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. Many times, the amount the consumers are being sued for is low enough that it does not make economic sense for the consumers to retain me to defend them. These consumers can avoid a default judgment by promptly contacting The Fullman Firm or another lawyer regarding unbundled services to assist them in representing themselves (more on that in future blogs).

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. My client 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.

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Represent Yourself

In addition to our usual litigation services, we recently expanded our practice to include assisting clients in representing themselves in court. Through these services we can assist those clients whose claims or lawsuits are important to them, but which do not involve enough financial value or risk to justify retaining us “full time”. When providing these “coaching” services, we do not contact the other side or make court appearances. Instead, we coach our clients to do these things, stepping in only to draft important documents for our clients’ use when asked and only for our clients’ signatures. We charge our full hourly rates for unbundled services, but we are not required to spend as much time on each file, which means lower legal bills for our clients.

Here is an example of how unbundled services might work for a small business:
Our favorite client, “Bob” had a dispute with a vendor over the purchase of a $10,000 grill for his restaurant, “Bob’s Belly Busting Barbecue Bonanza” (we have previously advised him to change the name, but the man will not listen to reason). The grill was badly damaged upon delivery. He wanted to send a letter to the vendor setting forth all the legal arguments for a full refund of his purchase price, but he did not want to incur the expense of having our firm handle the anticipated hours of follow up negotiations by telephone. We wrote the detailed demand letter on Bob’s behalf and sent it to him via email for printing and signature. He handled the negotiations

Bob did not come to a satisfactory arrangement with the vendor, and after consulting us, he decided that a lawsuit was warranted. So, we drafted his Summons and Complaint, and provided him with written and telephonic instructions regarding how to file it with the court and have it served it on the other side. Thereafter, we continued to guide him and to create certain required documents for his signature in order to assist him in moving his case forward. After three months and payment of only $1,000 in legal fees, Bob settled his case and received $9,000.00 from the vendor.*

We have had success in assisting clients in defending themselves as well, particularly in debt collection lawsuits. 

Keep in mind that, even with an attorney’s assistance, representing yourself in a lawsuit involves time and commitment. Bob’s case essentially became his new hobby during those three months. If you believe that you have a case suitable for unbundled legal services, please email me at adam@adamfullman.com.

*Imaginary results may vary. All pretend cases are unique and these results are not an indication of the likelihood of success of your imaginary case.