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Fair Debt Collection: 1.4.7.4 Chain of Title

In addition to original creditors selling debts, debt buyers may also choose to sell debts to other debt buyers. Debt that is sold multiple times may result in ambiguities as to which debt buyer owns the debt, making it difficult to establish an unbroken chain of ownership stretching from the original creditor. There can even be disputes as to who has proper title to a portfolio of debt.419

Fair Debt Collection: 1.4.8 Collection by Attorneys

When an account is placed with a law firm for collection, the law firm may be provided with limited information about the debt that may not include account-level documentation such as the operative contract, payment history, or collection history.421

Fair Debt Collection: 1.4.9.1 Number of Debt Collection Lawsuits

In the CFPB’s survey of consumer experiences with debt collection, fifteen percent of survey respondents who reported being contacted about a debt said that they had been sued by a creditor or debt collector in the previous year.440 Since the CFPB estimated that more than seventy million Americans were contacted by a creditor or debt collector about a debt in collection in the prior year,441 this would mean that more than ten million Americans were sued on a debt during that one-year period.

Fair Debt Collection: 1.4.9.3 Costs of Litigation

According to the Consumer Financial Protection Bureau’s survey of third-party debt collectors, it cost between $35 and $499 to file a collection lawsuit, court service fees cost $10 to $50, the additional cost if the case went to trial was between $500 and $2000, and a garnishment cost the collector $30 per transaction.459 In a study of Utah attorneys using a methodology developed by the National Center for State Courts, “the median cost per side to litigate a debt collection case through trial was $2698.”

Fair Debt Collection: 1.4.9.4 Default Judgments

When consumers do not appear in court for their collection lawsuits, the creditors that filed the lawsuits may be able to obtain default judgments—often without presenting any evidence and despite the fact that consumers may have legitimate defenses.

Fair Debt Collection: 1.4.9.5 Representation by Attorneys

Studies show that the overwhelming majority of consumers are unrepresented by an attorney when they are sued on a debt.475 However, being represented by counsel in debt collection lawsuits dramatically improves outcomes for consumers,476 including increasing the likelihood that the case will simply be dismissed.477 Having access to legal advice can also play a critical role in alerting clients to their rights prior to the filing of debt collection

Fair Debt Collection: 1.4.10 Using Arbitration to Collect Consumer Debts

In the early 2000s, hundreds of thousands of debt collection suits were initiated in perfunctory arbitration proceedings before the National Arbitration Forum (NAF) where the NAF would receive a bare-bones complaint and issue default rulings without any hearing or additional evidence being submitted.492 A state enforcement action493 put a stop to National Arbitration Forum (NAF)’s use of arbitration proceedings in collection suits.

Fair Debt Collection: 15.1.3.2 Common Interest Privilege

Another privilege, the common interest privilege, shields statements made to someone who has a legitimate interest in the information,55 such as a credit reporting agency56 or a spouse.57 A creditor’s provision of information about the debt to a collector may be protected by this privilege.58 The Restatement applies this privilege only to defamation and invasion of privacy.

Fair Debt Collection: 15.1.3.3 Anti-SLAPP Statutes

A closely related problem is “anti-SLAPP” statutes.67 These are intended to curb Strategic Lawsuits Against Public Participation (SLAPP suits), such as a meritless, but vigorously pursued lawsuit filed by a big developer to cripple a neighborhood group’s environmental or zoning challenge. Anti-SLAPP statutes typically apply to “petitioning activity” or to communication on matters of public interest, and require plaintiffs to make a strong showing of a prima facie case at an early stage.68

Fair Debt Collection: 15.1.4 Immunity Under the Fair Credit Reporting Act

The Fair Credit Reporting Act (FCRA) provides limited immunity from claims “in the nature of defamation, invasion of privacy, or negligence” for furnishing and reporting credit information.74 If the defendant furnished false information with malice or willful intent to injure the consumer, however, this immunity does not apply.75 Moreover, this immunity applies only if the consumer’s case is based on information that was disclosed to the consumer pursuant to one of three FCRA disclosure requirements

Fair Debt Collection: 15.1.5 Identity Theft

Victims of identity theft, an increasingly common crime, are often vigorously dunned for debts they do not owe, despite their efforts to clear their records.78 Their credit is often ruined by false reports to credit reporting agencies, and they may even be subject to criminal prosecution. These consumers may have several tort causes of action available to them.

Fair Debt Collection: 15.2.4 What Constitutes Actionable Conduct

In nearly all jurisdictions, outrageousness and emotional distress are required elements of a claim of intentional infliction of emotional distress,110 although some courts describe the standard for proscribed conduct as “unreasonable.”111 Some courts hold that as the outrageousness of the conduct increases, the need for additional evidence of severe distress decreases; if the conduct is highly outrageous, this may suffice to prove severe distress.112

Fair Debt Collection: 15.2.5 Negligent Infliction of Emotional Distress

Many states recognize negligent infliction of emotional distress as an independent cause of action,146 although some decline to recognize this tort.147 In the alternative, some states allow such a claim to be pursued as a type of negligence, with the usual elements of duty, foreseeability, and causation.148 Some courts allow recovery for negligent infliction of emotional distress only if the plaintiff suffered a physical impact

Collection Actions: 8.2.1 Introduction

This section discusses the scope, limitations, and validity of criminal dishonored check laws as well as defenses to prosecution under those laws. This summary should aid the civil practitioner in counseling clients who have written or endorsed checks not covered by sufficient funds. Familiarity with the limitations of criminal dishonored check laws should ease the fear of prosecution in many instances and may provide a basis for a civil claim against the collector who threatens prosecution.

Collection Actions: 2.3.2 Preparing for the First Client Interview

An essential part of any representation is meeting the client in person. There can be real problems representing a client the attorney has never met. When talking to a prospective client on the phone, before almost anything else is discussed, request that the consumer not write on any documents relating to the case. Too often consumers will have the original documents in front of them when calling the attorney and will take notes of their conversation on these originals.

Collection Actions: 2.7 Scams to Avoid

Attorneys should advise consumers as to certain scams to avoid. The marketplace is rife with companies preying on those in debt, and consumers compound their difficulties by signing up for one of these pitches.