The debt-buying industry has grown exponentially in recent years, with the Federal Trade Commission estimating the largest debt buyers had acquired accounts worth approximately $143 billion for just $6.5 billion.
How were they able to obtain this debt so cheaply? Simple: Because they were made to concede upfront that the rights to the past-due accounts they are buying have little or no documentation and the contracts of sale between the banks and these buyers typically contain broad disclaimers of warranty. In fact, the FTC reported that only 12 percent of sample debt accounts studied by the agency were accompanied by proper documentation. Rarely do debt buyers obtain information regarding the collection or dispute history of the accounts they purchase – which is highly relevant in determining whether the person actually owes what is purported.
And yet, our Miami debt relief lawyers know that when these same companies go to court, they vehemently argue that the information upon which they are basing their claim is accurate and reliable.
So bad is this information that there have been multiple instances of consumers being sued twice by the same company for the same debt.
You would think such dubious claims wouldn’t stand up in a court of law. But here’s the problem: Most of these debt-buyer lawsuits target disadvantaged groups: the elderly, low-income families and the working poor. These are people who would struggle to pay for a lawyer or take a day of work to actually show up in court. Too often, when the defendant debtor fails to appear, the debt-buyer is awarded a summary judgment.
This ends up spiraling into a very bad situation. Wages are garnished. Liens are placed on property. Credit scores are impaired. Families are stressed. Checks are bounced. Sometimes, these become obstacles to a person getting a job or securing an apartment. At this point, people might start exploring the possibility of bankruptcy.
But as a recent report from the University of Maryland’s School of Law indicates, this litigation is initiated by firms that have:
- Failed to devote sufficient resources to properly oversee collections litigation processes;
- Filed affidavits which are falsely represented as based upon personal knowledge;
- Filed documents that were inaccurate, resulting in final judgments that erroneously favored the debt-buyer.
In some situations, these companies were going after consumers for debts that were already paid, settled or discharged in bankruptcy.
This has been the subject of scores of consumer complaints, and the Office of the Comptroller of the Currency recently responded by issuing a “best practices memorandum” to help deal with these issues. But so far, there have been no reforms formally passed.
For consumers, the best recourse is fighting back. These companies are banking that you will back off or give up. When their claims are actually challenged in court, it is often the consumer who is successful – and many times, their attorney fees are covered as a result.
If you’re battling debt collectors in Miami or the surrounding areas contact Jacobs Keeley for a confidential appointment to discuss your rights. Call (305) 358-7991. Also, don’t miss Miami Foreclosure Attorney Bruce Jacobs on 880AM/the Biz, every Wednesday from 5 p.m. to 6 p.m. on “Mortgage Wars,” discussing foreclosure topics that matter to YOU.
Debt-Buyer Lawsuits and Inaccurate Data, Spring 2014, By Peter A. Holland, University of Maryland School of Law
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