This post originally appeared on ConsumerLawyer.MN with the title “Debt Collector Calls About Rental Debt.”
Debt collectors and landlords go together like peanut butter and jelly. When a landlord has a dispute over rental debt or damage to a rental property, a landlord will frequently turn to a debt collector.
Many times, the debt collector either misrepresents the amount of the debt or what can happen if you don’t pay it. If you have been contacted by a debt collector about rental debt, here is what you need to know.
Getting served with a debt collection lawsuit is one of the more upsetting things that can happen to you. When a process server hands a summons and complaint to you (or to someone you live with who can accept service), it means a debt collector is dragging you into the legal system.
And while getting served with a debt collection lawsuit is not fun, it is not the end of the world. In fact, that summons and complaint—legal process—provides rights to both parties to the case. Which means as a defendant in a debt collection lawsuit, you now have access to tools to defend yourself.
Let’s take a look at the first few parts of a lawsuit to try to dispel the fear and misunderstanding.
This article is a list of defenses that do not work. If you would rather find out what you should do, click over to “Served By a Debt Collector? What To Do Next.”
Most debt collection lawsuits are handled by overworked and unsympathetic debt collection attorneys. With that in mind, focus on your best defenses to the lawsuit. Here are some of the weaker defenses, which you should avoid.
Everyone agrees that a consumer plaintiff who prevails in a Fair Debt Collection Practices Act lawsuit is entitled to get his or her attorney fees and costs paid by the debt collector defendant. But in Marx v. General Revenue Corporation, the question is whether, under the Federal Rules of Civil Procedure, a debt collector can collect costs from an unsuccessful plaintiff. In other words, does the FDCPA apply, or do the rules of civil procedure?
This is a Really Big Deal, because if debt collectors can collect costs from unsuccessful plaintiffs, it will make it riskier to sue debt collectors. Quite apart from the law, the whole point of the FDCPA is to provide a formidable check on debt collection abuses. Damages in these cases are small, so if they cannot recover attorney fees and costs — or if they risk having to pay substantial costs — they will not sue.
If you want people to be able to stop debt collection abuses, then you cannot increase the risk. Doing so will render the FDCPA far less effective as a check on debt collection abuses. If you think consumers and consumer lawyers are running amok, then I suppose you favor the debt collector’s position.
Read Argument preview: Court considers litigation expenses in debt-collection disputes on SCOTUSblog. (Thanks, Graham!)
“The amount of defaulted loans — $76 billion — is greater than the yearly tuition bill for all students at public two- and four-year colleges and universities.”
The Consumer Financial Protection Bureau has started looking into regulating non-bank financial industries now that it has a chief. For starters, it is looking at debt collectors and credit reporting agencies. Says CFPB chief Richard Cordray, “Our proposed rule would mean that those debt collectors and credit reporting agencies that qualify as larger participants are subject to the same supervision process that we apply to the banks.” (Hat tip: CNN)
Unsurprisingly. The obscurely-named “Mobile Information Call Act of 2011” would allow robo-callers to dial your cell phone, something the Telephone Consumer Protection Act currently prohibits.
As US PIRG points, out, the debt collection industry claims that robo-calling harassment is rare, perpetrated only by isolated, rogue operations. But “[i]f that were true, why does the FTC receive ‘more complaints about the debt collection industry than any other specific industry'”?
California collection agency Rumson, Bolling & Associates apparently threatened to do exactly that to a woman who was having difficulty paying for her daughter’s funeral. According to the collection agency’s lawyer:
When the evidence comes out, it will show that the firm invested a lot of resources in trying to comply with federal law, Pitet said, “and if there were violations, as the FTC alleges, they were done by employees against company policy.”
Collection agencies always come up with crap like that. Here’s what it reminds me of:
They know what their collectors are doing. If they don’t approve of it, they look the other way while they rake in the cash.
(Hat tip to Brad!)
Debt collectors frequently call wrong numbers, for a variety of reasons. And unfortunately, if your number ends up on one debt collector’s list it is likely to end up on others. When this happens, it is nearly impossible to make the calls stop. Here’s why.
The 9th Circuit US Court of Appeals recently found that “a literally true statement can still be misleading” and therefore a violation of the Fair Debt Collection Practices Act. Arrow Financial Services (a Sallie Mae Company) sent a consumer a letter stating that if Arrow were reporting the debt to a credit reporting agency, it might submit negative information to that credit agency. However, Arrow could not have submitted the underlying debt to any credit reporting agency.
Gonzales, the consumer in this case, sued because Arrow implied a threat of negative credit reporting when it did not have the right to report the debt in the first place. The 9th Circuit agreed.
This decision (PDF) suggests that debt collectors cannot simply use a form that says if and leave it up to consumers to determine whether they are subject to the negative side of the if. In the 9th Circuit, at least, debt collectors may not threaten—even conditionally—unless they actually do have the right to do what they are threatening to do.
(Thanks for the tip, Randall!)