one local attorney sends out what appears to be a summons and complaint, except it's marked only with the office file number and has never been commenced in the court. The fear of litigation expenses and attorney's fees often has a huge effect on unsophisticated debtors, who pay rather than face a court. Which isn't a problem in (what the industry association rep describes as a "small minority") the cases where it's a scammer running up a debt he/she never intended to pay. It's more of a problem where the debtor doesn't have the money to spare or lives on a fixed income and may be eligible to have the debt forgiven or reduced. Another local attorney sends out letters which rely heavily on "the shame and public embarrassment" of a "publicly known" judgment as a debtor as a reason to pay ASAP.

I'm not in favor of anyone skipping out on legitimate debts. As in every situation, though, I see the rules as pretty much the boundaries to be followed. The FDCPA says no service of legal-looking papers that aren't actual pleadings, yet it continues. Harassing phone calls, day and night, continue even after orders to cease, as do calls to friends and relatives. Recently, I dealt with a case where the action for a deficiency judgment was being brought nearly two years after the statute of limitations had run. Anyone who could read the UCC (not a simple task, admittedly) or log on to Lexis could tell the suit was barred--but then again, the average debtor doesn't have those resources or access to an attorney, and coughs up some money, reaffirming the entire debt, on a (by definition) frivolous lawsuit.


Blogger Albany Lawyer said...

Thanks for your kind comments on my Albany Lawyer blog.

Your comments led me to look at your blog again, and I love your post on debt collection. I handle a few cases here and there on behalf of debtors. One case is a phenomenal one - a wrongful foreclosure where I hope to get punitive damages. Two months after a refi, and after a statement showing a zero balance, the old bank decided my clients owed them $20K. The bank ignored numerous phone calls and letters, including my letters to general counsel. Then they commenced a foreclosure proceeding. I'll do a post about it sometime.

I have another client who broke the lease on a copier, with ample notice. The copier company refuses to pick up the copier (I'm now holding it in escrow), and keeps harassing the client with phone calls even though I sent them a letter instructing them that all correspondence should go through me. I've argued that their failure to pick up the copier is a failure to mitigate. I did a post about this on my blog:

And I have my own experience with debt collectors. I've posted in the past about my disputes with Verizon -- both on the cell phone and on their yellow pages. I now have a similar dispute going with Transwestern Yellow Pages.

While there are some areas of debt collection where honorable people do good work, it seems like there's a lot of unpleasant folks.

Thanks again for your comments on my blog, and for keeping up such an excellent blog yourself.


3:02 PM  
Blogger Michael Herrin said...

I am a debt collection lawyer in Memphis TN and I often send out a demand letter with a copy of the complaint that I intend to file. The demand letter clearly states that the lawsuit that is attached will be filed after a certain date IF the debtor doesn't contact me and make sufficient arrangements for satisfaction of the debt. It's not designed to fool the debtor, but to give them concrete evidence of my intentions. And yes, I'm well aware that proposing legal action and then not following through could be construed as a FDCPA violation. I am not in violation as I fully intend to and do file suit if the debtor doesn't pay the bill. Check out my blog for the other side of the coin.

4:03 PM  
Blogger TMT said...

I think Mr. Herrin falls within the ambit of the law. My concern is with the practice, locally, of just sending out court-looking papers as if a lawsuit has already been filed. That's a completely different step than a legitimate warning a suit will be filed.

7:54 PM  

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