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Collection Actions: 3.3.6 Champerty and Other Limits on Suits on Assigned Debt

State law may prohibit certain suits on assigned debt. Connecticut prohibits a licensed collection agency from purchasing or receiving assignments of an obligation with the purpose of collection or instituting suit on the obligation.96 This provision in effect prevents licensed collection agencies from becoming debt buyers and bringing collection actions on the debts they purchase.

Collection Actions: 3.3.8 Requirement That a Collector Retain an Attorney to Bring Suit

A number of states require that a corporation only appear in court through counsel and not through a non-attorney employee.104 A corporate collector’s officer or employee cannot represent the collector in court unless that person is authorized to practice law in that jurisdiction.105 Other state law may limit the ability of “debt collectors” to pursue actions without an attorney,106 which raises the question of whether a debt buyer is a debt collec

Collection Actions: 3.4.1 Introduction

Consumer collection actions bear little resemblance to normal litigation. Some law firms have been known to file over one thousand collection complaints a week. Their focus is on volume, not precision. The collection attorney is relying on the fact that consumers are unlikely to contest a matter, so the form of the pleading is irrelevant. If the consumer does contest the action, the collection firm may drop the suit, so the form of the pleading is not even important to the collector if the consumer contests the action.

Collection Actions: 3.4.2.1 Generally

This subsection considers requirements that the plaintiff plead that it is licensed, owns the debt, or is authorized by the debt owner to bring the collection action.

Collection Actions: 3.4.3.1 Generally

There are significant variations between states’ requirements for legal pleadings. Most states have adopted notice pleading for civil litigation, often modeled after the Federal Rules of Civil Procedure. Other states, such as Florida, Illinois, Nebraska, and Pennsylvania, adopt “code” pleading that places more requirements on filing a complaint than is present in notice pleading states.

Collection Actions: 3.4.5 Signature and Verification of the Complaint

Federal Rule of Civil Procedure 11(a)—and similar state rules—require that a complaint be signed by the attorney of record in the attorney’s name or by a party personally if the party is unrepresented. In states following the federal rule, the pleading is improper if signed by someone other than the attorney of record, if the collector is represented by an attorney.

Collection Actions: 3.4.6 False or Vague Pleadings

Claims based upon obviously false statements in the pleadings are subject to dismissal. Collection law firms that file hundreds of cases a day may be producing pleadings by filling in the blanks within one standard form complaint without bothering to analyze how a particular case’s facts fit that form pleading. For example, the pleadings may allege that the contract was between the consumer and the debt buyer, instead of between the consumer and the original creditor.

Collection Actions: 3.5.1 Required Attachments to the Complaint

A number of states have a rule that, when a complaint is based upon a writing, the writing be attached to the complaint. This rule applies to collection actions as well. Section 3.4.2, supra, discusses one application of this requirement—that a debt buyer attach a document to the complaint indicating that it has ownership of the debt or the right to bring an action on the debt.

Collection Actions: 3.5.2 Is the Attachment Actually Attached?

When state rules require an attachment to the complaint, make sure an attachment referenced in the complaint is in fact attached. Debt buyers sometimes pretend to comply with rules as to the form of attachments without really doing so. If the complaint claims there is an attachment, make sure the attachment is actually attached.

Collection Actions: 3.5.3 Sufficiency of an Attached Document

When state rules require that a breach of contract claim attach a copy of the contract to the complaint, there must be more than just an unsigned, standard form contract attached to the complaint. Some connection between that form contract and the defendant and the defendant’s account number must be provided.227

Collection Actions: 3.5.4 Attachments for Account Stated Claims

Collectors often seek to recover based upon an account stated cause of action.242 The claim is that the consumer has been sent a statement of the account, and the consumer has implicitly agreed to pay that amount. Thus, the action is not upon the original contract or the individual charges making up the statement of account, but on the promise to pay the amount included in the statement.243

Collection Actions: 3.6.2 Other State Notice Requirements

Iowa’s right to cure statute applies to consumer credit transactions,259 and thus also applies to credit card collections.260 Consequently, before the creditor can accelerate the amount due—i.e., demand the full balance and not just paid due minimum payments—the creditor must send the consumer a right to cure notice that follows the language and requirements of the Iowa right to cure statute.261 Where a card issuer never accelerated the debt, but s

Collection Actions: 3.7.2.1 Generally

In general, collection actions are governed by state statutes of limitations. A four-year federal statute of limitations applies to civil actions arising under an Act of Congress, unless that Act provides otherwise.273 But collection actions are invariably not brought under federal statutes, so the four-year federal limitations provision does not apply.274

Collection Actions: 3.7.2.2.1 Overview

Federal law appears to specify a two-year statute of limitations for actions to recover on cell phone charges and on interstate or foreign landline communication charges,280 but courts have ruled otherwise.281 47 U.S.C. § 415(a) states that “[a]ll actions at law by carriers for recovery of their lawful charges . . .

Collection Actions: 3.7.2.2.2 Scope of the two-year limitations provision

The federal limitations period applies to common carriers. 47 U.S.C. § 153(10) defines “common carrier” or “carrier” as “any person engaged as a common carrier for hire, in interstate or foreign communication by wire or radio or interstate or foreign radio transmission of energy, except when reference is made to common carriers not subject to this chapter.” Thus, the definition of carrier includes cell phone, interstate, and foreign communications operators.

Collection Actions: 3.7.2.2.4 Federal limitations period applies to assignees

If a court were to disagree with the Fifth Circuit (and other courts) and find that the federal limitations period applies to a cell phone carrier, the federal limitations period applies to any assignee of that carrier. The assignee steps into the shoes of the assignor and has no greater rights. The assignor cannot revive an action simply by selling it to someone else. Thus, a federal court has stated:

Collection Actions: 3.7.3.1.2 Use of the forum state’s limitations period when it is the shortest

Although not followed by all states, both the 1971 and 1988 versions of Restatement (Second) of Conflict of Laws clearly state that the forum’s limitations period will be selected when it is the shorter of the two.290 An important purpose of a state’s statute of limitations is to prevent the state’s courts from having to hear stale evidence, an interest of the forum state no matter the law specified in a contract. A private contract should not force courts to hear stale cases that the legislature has determined should not be heard.

Collection Actions: 3.7.3.1.4 States not using the shorter contractually chosen state’s limitations period

Even when the law selected in the contract has a shorter limitations period than the forum state, some courts use the forum’s longer limitations period, viewing the statute of limitations as a procedural matter for the courts, not a substantive one determined by contract.305 Some states alternatively simply rule that the forum state’s statute of limitations is always to be applied.306 These courts are generally following the same approach as the 1971 version of the Restatement (Second) of Co

Collection Actions: 3.7.3.2.1 Borrowing statutes described

Over half the states have borrowing statutes that require, when an action arose elsewhere than the forum state, that the action can only be brought if within the limitations period that applies under the law of the state where the action arose. These borrowing statutes apply where the consumer resided in one state when incurring the debt but is sued in a second state where the consumer has since moved.311 This is a fairly common situation when the debt being sued upon is a number of years old.