2.1.3 Reason #3: Counterclaims Can Result in the Recovery of Damages and Attorney Fees

In many collection actions the consumer will have significant counterclaims. Being able to raise consumer claims as counterclaims has both advantages and disadvantages. Filing fees and arbitration requirements may be avoided and federal claims stay in state court. On the other hand, the collector may be less willing to dismiss its claims and may prosecute the collection case more aggressively in order to vigorously contest the counterclaim. Courts that hear collection cases may not have judges willing to put in the extra time that counterclaims require.

A good example of a collection case that raises numerous potential counterclaims is when the collector is seeking to recover a deficiency after a car repossession and repossession sale. The consumer may have counterclaims under Uniform Commercial Code (UCC) Article 9 and other state laws relating to the repossession and repossession sale—or to the vehicle’s original sale, financing, and warranty coverage.

In many collection cases, consumers can also raise counterclaims based upon the FDCPA and related debt harassment theories.¹⁵ It may even be possible to raise counterclaims related to the collector’s litigation misconduct.¹⁶ Legal representation can thus result in dismissal of the collector’s case and in the consumer’s recovery of significant damages and attorney fees. In one case, the consumer raised counterclaims against a major debt buyer, Portfolio Recovery, and was awarded $250,000 compensatory damages, $82 million in punitive damages, and over $300,000 in attorney fees and expenses.¹⁷