State and federal debt collection laws prohibit harassment. Learn more about your rights.
Debt buyers are companies that purchase old debt, usually for pennies on the dollar. They then try to collect the full face value of that debt for profit. One collection strategy debt buyers use, both inside and outside Pennsylvania, is the mass filing of debt collection lawsuits. The most active debt buyers in Pennsylvania are Midland Funding, Portfolio Recovery Associates, LVNV Funding, Cavalry SPV I LLC, and CACH LLC, Unifund CCR, and Velocity Investments.
In this post, we look at the huge discounts debt buyers enjoy when buying debt, how many lawsuits they file, and some of the questionable court practices debt buyers employed over the years. If you need help fighting a debt buyer lawsuit, or if you think your rights were violated, contact BCJ Law for help. Call us at 1-800-997-5561 or complete our contact form.
Debt buyers purchase many types of past due consumer accounts. This includes credit card debt, personal loans, student loans, medical debt, utility and telecom debt, car loans, auto loan deficiencies, and mortgage debt.
In 2013, the Federal Trade Commission (FTC) released a study that found debt buyers, on average, paid around 4 cents for each dollar of debt purchased. This study analyzed the purchase of nearly 76 million consumer accounts.
In 2015, an enforcement action by the Consumer Financial Protection Bureau (CFPB) stated that the largest debt buyer in the United States paid just $4 billion to acquire 60 million consumer accounts with a face value of $128 billion. In other words, the debt buyer paid about 3 cents on the dollar to acquire $128 billion of consumer debt.
A common debt collection practice employed by debt buyers is the mass filing of collection lawsuits. Mass filing campaigns result in thousands of lawsuits filed each week and tens and hundreds of thousands of lawsuits filed over the span of a single year.
In our experience, it is common to some debt buyers file between 500-750 lawsuits per week in Pennsylvania. If a debt buyer were to maintain this filing rate over the course of a year, it would file between 25,000 and 35,000 lawsuits just in Pennsylvania. That amounts to the filing of 60-95 lawsuits a day.
In the mid-2000s, when debt buyers disclosed the amount of lawsuits they filed, one publication crunched the numbers and found that the largest debt buyer in the United States filed approximately half a million lawsuits in 2010.
Debt buyers likely file a large number of lawsuits because they often win by default. Most people ignore collection lawsuits. When you ignore a collection lawsuit, the debt buyer wins a “default judgment” and doesn’t have to show to court. This is a cheap way to collect money from you.
In Pennsylvania, we estimate that the vast majority of people ignore collection lawsuits and get a default judgment entered against them. A study entitled “Junk Justice” seems to support our experience. It analyzed thousands of lawsuits filed in Maryland, and found that 84% of consumers failed to respond.
Even when consumers don’t ignore debt collection lawsuits, they usually don’t retain a lawyer. For example, an analysis of suits filed in New Jersey and Missouri found that between 91-99% of debtors lacked legal representation. That’s fairly consistent with our experience; it’s likely that less than 10% (and closer to about 5%) of Pennsylvanians sued in collection lawsuits retain a lawyer.
Failing to retain a lawyer can drastically decrease a debtor’s chance of success. Focusing again on the Junk Justice study, it found that debt buyers recovered 62% of the debt against unrepresented parties, but recovered just 21% of the debt against represented parties. “Overwhelmingly, de[btors] with an attorney succeed in having the[ir] case dismissed.”
The CFPB stated that Midland and PRA “filed lawsuits against consumers without having the intent to prove many of the debts.” According to the CFPB, Midland and PRA also allegedly filed court documents that contained false information and misrepresentations. The companies also sued consumers on debts that were so old lawsuits could not legally be filed.
Various law firms that represent debt buyers also have been sued by the CFPB. For example, Pressler Felt & Warshaw, According to the CFPB, “churned out one lawsuit after another to collect debts … that were not verified and might not exist.” Another example is Frederick J. Hanna & Associates, which, according to the CFPB, “relied on deception and faulty evidence to coerce consumers into paying debts that often could not be verified or may not be owed.”
Don’t panic if a debt buyer sues you; it’s likely that you can win. In our experience, debt buyer lawsuits are far easier to win than lawsuits filed by credit card companies or original creditors. Here are some tips for dealing with debt buyer lawsuits. If you need help call us at 1-800-997-5561 or complete our contact form.
Ignoring a debt buyer lawsuit is the worst thing you can do. If you do this, the debt buyer wins automatically. After that, they can engage in aggressive collection tactics, like garnishing bank accounts or seizing property.
This is the course most people take. Its the wrong course, in our opinion, because debt buyers, as explained below, usually don’t have the evidence or witnesses necessary to win.
Making sure debt buyers actually own your debt is quite possibly the single most important aspect of any defense. Since you didn’t enter into a contract with the debt buyer, it needs to show that it purchased your debt from someone else.
Debt buyers often are unwilling to produce the contracts they entered into with creditors. If you hire an attorney, attacking the debt buyer’s ownership of your account likely will be a significant part of your defense. If you go it alone, you should request all contracts between the debt buyer and the original creditor. You also should make sure those documents reference your account and show that your account actually was purchased.
Many of our clients don’t know if the debt they are being sued for is accurate. Because most people don’t know whether a debt collector is trying to collect the correct amount, most courts require debt buyers to provide a full accounting of your debt.
Debt buyers often provide a few account statements regarding delinquent accounts, but usually don’t provide all of the account statements that make up your debt. Providing a few account statements is not sufficient.
A final piece of evidence courts require is the original credit contract or the contracts applicable to the debt at issue. This is required to show that the interest and fees are owed. Again, debt buyers generally don’t produce this document.
If you aren’t represented by a lawyer, make sure the contracts produced references your name or account. Also make sure the date of any agreement, along with its terms, match the date and terms on your account statement.
Even if debt buyers have all the documents they need (they usually don’t), those documents need to get into evidence. To get documents into evidence, witnesses with knowledge about certain aspects of the documents must testify at trial.
Debt buyers usually hire attorneys to present documents at hearings. It is rare for debt buyers to fly their own witnesses to your town to testify. And, even if the debt buyer has its own witnesses, most of the documents concerning your account came from a third-party. To authenticate these documents, debt buyers need witnesses with knowledge of the original creditor’s business practices. It is unlikely that this will happen.
The statute of limitations for most types of debt is four years in Pennsylvania. If your last payment was over four years ago, you usually can’t be sued. Debts past the statute of limitations are called “time-barred debts.”
If you’re sued on a time-barred debt, the lawsuit should be dismissed. You also likely have a claim against the debt collector for damages. Read our page on debt collection and the statute of limitations to learn more about.
Debt buyer lawsuits are winnable. In addition to everything we detailed above, you should consider what specific debt buyer is suing you, who their attorney is, the age of your debt, the identity of your original creditor, where your case is pending, and whether your case is pending before a magistrate judge or before a common pleas judge. Each of these things has the potential to affect your case.
If you’re getting sued by a debt buyer, contact BCJ Law for help. We may be able to win your case or get it dismissed. You won’t owe us fees unless we win. You can fill out our contact form or call us at 1-800-997-5561.
State and federal debt collection laws prohibit harassment. Learn more about your rights.
Debt collection judgments allow debt collectors to use certain debt collection practices against you.
Credit card lawsuits are common. Credit card companies and debt buyers sue consumers often.
Debt collectors can’t garnish your wages for credit card debt in Pennsylvania.