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Collection Actions: 5.2.2 Misapplication of Payments

Particularly when a debt is sold and resold, or when a creditor has hired multiple collection agencies to collect the same debt, consumer payments to these various entities may not all be properly credited, resulting in the collector claiming an excessive amount owed or seeking collection on a debt already paid in full.46 This can happen when a consumer makes a payment to the original creditor after the debt buyer has purchased the account.47 In fact, the debt buyer may have no system in place to ac

Collection Actions: 5.2.3 Sales-Related Claims As Defense to Credit Card Obligations

The Truth in Lending Act provides that a credit card issuer is subject to all claims (except tort claims) and defenses of a consumer against a merchant when the consumer uses a credit card as a method of payment or extension of credit, if certain conditions are met.51 That is, the consumer can dispute the amount owed on a credit card obligation by claiming that the purchases at issue involve claims against the merchant, such as product or service defects, deception, or nondelivery.

Collection Actions: 5.2.4 Sales-Related Claims As Defenses to Other Forms of Credit

Many sales transactions involve either a credit-sale, where the seller originates the credit, or the seller arranges for credit from a third party to allow the consumer to make the purchase. A prime example is a motor vehicle sale where the dealer originates and assigns the motor vehicle installment sales agreement or where the dealer arranges financing from a third party. Other examples are home improvement sales, manufactured home sales, furniture sales, and electronic appliance sales.

Collection Actions: 5.2.5 Servicemembers’ Dispute As to Finance Charges

When an obligation was incurred prior to a servicemember’s active duty, the interest rate and late payment fees on any credit obligation must be reduced to 6% while the servicemember is on active duty.53 Any additional charges must be forgiven, not deferred, and spouses jointly liable on the obligation share the same rights as the servicemember.

Collection Actions: 5.2.6 Where Debt or Interest Portion of Debt Is Void

State law often finds that usurious interest charges void or makes voidable either the interest charges or the principal and interest.55 A good example may be a payday loan for which interest rates exceed that allowed by law.56 If a loan obligation is void in whole or in part, this is a valid defense to the collection action.

Washington State has a statute providing that:

Collection Actions: 5.2.7.1 Generally

Often, consumers make a payment on a debt in reliance on the creditor’s or debt buyer’s representation that the partial payment will be in full settlement of the amount owed, or pursuant to an agreement that, if the consumer follows a revised payment schedule, the total remaining obligation will be reduced. Customer service agents are often authorized to waive or reduce fees and interest rates in response to customer requests.

Collection Actions: 5.2.8 Discharging the Debt by Accord and Satisfaction

When a consumer has made a partial payment of the amount the collector seeks, and notifies the collector that the payment is in full accord and satisfaction of the debt, then the debt is discharged if certain conditions are met. For payments made by check, these conditions are set out in U.C.C. § 3-311.85

Collection Actions: 5.2.9 Prior Collection Action on the Same Debt

A surprisingly common practice is for the consumer to be sued twice on the same debt.95 For example, a debt buyer may sell an account after the debt buyer’s collection lawsuit has been dismissed with prejudice. Alternatively, a consumer can be sued on a debt, pay it off in full, and be sued on the same debt again. The same consumer debt is regularly sold and resold to multiple debt buyers, often as part of a portfolio of thousands of accounts that may be evidenced by nothing more than an Excel file.

Collection Actions: 5.2.10 Debts Discharged in Bankruptcy

The discharge of a debt in bankruptcy is a complete defense to that debt. Nevertheless, some collectors continue to sue on debt discharged in bankruptcy. For example, in one case, a U.S. trustee alleged that Capital One filed 5600 bankruptcy proofs of claim for debts previously discharged in bankruptcy.

Consumer Class Actions: 17.2.1 Overview

This section outlines basic trial preparation and alternative trial structures for determining liability and damages. The trial structure and format may take many forms. The most basic form is trying both liability and damages in one trial, although other accepted techniques may include bifurcating liability and damages, resolving different causes of action in separate phases of the trial, or using other innovative trial structures. Whatever technique is adopted, however, early trial preparation is key in class action cases.

Consumer Class Actions: 17.3.1 Overview

Proving liability in a class trial may be no different than proving liability in an individual trial with one important exception—in the presentation of each piece of evidence, the case must focus on the defendants’ wrongdoing on a classwide basis. It is therefore important to introduce the defendant’s common course of conduct, policy, or practice early in the trial proceedings. Having a liability expert testify first is often the wisest strategy. That expert can then explain the business practice and whether it was common or uniform for all class members.

Consumer Class Actions: 17.3.2 Proof Through Class Representatives

Although liability may be proven solely through the testimony of the class representative and supporting documentary evidence, defense counsel will often attempt to impeach this testimony by eliciting admissions that the representative does not—and cannot—know how other persons reacted, or whether they were harmed in any way. Setting aside whether such questions are proper in a certified case, the better practice is to establish the defendant’s common course of conduct before the representative testifies.

Home Foreclosures: 16.2.2.1 Priority of Real Estate Tax Liens

If the property tax is not paid within a certain time period, the tax bill becomes a lien on the property. (Often this is the first day of the year following the year in which the tax is assessed.)14 The creation of a tax lien generally occurs automatically by operation of state statute. In some states, a lien for the tax obligation may arise automatically upon assessment even without a delinquency. The lien also typically becomes effective as against fixtures on the property.

Home Foreclosures: 16.3.3.1 Overview

Once a tax sale has been conducted, homeowners generally have three options: they can redeem the property by paying the purchase price plus interest, penalties, and costs; they can do nothing and the tax purchaser’s interest will ripen into ownership, or they can attempt to set aside the completed sale.

Home Foreclosures: 16.2.3.1 Overview

Most jurisdictions follow these sequential steps to foreclose on properties delinquent on taxes: (1) imposition of lien and notification of pending tax sale; (2) sale of a tax lien certificate or tax deed, or conditional transfer to the government entity; (3) period for homeowner to redeem; (4) foreclosure of the right of redemption; and (5) final transfer of the property.

Collection Actions: 5.1.1 What This Chapter Covers

This chapter analyzes basic defenses that apply to actions to collect credit card debt and other consumer debts. Depending on a state’s procedures, some of these issues must be raised as affirmative defenses in the consumer’s answer or they will be waived. For other courts, a general denial of allegations in the collector’s complaint will suffice. The following defenses are considered in this chapter:

Federal Practice Manual for Legal Aid Attorneys: 8.0 Introduction

This Chapter will explore the contours of the primary limitations on suing states, state subdivisions, and state officials in federal court. The first Section surveys the Eleventh Amendment and focuses on important recent developments in this area. It covers the abrogation and waiver of sovereign immunity and the availability of prospective injunctive relief under the Ex Parte Young doctrine. The second Section discusses the scope of absolute and qualified immunity in Section 1983 suits against public officials in their individual capacities.

Federal Practice Manual for Legal Aid Attorneys: 8.1.0 States’ Violation of Federal Statutes

Section 8.1 updated 2013 by Rochelle Bobroff, 2023 by Jane Perkins

Many federal programs, including cash assistance, medical insurance, nutrition assistance, and housing, are implemented through grants to states. The states are responsible for the administration of these programs and are required to operate them in compliance with federal law.3826 Beneficiaries may have a claim in federal court if a state violates a federal directive in the administration or denial of these programs’ benefits.

Federal Practice Manual for Legal Aid Attorneys: 5.4.1 Implied Private Rights of Action

In Marbury v. Madison, the Supreme Court explained that “[o]ne of the first duties of government is to afford” remedies “for the violation of a vested legal right.”2086 But federal law has never guaranteed a personal remedy for every violation of a federal right. For a time, however, the Court pointed to Marbury as inspiration for the routine implication of private rights of action to enforce rights under the Constitution and federal statutes.2087

Federal Practice Manual for Legal Aid Attorneys: 2.6.1 Introduction

Section 2.6 updated 2013, 2023 by Jeffrey S. Gutman

Violations of state law may provide a basis for claims in addition to those founded in the Constitution or federal statutes, to be litigated in federal court. Bearing in mind the strictures of the Eleventh Amendment, discussed further below, advocates must evaluate whether the principles of supplemental jurisdiction should allow the federal district court, in its discretion, to adjudicate state law claims.