Shady credit card collection practices

Debt buyers, private companies that purchase credit card and other debt for pennies on the dollar and then do whatever it takes to collect that debt, usually end up filing an action in state court. However, according to Steve Recordon, an attorney from San Diego, California whose firm represents individuals who have been sued or harassed by debt buyers, they usually do so for more than the amount owed. He told us that one of his clients had a credit card with a limit of $300. However, by the time the lawsuit came along, their demand was $1,700. What made the debt over five times higher? Attorneys’ fees, interest and penalties – all of which the company was not entitled to.

Recordon explained debt buyers’ business plans:

Debt buyers have a business plan when it comes to filing an action – regardless of the type of debt involved such as a credit card, repossession of a vehicle or medical bill – and that business plan is that they don't want to have to prove this in court. They know they have limited information or no information at all. So they're depending on the debtor defaulting.

In fact, their business plan works pretty well because more than 90 percent of the people that are sued think they can't afford a lawyer and are not familiar with the Federal Debt Collection Practices Act (FDCPA) or the Rosenthal Act (California’s version of the FDCPA) or other states’ statutes, so they just let it go. They have other problems. They just ignore the lawsuit once it's been served, if it actually gets served at all. That's another part of debt buyers’ abusive tactics – claiming that they had personally served an individual when they didn't.

Debt buyers hope you default

Believe it or not, most debt buyers hope that you’ll default. Recordon told us why, “It may be that the first time a debtor finds out about the lawsuit is when there's a wage attachment. However, with a 90 percent default rate, debt buyers don't have to prove up their case. They like it that way because once they’ve got their default; it's a whole different ballgame. Now, it doesn’t matter if they were able prove up their case before or not. It's very difficult to get a default set aside.”

In fact, Recordon says that the statutes in these cases are very limiting and aren’t generally set aside unless a service of process was not effective. He added, “With a 90 percent default rate, now wage attachments, garnishments, seizures and liens come into play and it's a lot more effective for debt buyers when they didn't have a good case from the beginning.”

If you’ve been sued or harassed by a debt buyer / collection agency, contact an attorney whose practice focuses in this area of the law to discuss your situation. Consultations are free, without obligation and strictly confidential. To contact an experienced attorney, please click here. We may be able to help.