Served By a Debt Collector? What To Do Next

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.

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Iowa Attorney General Wins $33.5 Million Judgment Against Vertrue

Preacquired account marketing means charging you for things you don’t buy. These are the Free trial membership!!! offers you get in the mail or see in magazines, or the $9.99 text messages that keep coming if you don’t text back a special code to stop them. Preacquired account marketing companies play fast and loose with what it means to give consent to be billed for a service.

A recent Iowa judgment against a major perpetrator of these scams may have other companies thinking twice. Iowa district court judge Robert Hutchison ordered Vertrue to pay about $33.5 million for violating the the Iowa Buying Club Membership Law and the Iowa Consumer Fraud Act.

That’s a huge victory, but let’s put it in context. Vertrue’s website claims that its revenues were $800 million just a few years ago. That was before the economy tanked, and we don’t know how much of that was profit, but it sounds like Vertrue can probably absorb this loss. Fortunately, it cannot keep up with business as usual in Iowa; the judgment also includes an injunction prohibiting Verture from further violations of the law.

(Thanks, Prentiss!)

(photo: http://www.flickr.com/photos/smull/62675525/)

Bank Account Garnishment Issues in Minnesota


Regardless how a case reaches the garnishment stage, having your bank account frozen is a very unsettling feeling. Learning about how garnishment works, and how cases reach the garnishment stage, can help you understand what is going on.

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Defaults in Minnesota in 2008 Increase 39% Over 2007


If the default numbers for Minnesota are any indication, debt collectors are falling all over themselves, suing everyone in sight. In 2007, a “mere” 36,000 defaults were filed. In 2008, that number jumped to just over 51,000.

Some were responsible for more of those lawsuits than others. Minnesota debt collection law firm Messerli & Kramer, for example, filed nearly 35% of the default judgments in Hennepin County for Dakota Bluff Financial, LLC; Livingston Financial, LLC; Midland Funding, LLC; Pipestone Financial, LLC; Red Rock Lake Financial, LLC; and Capital One

The worst part is that many of these cases are brought by debt buyers who cannot prove their case. But the odds are on their side. As far as I can tell, very few consumers ever answer the complaint or defense themselves.

If you get sued over a debt, contact a consumer rights lawyer as soon as possible to find out whether you can win your case.

Default surge: Misery by numbers | Star-Tribune

Chicago courts clogged with collection claims

Chicago joins California and Minnesota in the news, as its civil courts try to deal with moving more than 119,000 debt collection lawsuits through the system.

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Two consumer law CLE seminars coming up

I am teaching two continuing legal education seminars on consumer law in June. My presentations tend to be engaging (I don’t have the patience for boring presentations even when I am giving them), informative, and well-attended. Register early!

I am teaching four other CLE seminars in the next three months focusing on practice management. For more information, visit my firm website.

Shady Practices in the Garnishment Business

Due to a change in Minnesota’s garnishment statute, the following no longer applies. Now, the burden is on the debt collector to request a hearing if it objects to the debtor’s exemption claim.

Today I discovered yet another way debt collectors use the court system to their advantage. Even though some funds—like child support payments—are exempt from garnishment, a debt collector can make it difficult for the debtor-defendant to get an exemption. In a matter I saw today, Messerli & Kramer served a complaint on the debtor, who failed to answer because she did not realize that she (effectively) had no rights unless she showed up in court to assert them. She also didn’t talk to an attorney at the outset like she should have.

So the debt collector got a default judgment and started with garnishment. But because the funds in the debtor’s account were child support payments, and therefore exempt, she filled out the exemption form and sent it back. Seeing the writing on the wall, the debt collector objected to the garnishment, assuming (probably correctly) that the debtor would not bring the necessary motion in district court. Minnesota law favors creditors and debt collectors so much that all a debt collector needs to do is object. The debtor must then file a motion in district court to grant the exemption, placing the burden on the debtor, not on the debt collector.

The debt collector in this case would surely argue that it was only asserting its right to be sure the claimed exemption was legitimate. And that is certainly the reason the law gives the debt collector a right to object to exemption claims. However, by placing the burden on the debtor to bring a motion to determine the exemption, while all the debt collector has to do is object, and get paid, the law basically rubber stamps debt collectors’ objections to exemption claims.

Instead, the burden should be on the debt collector, given the realities of debt collection. But debtors obviously don’t have the lobby that the debt collectors do, so the law favors the debt collectors.