In prior postings on this blog, I have identified numerous problems with the way credit card companies, debt collectors, and their lawyers try to abuse consumers through the legal system.  In this post, I provide some guidance on possible solutions that would at least curb some of the most flagrant abuses.

Require Proper Evidence of the Debt:  In many debt collection lawsuits, the credit card company and their lawyers don’t attach the credit card contract to the lawsuit.  Why do we tolerate debt collectors who sue on an alleged contract but don’t even provide you a copy of that contract?  Florida’s laws of civil procedure require that the contract be attached to the complaint or statement of claim.  If it is not, the debt collector should be forced to either provide a copy of the contract or dismiss their lawsuit.

Require Meaningful Reviews by Lawyers Before Suing:  In many debt collection lawsuits, the lawyers simply file a form pleading that is essentially the same as for all their other lawsuits.  Requiring the lawyer to review the facts of each case before signing the lawsuit paperwork would go a long way toward curbing these lawsuits.  In one of my recent cases, a debt collector sued on an alleged credit card contract, but then denied that such a contract existed.  Such lawsuits are frivolous and nothing but an attempt to intimidate the consumer.

Strengthen Government Enforcement:  Meaningful enforcement of state and federal laws can also prevent significant debt collector abuse of the legal system.  Instead, the government’s enforcement tends to get publicity only in the run-up to elections.  Then, it conveniently fades until the next election.  Having an assistant attorney general spend an entire day in small claims court watching the abuses that take place would undoubtedly be an eye-opening experience for them.

Improve Consumers’ Access to Legal Assistance:  Very few consumers sued for credit card debt are represented by lawyers.  Part of the reason is that many attorneys prefer to work for large and wealthy corporate clients; in contrast, consumer protection attorneys in Central Florida are few and far between.  It would be helpful for court clerks to at least post information outside the courtrooms telling consumers where they can find free or low-cost legal representation.

These recommendations are drawn in large part from the May 2000 report entitled Debt Deception – How Debt Buyers Abuse the Legal System to Prey on Lower-Income New Yorkers.  Based on my experience as a consumer protection lawyer in Central Florida, these recommendations would go a long way to help Florida consumers from being victimized by debt collectors.

Recently, a new report was published regarding debt deception and how debt buyers abuse the legal system.  Although the report was based on a study in New York, my experience as a consumer protection lawyer in Central Florida reveals the same kind of debt collection abuse takes place here in the Orlando – Daytona – Melbourne metropolitan area.

Debt buyers are companies who buy debt from other companies who were unable, unwilling or prohibited from collecting those debts from consumers.  For example, a credit card company may decide that it is unlikely to collect a debt from a consumer, and simply sell that debt to another company who specializes in debt collection.  Usually, such debt is sold for pennies on the dollar.  That way, a debt buyer who is successful in collecting on that debt stands to make a huge profit.

The study revealed that 94% of debt buyers prevailed in court, usually through default judgment.  A default judgment is when the plaintiff (in this case, the debt buyer) wins the lawsuit simply because the defendant did not show up in court or did not file the proper paperwork.  The study noted that 90% of the consumers did not answer the summons and complaint, and only 1% were represented by an attorney.  As you might expect, virtually all people who had default judgments entered against them lived in low- or moderate-income neighborhoods.

Debt collectors obtain billions of dollars in judgments, sometimes using questionable or even illegal tactics.  Some of these tactics include:

• Filing lawsuits on claims that are legally barred, such as filing them after the statute of limitations has run
• Filing lawsuits on claims for which they lack proof of the debt
• Failing to ensure defendants receive proper notice of the lawsuit
• Failing to provide notice of their right to dispute the debt under the federal Fair Debt Collection Practices Act
• Using intimidation to pressure consumers to give up their legal defenses

This is consistent with my experience in Florida’s small claims courts in Central Florida.  This past week, I was in court on one of my cases in Volusia County.  My client was the only one who had a lawyer assisting her, out of 14 cases scheduled for that morning.  In other cases, I have personally observed consumers manipulated by stand-in lawyers who the consumers apparently believed to be impartial mediators.

Don’t allow yourself to be intimidated by debt collectors using illegal or questionable tactics.  If you have been sued by a debt collector, contact a consumer lawyer before you are deprived of your rights.  If you are in Central Florida (Orange County, Seminole County, Volusia County, Brevard County, Flagler County, Lake County, and surrounding area) and need an attorney to defend you in a debt collection lawsuit, please feel free to call us for a free consultation.  Or, just click here to send us an email and we will be happy to call you to discuss your case with you.  Remember, once a debt collector receives a judgment against you, they may be able to freeze your bank accounts, seize your assets (including cars), and garnish your wages.  A judgment will make it more difficult for you to obtain credit, secure housing or even find a job.   Don’t let this happen to you!

A recent study published by the National Consumer Law Center shed new light on the abuses that can arise from forced arbitration.  Arbitration is a process where the parties avoid going to court by using a private process to resolve disputes that would otherwise normally end up in court.  Arbitration is a private process, with lots of secrecy and without many of the most important rights you would have in court.  Unfortunately, many agreements have forced arbitration buried in the fine print of your contract, including credit card agreements, car purchase agreements, bank agreements, phone company agreements and many others.

Millions of consumers have given up their right to have a court resolve any disputes, along with the protections provided by the court.  Instead, the big business gets to choose the arbitrator.  Often, big businesses chose arbitrators that had previously given them what they wanted in such cases.  Simply put, the deck is stacked against consumers in those cases, no matter what the facts are and no matter what the law says.  Once big business wins in arbitration, it is generally very difficult for a court to set that win aside.

The study showed that, back in 2006, a Wall Street Investor to stack the deck even more.  He helped facilitate a direct financial connection between a law firm who often represented big business in those arbitrations and the arbitration companies themselves.  This corrupt arrangement was finally uncovered by the Minnesota Attorney General in the summer of 2009.

As a result of the work by the Attorney General and her staff, the National Arbitration Forum (NAF) was exposed, and agreed to stop doing most consumer arbitrations.  At least four giant banks also agreed to stop enforcing the arbitration provisions.  The giant debt collection law firm, Mann Bracken, collapsed from the fraud charges.  Please click here to read the full NCLC report.

Now that the fraudulent practices of forced arbitration have been exposed, I hope that they will disappear.  However, the banks’ pledge not to enforce arbitration agreements expires in 2013.  That is why it is important to put legislation in place to prevent companies from forcing you into arbitration through the use of fine print.  There has been some discussion of this in Congress recently, but only time will tell if it becomes the law of the land.

Portfolio Recovery Associates, LLC recently sued our client on behalf of HSBC Private Label Acquisition Corp./Suzuki, claiming that our client had defaulted on paying for a Suzuki motorcycle.  Suzuki had repossessed the motorcycle, which resulted in our client being sued for a deficiency judgment.

Using our experience in defending debt collection lawsuits, we were able to identify several areas where they failed to comply with Florida law.  We also defended on the basis that Portfolio Recovery Associates had violated Florida’s rules relating to civil procedure.  Based on our lawsuit defense, Portfolio Recovery Associates agreed to completely drop their lawsuit.

If you receive a summons for a lawsuit, let us help you.  All too often we get a call after the lawsuit is over.  By then, they have signed a stipulation or settlement agreement without understanding what it meant, and thinking they received a good deal on it.  Later, they learn there is a judgment against them, which affects their credit rating and the interest rates they receive on future loans.  Sometimes, they don’t find out the effect until their wages are withheld or the money in their bank account is taken away.  Don’t let this happen to you - know your rights before you sign.