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Truth in Lending: 7.11.7 Adverse Credit Reports; Collection Activity

As with the billing error procedure, a card issuer cannot make an adverse credit report based on the consumer’s withholding payment in accordance with these claims and defenses procedures “until the dispute is settled or judgment rendered,”1399 though it may report the amount as disputed.1400 Adverse credit reporting would include notations that the amount is delinquent,1401 and should include other derogatory notations, such as reporting tha

Truth in Lending: 7.12.1.1 Introduction

A credit card issuer may not issue a credit card, except in response to an explicit oral or written request or application for the card from a consumer or business (or when renewing a card which the customer has already accepted).1406 The prohibition against unsolicited issuance of a credit card was added to TILA in 1970,1407 after numerous problems were reported due to the proliferation of unsolicited credit cards.1408 TILA statutory damages

Truth in Lending: 7.12.1.2 Conforming Requests for a Credit Card

The request must be for a credit card; a request for some other form of credit does not allow the creditor to issue a credit card.1411 With exception of requests by consumers under twenty-one years of age,1412 the request need not be made in writing, but can be made orally1413 or electronically.1414 Indeed, the vast majority of applications for credit cards are now made electronically.

Fair Debt Collection: 2.2.1 Strategy for Initial Interview

An initial interview with a prospective client who has been subjected to debt collection harassment may be lengthy. After debt collection contacts are identified as a core legal problem, all available documents must be gathered, the validity of the debt should be examined, damages ascertained, and the availability of witnesses explored. Only then is the lawyer in a position to assess the case properly, chart future action, and counsel the client. As a result, an initial interview may last an hour or longer.

Fair Debt Collection: 2.2.2 Questions to Uncover Damages

Once a sequence of events has been developed, the client should be instructed to describe fully the events during and after each harassing contact.6 Probing questions should be asked to identify corroborating witnesses to the contacts and damages and to determine the availability of documentary evidence, such as dunning letters and their envelopes, and telephone, pharmacy, and doctor’s bills.

Fair Debt Collection: 2.2.3 Examining the Validity of the Debt

After developing a chronology of collection contacts, details of each contact, and names, addresses, and telephone numbers of witnesses, the interviewer should examine the validity of the debt and possible defenses to its collection in appropriate cases.11 This inquiry may uncover a defense to the client’s liability, and also serves to assess the strength of the collection harassment claim.

Fair Debt Collection: 2.2.5 Careful Case Selection

Lawyers considering handling a fair debt collection case should proceed carefully after interviewing potential consumer clients. Many debt collectors and judges will closely examine the consumer’s background and conduct, and the consumer’s lawyer should not be surprised in that regard. Are there sufficient incontrovertible facts, or is further investigation required to assess the strength of the case being considered?

Fair Debt Collection: 2.2.6 Developing a Plaintiffs’ Fair Debt Collection Practice

There are a number of ways to develop a plaintiffs’ fair debt collection law practice. Touch base with the members of the National Association of Consumer Advocates (NACA)33 in the area to talk about the pros and cons of that practice locally. They are likely to be a source of referrals or co-counseling. Explore client referral relationships with consumer bankruptcy attorneys when they send you their bankruptcy client’s fair debt collection claims.34 Join legal services and bar referral panels.

Fair Debt Collection: 2.4.1 Overview

Consumer attorneys can help solve their clients’ distress from debt collection abuses without committing the full legal resources required for a lawsuit or bankruptcy. Whether strategies short of suit are appropriate in any given situation depends upon the client’s objectives, the nature of the abuse (for example, whether the harassment is aberrant or routine for that collector), the damages suffered, and issues of efficiency (for example, litigation provides greater deterrence).

Fair Debt Collection: 2.5.7.8 Proper Service

Attention should be paid to obtaining proper service of process on an attorney collector. Service on the attorney at the address on the attorney’s collection letter may not be valid if the attorney does not maintain offices at that address.87 The attorney’s address can be checked through the state bar association as well as lawyer directories and other sources.

Fair Debt Collection: 2.5.8 Mandatory Arbitration of Consumers’ Claims

Creditors, debt buyers, or those collecting on behalf of creditors or debt buyers often seek to enforce a mandatory arbitration clause found in the credit agreement between the original creditor and the consumer. These clauses require debtors to bring legal claims in private arbitration as opposed to litigation in court.

Fair Debt Collection: 2.5.9 Discovery

Interrogatories, admissions, and a request for production of documents should be filed with the complaint or soon thereafter to maintain the momentum of the case and to obtain critical evidence while it is still fresh and available.

Fair Debt Collection: 2.5.10 Prepare for Trial at the Beginning of the Case

Most debtor harassment cases are settled by negotiations prior to trial. A lawyer who has not successfully tried a case of this type should know what can be accomplished at trial before negotiating a settlement.92 It is essential to know the probable range of damages that may be awarded in a case of this type before entering into negotiations.

Fair Debt Collection: 2.5.11 FDCPA Claims Are Frequently Determined by Summary Judgment

In FDCPA suits and in actions under state debt collection statutes, the legal proscription may be so clear and narrow, particularly when liability may be established by a debt collection letter or other document, that factual issues can be determined early in a case. In such cases, liability issues may be decided by partial summary judgment, and only the issue of the damages may need to be tried or negotiated.94 A sample motion and supporting memoranda on summary judgment are available online as companion material to this treatise.

Fair Debt Collection: 2.4.3 Notifying the Collector That Bank Account Is Exempt from Seizure

Some types of income, such as Social Security and public assistance benefits, are exempt from creditors’ postjudgment remedies and that exemption follows those funds into bank accounts in most circumstances.45 However, it is not unusual for a creditor to have those funds frozen until the debtor establishes the exemption in court. Freezing the account of a low-income household can be devastating even for a short time as there are usually no reserves for medications, rent, food, heat, etc.

Fair Debt Collection: 2.4.4 Proposing a Workout Agreement

Probably the most common consumer strategy (but not necessarily the best) is to work out payments with those collectors who have most effectively harassed them. Many collection agencies and some creditors will take an initial position that they must receive payment of the balance in full. They will urge the consumer to borrow from a loan company or relatives to pay off the debt.

Fair Debt Collection: 2.4.5 Complaining to Consumer Protection Agencies

Another strategy to stop collection harassment is for the consumer (or lawyer) to write an e-mail or letters to state and federal agencies responsible for enforcing the laws against debt collection abuse. While the government agency is not likely to investigate unless it has other complaints against the same collector (which probably cannot be known beforehand), sending the collector a copy of the complaint letter may produce good results.