Calling the Debt Collector’s Bluff

We have all seen it on television or in the casino. A high stakes game of poker in which one of the players confidently bets a huge sum of money, striking fear into the hearts of the other competitors. These bets usually result in the other players folding their hands in order to avoid the risk. Yet sometimes there will be one player who will believe that the bettor does not have as good a hand as he would have the others believe. This player may “call” or perhaps even “raise” by betting even more money. Sometimes the first bettor wins, but sometimes he must admit he has been caught “bluffing.”

As a result of the Fair Credit Reporting Act and Fair Debt Collections Practices Act work I do, I get several calls per week from people being sued by debt collectors for amounts varying from $5,000 to $100,000. Typically, these collectors have purchased the debt from the original creditor for pennies on the dollar and are looking to obtain a default judgment against the consumer in order to maximize their profit (default judgments are obtained when defendants – consumers- fail to properly defend themselves).

When consumers retain me to defend them against the claims of the debt collectors, I am consistently amazed at how ill prepared for litigation the debt collectors are. Many of them do not have the evidence to prove their case or fend off an affirmative defense. They are caught “bluffing.”

Many of these companies purchase hundreds of debts at a time. They do not review each claim individually. Therefore, if their file is missing important information or documentation, they will often not know about the problem until they are challenged in formal litigation.

Litigation offers the consumer a unique opportunity to “call the bluff”. The burden of proof on the creditor is very low when the creditor is merely destroying the consumer’s credit rating by way of statements to a credit reporting agency. In litigation the burden on the creditor to affirmatively prove its case is much higher and often it simply cannot meet that burden. Here is an example from a recent case in my office.

My client (let’s call him “Bob”) was sued by a debt collection agency that claimed to have purchased a debt of $100,000 from a bank. Bob insisted that he had not had any dealing with the bank in for over four years before the lawsuit was filed. Therefore, I answered the complaint on his behalf and asserted a “statute of limitations” defense. I then immediately sent out discovery demands designed to learn whether the opposing party had any proof either of the alleged debt or regarding our defenses. The attorney for the debt collector was forced to admit that the bank had failed to give the debt collector a complete file when it had purchased the debt and that the debt collector could not prove its case. The debt collector agreed to dismiss the case and Bob did not have to pay a single dime to the other side.*

*Your results may vary. All cases are unique and these results are not an indication of the likelihood of success of your case. This generalized example is for informational purposes only and “Bob” is a composite character made up of several other clients.