So you’ve been sued by a debt buyer

So you’ve been sued by a debt buyer
By Cory S. Crawford, Attorney at Law

Consumer LawsuitIt’s a terrible experience. You’ve been behind on your bills for so long you don’t remember the last time you had enough money to pay for the things you need to live. Some of your debts have piled up and suddenly you hear a knock at the door. It’s a process server with a Summons and Complaint from some company you’ve never heard of saying you are being sued on a long-forgotten credit card.

You are not alone. For the past few years, tens of thousands of Arkansas have faced similar situations. The recent recession caused millions of defaults nationwide, leaving prime real estate for third-party debt buyers to buy up large portfolios of debt for pennies on the dollar.

These debt buyers include Midland Funding, CACH, Portfolio Recovery Associates, LVNV and a host of others that, instead of using intimidation or guilt trips to get consumers to pay old debts, use the courts. 

Each year, these debt buyers clog the courts, usually the lower level district courts, with countless lawsuits against low-income consumers who could not manage payments once interest and late fees had accumulated. 

While it can be difficult to come down on the side of debtors who are unable to pay their bills, these debt buyers create headaches not just for their lawsuit prey. In some jurisdictions they have created so much filing work that they have forced counties to hire new court personnel, at the taxpayer’s expense. 

Debt buyers notoriously bring cases without the requisite proof to prevail on their lawsuit. They do this with the hopes to collect default judgments – or judgments against defendants who do not appear to defend their cases or answer the Complaint within 30 days. 

Courts are only too happy to clear their dockets and sign off on the default judgments without looking at the scant documentation provided by the debt collection law firms. More than two-thirds of debt buyer cases end in default judgments. Most of the others are voluntarily dismissed by the debt buyer if they cannot locate the defendant or a settlement is reached without the involvement of an attorney on the defendant’s side. This creates no incentive for debt collection plaintiffs to play by the rules and it is wreaking havoc on Arkansas’ low-income population.

Below are some of the problems consumers should bring to the court’s attention if they ever find themselves in this situation.

Prove the debt. It seems simple enough but so many of the cases brought, the debt buyer cannot, within the Rules of Civil Procedure and Rules of Evidence, prove the debt is theirs or that the numbers in the documentation are correct. In your Answer, you should deny that you owe that particular debt buyer. For one, they are almost guaranteed to be misrepresenting the true debt in the Complaint filed. 

A consumer should ask the judge to consider where this information is coming from and point out that the documents the debt collection lawyers are using are hearsay (most of the time hearsay within hearsay within hearsay) and that the debt buyer has not proved its case. Again, this is a United States court. The plaintiff must prove its case. The defendant does not. 

Procedure is important. Debt collection lawyers will try as hard as they can to get the judgment without proving their case. All lawyers are mandated to attach required documentation to their Complaint. Few debt buyers do so. If they get past this hurdle with a defendant fighting the case, they will then try to win the case with Requests for Admission, which are discovery requests sent by a party that are admitted if not answered within 30 days. While Arkansas law is clear that Plaintiffs are not to use Requests for Admission to prove their case, debt buyers routinely get away with this method to acquire Summary Judgments against defendants. 

Of course, defendants can also request documents from plaintiffs. The best way to go about this is Interrogatories and Requests for Production. The Holy Grail of defense to debt collection is obtaining the “forward flow agreement” from the debt buyer. They will fight tooth and nail to prevent you from getting this document. 

What is the “forward flow agreement” you ask? It’s the agreement between the original creditor and debt buyer. Sometimes, if the debt has been sold more than once there will be multiple agreements. These are great for defense cases because they will show exactly how much the debt buyer paid for the portfolio of debts and why exactly the Court should not trust the documents provided by the debt collector. The agreement will invariably disclaim that the numbers cannot be trusted and that there is no warranty about the accuracy of the information in the portfolio. A evidence-seeking judge reading that information will throw the case out of her court the minute she reads that sentence. 

Sometimes the best defense is a good offense. The Fair Debt Collection Practices Act provides consumers with several theories to bring a counterclaim against the debt buyer lawsuit. If any debt collector in the chain of collection threatened criminal sanctions, if they threatened to harm you, if they threatened or did contact your employer or  family members, if they left a message on your answering machine, if they robo-called your cellphone, if they brought a case they could not legally bring, etc., the FDCPA is implicated. There are several other violations and there are several FDCPA attorneys more than willing to provide you services. If successful, the consumer has a right to $1,000 in statutory damages, any other damages, attorney’s fees and any other costs associated. A legitimate FDCPA claim will undoubtedly send a debt collection lawyer running to settle. 

While there are ways for a consumer to fight a debt collection lawsuit on his own, the best way is to hire a credible debtor’s rights attorney. If you cannot afford an attorney, Legal Aid of Arkansas, Inc., provides free legal services with clients only paying the costs associated with filing a case.  You can apply for Legal Aid of Arkansas by calling the helpline Monday through Thursday from 9-11 am and 1-3 pm. The helpline number is 1-800-952-9243.

One day, maybe all cases with debt buyers will have due process enforced. Until that day, an attorney is the only way to ensure that your rights are protected when the Summons and Complaint are left at your feet.  



Cory Crawford

About the Author:
Cory Crawford is a Staff Attorney with Legal Aid of Arkansas in the Jonesboro office. His work with Legal Aid of Arkansas includes: assisting low-income individuals and groups with legal problems; development and participation in legal outreach programs; and the representation of victims of domestic violence.

His primary practice focus is on consumer-protection practice and litigation.