Michigan Collection Law Blog published By Michigan Creditor Lawyers Nitzkin & Associates

There is a great article in today's Wall Street Journal that talks about credit repair companies. While the industry is rife with charlatans, I have come across some credit repair companies that are quite legitimate.

For example, I have recently met the owners of Credit 1 in Pontiac, Michigan. Credit 1 charges one fee for consumers who want Credit 1 to fix their credit. Credit 1 charges a lesser fee to consumers who take Credit 1's free credit repair classes and learn how to fix their credit. I think this is a great idea. I recently spoke at a Credit 1 class and was very impressed with Credit 1's methods for credit repair. Credit 1 is a very reputable company whose staff is very dedicated to achieving legitimate results for its clients.

The Wall Street Journal article, unfortunately is like most other articles about credit repair companies. The author excoriates the industry. While the author makes several legitimate points, I think he paints with a rather broad brush. Not all credit repair agencies are illegitimate. I am thankful that I have been given the opportunity to see one such credit repair company that works hard for the benefit of its customers.

If you would like more information about Credit 1 USA, you call Mr. Maurice Taylor at (866) 502-7242.

I love defending people against debt buyers because the Plaintiffs case is as strong as a house of cards in a hurricane. Debt buyers buy judgments, credit card charge offs and other sordid garbage debt for pennies on the dollar. Hell, there are even debt buyers that buy debt that has already been through a collection agency or two. Usually, when a debt buyer purchases his paper, he gets little more than the judgments or a spreadsheet showing the balances due. What does this mean for the consumer that is sued? Everything. The debtor buyer has no proof that the consumer owes anything other than some shmoe's word for it that the debt was owed in the first instance. Recently, someone got wise to the idea that an attorney who sues on this crap and does not have the goods to show that the debt is actually owed, may be violating the Fair Debt Collection Practices Act. I can't wait to share this case with you.

In Isom v Javitch Block and Rathbone ("Javitch"), the defendant is a law firm that had sued Ms. Isom in state court for a debt that was purchased by some company called Direct Merchants. Javitch attached an affidavit to its complaint that had been prepared by Direct Merchants. When Ms. Isom demanded discovery in the state court case, Javitch simply dismissed the case. Why? Because it did not have any proof to show that its client was entitled to any money from Ms. Isom. Now, its Ms. Isom's turn.

She sued Javitch in federal court and asked for class action status. She alleged that because Javitch had sued her without having any documentation to show that she owed the debt that Javitch had violated the Fair Debt Collection Practices Act. Ms. Isom alleged in her complaint that Javitch attached a false affidavit signed by Direct Merchants that said that Direct Merchants had personal knowledge of the balance due by Ms. Isom. The court held that because Ms. Isom alleged fraud her complaint against Javitch, that she has enough of a case to go to trial. The court denied Javitch's Motion to Dismiss Ms. Isom's claim.

In analyzing Ms. Isom's case, the court noted two lines of cases that dealt with the issue of whether a debt collector violates the FDCPA by suing a debtor without having substantial supporting documentation for its case. In Delawder v Platinum Financial, the U.S. District Court denied the Defendant's Motion to Dismiss. In Delawder, the Plaintiff alleged that the debt collector had committed fraud because the affidavit in support of its case misrepresented the amount of the debt or the debt collector's legal claim upon the debt.

The second line of cases involved Harvey v Great Seneca Financial in which the Plaintiff alleged that the filing of a suit to collect a consumer debt without the means of proving that debt was a violation of the FDCPA. The court in Harvey dismissed the action stating that Plaintiffs do not need to prove their cases at the time that the lawsuit is filed. However, in Harvey, the Plaintiff did not allege that the affidavit attached was false.

In Ms. Isom's case, she alleged that the affidavit that was attached to the complaint against her in state court was false. She alleged that there was no way that the Plaintiff had "personal knowledge" of her debt to the original creditor. The court found that Ms. Isom's case should proceed to trial on the issue of whether the Defendant's affidavit was false and if so, whether it violated sections 1692e and 1692f of the FDCPA; the Act's prohibitions against false or misleading representations and against unfair collection practices, respectively.

Javitch pled to the court that it should not be held responsible for an affidavit that its client had signed in support of the complaint. Judge Barrett would have no part of that argument. Javitch's attempt to side step the FDCPA bullet was foiled when Judge Barrett correctly pointed out that it was Javitch that signed the complaint and attached the affidavit in support of its complaint. Javitch, as a third party collector, has to take responsibility for its own actions.

ATTORNEYS FOR DEBT BUYERS BEWARE. Remember that you are responsible to verify that the debt and every part of the debt that you are collecting is legitimate. The days of suing debtors without having proper documentation and hoping for a default judgment is like playing Russian Roulette. You are bound to piss off some debtor who reads my blog and knows his rights. Now, you have to doubly (if there is such a word), that the affidavit that you are attaching to your complaint is accurate. The FDCPA makes you a guarantor of sorts that the affidavit is bona fide.

In March of 2007, the U S Court of Appeals for the 6th circuit decided Mabbitt v Midwestern Audit Services. This was a very interesting case.

Ms. Mabbitt and her sister shared a home on Leota Blvd. Consumers Energy provided gas to that space. The bill was in Ms. Mabbitt's name. When she got over $900 in arrears, Consumers threatened to shut off her gas. She and her sister moved to a new space on Lake Ridge Drive.

At this new space, the lease was in the names of both sisters but the Consumers power bill was in the sister's name alone. Consumers got wise to this move and informed its collection agency, Midwestern Audit. The collection agency sent the sister a notice stating that Consumers had observed that a prior obligation existed for Ms. Mabbitt and that that balance would be transferred as a beginning balance on the sister's account with Consumers ("Balance Transfer Letter").

Ms. Mabbitt sued for violation of the Fair Debt Collection Practices Act. She was upset that Consumers had disclosed "her business" to her sister in the Balance Transfer Letter. The legal basis for her claim was that Midwest Audit had disclosed her debt to an unauthorized third party in violation of 15 U.S.C. 1692c(b).

The court held that Midwest Audit's letter advising of the balance transfer was not a communication "in connection with the collection of a debt." The court first looked at 15 U.S.C. 1692c(b), which governs communications in connection with the collection of a debt. The court then compared Midwestern Audit's initial demand letter with the Balance Transfer Letter and noted that the former was in connection with the collection of a debt while the latter was not. The court held that the Balance Transfer Letter was not an attempt to collect a debt. Rather, it was an attempt by a business to inform customers that a previous debt has been transferred to a current account without having to follow the dictates of the FDCPA. To hold otherwise would prevent business from seeking a peaceful resolution of debts and would do nothing to achieve the stated purpose of the FDCPA which is to eliminate abusive debt collection practices by debt collector." Yeah...so was I!!!

First of all, the court conveniently overlooked the fact that the letter was not sent by Consumers Energy, the creditor. Rather it was sent by its collection agency; an entity that is governed by the FDCPA. I would think that any actions or communications taken by a collection agency would be governed by the FDCPA. Was Midwest simply trying to be nice to Ms. Mabbitt's sister by graciously informing her of the balance transfer? C'mon! Midwestern is in the business of collecting debts and this was a debt that it was trying to collect. Did Midwestern walk away from its commission fee because the balance was now transfered to the sister's account? Do cows really jump over the moon? O.K. now that we have that issue solved, lets talk about the second issue this case presents.

What the hell is the difference between a debt collector merely informing someone of her payment options vs asking her to pay her bill? Give up? So do I. The court seems to think that this is the difference between a communication that is "in connection with the collection of a debt" and one that is merely a business's attempt to offer payment options without getting mired in the FDCPA. Boy, I sure did not see this coming. I wonder if Congress saw this coming when they promulgated the FDCPA.

I am a lawyer that collects debts for a living. I confess that I am appalled by this ruling. How about you?

If you owe money on a credit card that has been turned over to a collection agency, chances are excellent that the collection agency is not only pursuing you but any authorized user. Be careful about this and know the difference between an authorized user and a co-signer. One of these persons is liable on the debt and the other is NOT. Collection agencies love to blur the distinction because they really don't care from whom the money comes to pay the debt. If they can harass someone successfully into paying the debt, all the better. You read my blog. You follow my blog. You are an intelligent person and are educated about your rights.

A co-signer is someone who agrees to be liable for a debt to the same as extent as debtor who originally applied for and obtained the credit. For example, many parents co-sign for their kid's cars. If the kid stops making the payment, the parent gets dunned for the money.

An authorized user of a credit card is simply someone who has permission to charge goods and services to the debtor's account. This person is NOT liable on the underlying debt.

If you get a car from a collection agency demanding payment for a debt on a credit card, simply asking the nice collector to provide you with proof as to your status on the debt; e.g. co-signer or authorized user. If the collector cannot produce any such proof, ask them to have no further contact with you and to have a nice day. Yes, this can all be accomplished nicely.

I follow a number of blogs. There is a great deal of good information on the web that keeps me current about the state of the law. Unfortunately, there are also a number of quacks that spew baseless information with such authority that one might be lulled into believing its true. I found two such nuggets this morning. I won't mention the blog by name, but I will tell identify the two statement the author has put forth that are simply wrong. He states:

1. If a debt collector insists on payment in full (as every decent collector does), he violates the Fair Debt Collection Practices Act when he refuses to take payments even though he is authorized to do so.

RESPONSE: WRONG. The debt collector may be authorized by his client to accept a payment plan from the debtor, but that does not mean that he has to negotiate one. In fact, most clients simply give their debt collectors some blanket authorization and direct the debt collector to use her discretion to make the best deal possible. In short, just because a collector has the authority to accept a payment plan does not mean that he is required to make one.

2. If a debt collector sends the debtor a notice that refers to a Form 1099, the debt collector has per se, violated the FDCPA because the IRS is not involved.

RESPONSE: WRONG. In fact, when a debt is compromised from its original balance, the IRS has recently required that the collector issue a 1099-C for the difference between the debt as owed and the balance for which it was settled. These rules came about a few years ago and affects both the creditor who has a duty to report debt forgiveness over $600 and debtors who now have to report the debt reduction.

While there is a lot of good information on the 'net, there is also a lot of bad information as well. Just beware of the source of the information to see if its reliable and if the author has the credentials that would give you faith in what he says.

In order to pull someone's credit report, the debt collector has to have a federally permissible purpose according to the Fair Credit Reporting Act. OK...we all know that. We cannot go spelunking for our ex-girlfriends and such for amusement. As a general rule, it used to be that a collector could pull a credit report on any debtor. This is an easy concept. This is not the law anymore.

The 9th Circuit Court of Appeals recently decided Pintos v Pacific Creditors Association. In that case Ms. Pintos' car was towed. She failed or refused to pay the towing company so they sold her car. Apparently, the car did not fetch enough money to pay her towing bill. The towing company turned the debt over to Pacific Creditors Association ("PCA"). PCA pulled her credit report. The 9th Circuit held that this was a mistake. Under the Fair and Accurate Credit Credit Transactions Act ("FACTA") the newest revision of the Fair Credit Reporting Act, a collector may only pull a credit report in connection with a "credit transaction." Ms Pintos did not ask the towing company for credit; rather she helped herself to it. Ms. Pintos lost her claim at the trial court but not in the Court of Appeals.

FACTA became law in 2003. Prior to FACTA, we only had the the Fair Credit and Reporting Act ("FCRA"). Under FCRA, the defendant PCA, would not have been in violation of the law for pulling Pintos' credit report. Under FACTA, it is in violation of the law.

Yesterday, I got a CYA letter from Transunion advising me of this issue. I can see why it is up in arms. Ms. Pintos not only sued PCA, but also sued Experian for providing her credit bureau to PCA.

MORAL OF THE STORY - Before pulling a credit bureau in connection with a consumer transaction, take note of whether the transaction at issue was a voluntary request for credit that has gone bad or whether it was an involuntary debt incurred by the debtor. If it is the former, you may legally pull a credit bureau. If it is the latter, you had better think twice before doing so.

The United States District Court here in the 6th Circuit recently decided Jerman v Carlisle, 502 F Supp 2nd 686 (2007). While this is not an appellate decision, it may very well be a harbinger of the 6th circuit court of appeals' sentiment may lay with respect to the issue of whether a summons and complaint is an initial communication under the federal Fair Debt Collection Practices Act.

Until now, this issue has been unsettled in this circuit. Under the FDCPA, a debt collector has to send a validation notice to the debtor within 5 days of its initial communication with the debtor. Hence, if a law firm files a lawsuit to foreclose on a mortgage, it must send out a validation notice within 5 days of serving the complaint for foreclosure on the homeowners. This holding should be noted by every law firm that does mortgage foreclosures.

Law firms and attorneys that only dabble in debt collection and foreclosure BEWARE....many of you will most likely see a wave of FDCPA lawsuits naming you as defendants. While you may not want to get involved in the pre-suit "collection process" , you cannot avoid the strictures of the Fair Debt Collection Practices Act by refusing to call the debtor before you file suit. If you have had no pre-suit contact with the debtor, then your lawsuit IS the initial communication with the debtor. You MUST then send out a validation notice. The Jermane holding is a wake up call to every attorney and law firm that if you are going to sue someone on a consumer debt, you better send that consumer a validation letter within 5 days of serving the consumer with the complaint.

Here is a post that is going to win me absolutely no friends with the credit card industry or even my colleagues. But what the hell...here it goes.

Are you delinquent with your credit card debt? Is the credit card company dunning you? You should know that it is highly unlikely that they will compromise this debt. If you want to save your credit rating, do your best to make a deal. BUT...if you are not as concerned about your credit rating (translation...this ain't the only debt on your record), then here is my advise....IGNORE THEM. Simply tell them once, kindly, not to contact you. If it is a consumer type debt, then under the Fair Debt Collection Practices Act, they have to comply. They will then take one of 3 possible actions against you:

1. They will refer your debt to a collection agency which is good news for you),
2. They will refer it to law firm to file suit against you (which is even better news for you) or
3. They will sell your debt to a third party (which is great news for you.) Here is why...

1. If the credit card company refers your balance to a collection agency, the agency typically has some settlement authority with which to make a deal with you. They usually have far more authority to compromise your debt than the collector at the credit card company did. If you can make a deal at this point, you might want to consider it. But, if you want to screw with them a little, then just tell the nice collector from the agency to not call you anymore and wait for the debt to go to a law firm or a debt buyer.

2. Law firms - typically don't like suing on credit card debt. Why? Because if you present any kind of a defense to it, you may actually get out of paying the debt altogether. I know of several judges in Michigan that hate this kind of debt coming into their courtroom. Moreover, unless the debt is really really high, it is unlikely that the credit card company is going to send a witness to trial. If you demand a trial and don't back down, the law firm will go to some pretty great lengths to make a deal with you.

3. Credit card purchasers. This is the Tri-fecta for a debtor. First of all, these credit card purchasers usually do NOT get the back data on their debts. Thus when they take you to court, tell the judge that you want "discovery." This means that you want the debt buyer to come across with a copy of the contract that you signed when you opened the account. They almost never have this information. When you demand this discovery and the law firm comes up short,l they will bend over backwards to make a deal with you. There is a sizable debt collection law firm in West Bloomfield that does a brisk business in credit card collections. When debtors demand discovery, this firm will usually come across with a paltry offer or simply dismiss their case.

There you have it. Credit card debt is highly manageable depending on the level of risk you are willing to take and also depending on who is collecting the debt. If you can stand the heat, I would suggest that you wait until the debt falls into the hands of a third party. You can make your best deal at that level.

I attended the State Bar of Michigan convention this week. It was fabulous. Among the top speakers was a practice management coach named Dustin Cole. His company, Attorneys Master Class, teaches attorneys how to run their practices efficiently. He opened my eyes to so many things this week that my head was spinning when I left his seminar. The ONLY thing he said that I do NOT agree with is that attorneys should never sue for their legal fees. He is wrong. Attorneys should sue for their fees when a client is going to stiff them. Here is how you do it to minimize your risks:

1. When you have decided that you are going to have to sue the client for your fees, send the client a termination letter. In that letter, inform the client that as of today, you are no longer going to represent him and that he should get other counsel. In that letter state that you have not been paid and that the client is in breach of your contract. This way, you have established a date for which you are no longer representing the client. If you are in the midst of litigation on behalf the client, file a Motion to Withdraw. Come to court with an order for the judge to sign that day after she grants your motion. Sent the client a copy of that order if the client does not come to court along with your termination letter.

2. Do not sue until the statute of limitations for malpractice has run in your state. In Michigan the statute of limitations for a malpractice suit is two years from the date of last service or six months from when the malpractice was or should have been discovered by the client. Lawsuits for attorneys fees are usually responded to by vindictive clients with a malpractice action and/or a grievance. Lets talk about these:

Grievance - There are two kinds of attorneys in this world; those who have been grieved and those who will be grieved. Many of us have cross over that threshold a long time ago. As long as you did nothing wrong, don't sweat a grievance. It should not be a deterrent to you pursuing your fees.

Malpractice counterclaim - A client may file a counterclaim for malpractice AFTER the statute of limitations has run. However, because the statute has run, the award on his claim can only be an offset to your claims against him. His malpractice counterclaim award cannot exceed the award you obtain against the client. Hence, even if you did do something that hurt your client, your exposure is limited by waiting two years. Moreover, if you have malpractice insurance, then you have no exposure other than your deductible.

I represent a number of law firms and we follow these rules when pursuing claims against clients. It makes suing a client for fees less perilous and more profitable. Is that the name of the game?

My good friend, Howard Young, is a seasoned and brilliant lawyer. His firm, Weisman Young Schloss and Ruemenapp, P.C. is a group of highly respected business, transaction, and litigation attorneys. The bad news is he works on the opposite side of the table from me. Amongst his specialties (and he has many), is helping people hide their assets.

Howard recently emailed me the following article that he wrote and I wanted to share it with you, not just because Howard is my friend, but because he has some very interesting things to say from an asset protection perspective. I have reproduced his article, verbatim, with his express permission as follows:

CAN AN ORCHESTRATED DIVORCE BE USED AS AN ASSET PROTECTION DEVICE

For years clients under extreme financial distress have asked whether getting a divorce from their spouse will allow them to avoid paying creditors. The typical scenario involves a husband who has guaranteed significant loans to his real estate development company but now, because of deteriorated conditions in the home sales market, is being called upon by the bank to make good on his guaranty as the primary obligor is insolvent. Wife, with a wink and a nod, retains divorce counsel and files for divorce. Negotiations between wife's lawyer and husband's lawyer are amazingly easy as husband agrees to convey all or substantially all of his assets to his wife as part of the property settlement. The bank's lawyers look on in dismay as they recognize they cannot intercede in the divorce proceedings and, thus, may be faced with an insolvent guarantor-but one who may have transferred millions of dollars to his wife in the form of a property settlement. Now, in a case of first impression [footnote 1], the Michigan Court of Appeals has held that a court can review the division of marital assets in a divorce proceeding in the context of a fraudulent transfer claim.
______________________________________________________________________
Footnote 1 Estes v. Titus, 478 Mich. 864, 731 N.W.2d 423 (May 25, 2007).
______________________________________________________________________

The origin of the claim in Estes is not your usual business transaction. Jeff Titus was sentenced to mandatory life imprisonment for shooting Douglas Estes and another hunter two days into the 1990 firearm deer-hunting season. Plaintiff Jan Estes, who was Douglas Estes's wife and the personal representative of his estate, filed a wrongful death action against Jeff Titus. Less than 2 months after the wrongful death action was filed, Julie Titus, Jeff Titus's wife, filed for divorce and was awarded substantially all of the marital assets. Jan tried to intervene in the divorce action claiming that the property-settlement provisions constituted a fraud upon Jeff Titus's creditors, but Jan's Motion was denied. Jan appealed to the Court of Appeals.

The Court of Appeals agreed with the trial court that it did not have jurisdiction to intervene in the divorce case or to modify the judgment of a sister court. However, the Court did find that Jan stated a valid claim under the Uniform Fraudulent Transfer Act and, therefore, the trial court has jurisdiction under that Act to grant relief with respect to property that Jeff Titus transferred pursuant to the agreed-upon division of marital property incorporated into the terms of the divorce judgment. The important distinction made by the appellate court is that any trial court orders under the UFTA would not operate to modify the divorce judgment; they would operate against persons and property within the trial court's jurisdiction. The court concluded that a transfer of marital assets pursuant to a settlement incorporated in an uncontested divorce judgment may be a fraudulent transfer under UFTA with respect to a transferring spouse.

The court found support for its conclusion in both Oklahoma and Oregon cases as well as in California. It then proceeded to analyze whether Jan alleged sufficient facts to present a justiciable claim that the settlement constituted a fraudulent transfer. The court analyzed the Michigan version of the UFTA and found she would be entitled to recover under the facts alleged; namely, (i) even though the alleged fraudulent transfer took place prior to the judgment in the wrongful death claim under MCL 566.35, the claim arose before the transfer was made (ii) the transfer was made without receiving a reasonably equivalent value in exchange and (iii) the debtor became insolvent as a result of the transfer. Also, the transfer to insider provision of MCL 566.35(2) would apply since the transfer to a spouse is a transfer to an insider under MCL 566.31(k).

EDITOR'S NOTE: It is now fairly evident that a transfer of property pursuant to an orchestrated divorce (or marriage for that matter… in such case in the guise of a transfer of property as partial consideration for a party entering into a prenuptial agreement), may well constitute a fraudulent transfer under Michigan's UFTA. (C) Howard Young, 2007.

Many years ago, I heard attorney Manny Neuburger talk about the power of using an offer of judgment in the defense of a Fair Debt Collection Practices Act claim. Manny is a Texas attorney and a giant when it comes to the defense of FDCPA cases. He said that one of the best defense techniques that a defendant can interpose in litigation is an offer of judgment.

Under an offer of judgment under FRCP 68, the defendant offers to give the Plaintiff a judgment for a certain amount. There are great tactical advantages to this. First, if the offer of judgment is accepted, the Defendant is able to cap its damages. Secondly, if the offer is accepted, the Defendant is also able to effectively end the litigation and curb further attorneys' fees in its defense. Thirdly, if the offer is NOT accepted, then the Plaintiff runs the risk of having to pay the Defendant's attorneys' fees if the Plaintiff does not get a judgment that is greater than the offer made in the offer of judgment. But wait...now there is more.

The United States District Court for Western District of Kentucky recently held in Tallon v Lloyd and McDaniel et al, (3:06CV-314-H) that when a defendant makes a good enough offer of judgment, that it can actually get a case dismissed on the grounds of mootness. That is great news for defense counsel in FDCPA litigation. In a nutshell, one of the defendants was a law firm that was accused of violating the FDCPA by sending garnishments to several banks in an area local to the Plaintiff/Debtor. The debtor sued stating that the blind garnishments violated the FDCPA. The court held that inasmuch as the Defendant offered to pay the Plaintiff the maximum that the Plaintiff could recover in this litigation, that the case should be dismissed on the basis of mootness. The court reasoned that the defendants have offered to satisfy all of the Plaintiff's monetary claims and the Plaintiff's claims are now moot. Even though the Plaintiff did not accept the Defendant's offer of judgment, the court appears to have made that acceptance on behalf of the Plaintiff anyway.

The court granted the Defendant's Motion to Dismiss the case by entering a judgment in favor of the Plaintiff for the $1,055; the amount of the offer of judgment. The court stated that it would enter the judgment pursuant to FRCP 68 which is the Offer of Judgment Rule. But, one question not answered by the court is whether it will now assess costs against the Plaintiff for failing to timely accept the offer. After all, the Plaintiff did not better its position in the litigation after failing to accept the offer. I suspect that there will be a subsequent motion to determine these costs.

I am frequently approached by debt buyers to represent them in collecting their newly acquired portfolios. I generally do not accept these kinds of engagements. These debts are generally fraught with lots of problems. If you are contemplating buying debt or if you are being sued on a credit card debt from someone other than the original creditor, read on...I am about to save you a lot of grief. Here are the usual problems with purchased debt:

1. The debt buyer usually does not get any supporting documents to show that the debt is owed by the consumer. If you are a consumer and you get sued by a debt buyer, simply ask the court to order the debt buyer to provide proof of the amount of the debt and a signed contract. 99 percent of the time, the debt buyer cannot produce these documents. This leads to a dismissal of your case.

2. The debt was usually presented to other collection agencies and/or lawyers to collect. They could not collect it and that is why it was sold. Now you are trying to collect it and what happens? Chances are you are not going to be anymore successful than the previous collector. What amazes me is when the debts are represented (misrepresented) as having been presented to only 1 prior collection agency. How do you know that for sure? There is no way to verify this.

3. If the debt was consumer based, then the new owner and collector are both subject to the Fair Debt Collection Practices Act. This Act is so easy to violate. Suing on this debt can easily turn a defendant into a plaintiff. I have frequently sued collection agencies for violating the FDCPA. Usually, as part of the settlement, we have the debt extinguished. We frequently settle these cases not just because the collection agency made an error of some sort, but because if they defend it, attorneys fees in defending the case will cost them thousands of dollars. Even if they successfully beat us in court (to date that has not happened...but even if that fateful day ever came), and the collection agency was awarded attorneys' fees against the debtor, they know that their chances of collecting are essentially nil. They have much to lose and very lttle to gain. Buying debt that is already in default subjects not only the collection law firm to the FDCPA, but it also subjects the debt purchaser to the Act as well.

4. The Fair Credit Reporting Act presents a host of new opportunities for debtors to sue you as well. If the debt purchaser reports the debt on someone's credit bureau, the consumer can dispute it. The debt then has to be flagged by the new purchaser as a disputed debt or the debt purchaser gets into trouble. Here is something else to consider. If the consumer asks the credit bureau to investigate the debt, the debt purchaser better be absolutely sure that the debt is valid or else the purchaser can get into trouble with the consumer and yes...end up paying the consumer's attorneys fees.

5. HIPPA - yes...you must have heard of it by now. Essentially, and in an overstated fashion, if a healthcare professional gives away any of your personal information, they can get into deep trouble with some governmental agency. Note, that presently, there is no private right to recovery, but the government can fine the health care professional up to $50,000 for violating this Act.

Hey...are you still interested in purchasing debt? If not, good. If so, please visit my website as we do legal defense of these Acts and will be glad to defend you....

I am not a big fan of credit repair. In fact, I am downright scared of them. However...I was recently contacted by Marc Chase of My Credit Group. He runs a blog that talks about credit repair services. I liked what he had to say in his email to me. He said "we're working hard as we can to help clean up the industry a little bit On both sides of the fence." I think its a great idea. Credit Reporting Agencies are notorious for frequently reporting incorrect information in consumers' credit bureaus. There is a definite need for credit repair service companies. There is, unfortunately, an equally large need for industry rules, regulations and standards so that a consumer can be reasonably assured that she is working with a company that will aid her in fixing her credit issues.

Marc, I wish you well in your endeavor and look forward to posting good news about positive things you accomplish in this arena.

....that if a debtor contacts you and says that the debtor you are collecting on is a result of identity theft, that you have a duty to: 1. report to your client that the debt may be the result of identiity theft and 2. provide the alleged debtor with all of the information you have on the account? I just found this out recently. I have been looking at the Fair Credit Reporting Act lately ("FCRA"). When it was modified in 2004 by FACTA, this requirement was put into the FCRA. I only bring htis up because it is definitely a trap for the unwary collector. You would think ( or at least, I do) that anything having to do with collectors would be contained in the Fair Debt Collection Practices Act, right? WRONG! So be careful.

However, if you follow my blog, you are more likley to stay out of trouble, right? :)

I just read a very interesting opinion by Judge Cleland in the case of Purnell v Arrow Financial, 2007 U.S. Dist Lexis 7630 (Decided Feb 2007).

The collection agency defendant reported a debt that was disputed by the consumer to Equifax over a period of several months. The court held that each of these reportings to Equifax, without the dispute marker, constituted a discrete violation of the Fair Debt Collection Practices Act. Without boring you with the details, the statute of limitations for an FDCPA action is one year. In this case, however, that statute was renewed every time the collection agency reported the debt without the dispute marker.

Moral of the story to collection agencies - Be careful to report any debt that has a dispute with that dispute marker.