Debt collectors and lawsuits

I have a question. I am in Massachusetts and was wondering if a debt collector themselves can file a lawsuit against a consumer or if they would have to hire an attorney to do it for them.

In my state they have to be a licensed debt collector. So if they are and contact a consumer and if the consumer doesn't respond in the first 30 days, what happens next? We have debt collector attorneys in this state and frankly they are worse than the debt collectors. But I would assume that if a debt collector is unsuccessful at contacting a person they would then have to sell the debt off or pass it to an attorney and the whole dunning letter process starts over again.

Am I correct?

Some states (like IL) will not allow companies/corporations to litigate themselves; companies wanting to sue are required to retain a lawyer to file suit on their behalf. However, other states (like WI) do allow companies to file suit pro se without an attorney representation. So it does depend on your state law -- it will be buried somewhere in the code of civil procedure. Also, some CAs have in-house attorneys on the payroll who can file suit for them if it is required.

As to licensing -- I know that if the debt collector is required to be licensed in your state, then they should not contact you directly (letters, phone calls, etc) unless they are licensed. I'm not sure whether they would have to be licensed if they used a licensed attorney to do their collections for them...

Regardless, every company works differently and has different policies. Some will sue, some will just resell it. Mostly it has to do with the "collectibility" of the account. If they believe they'll be successful and they know where you live & work, they may go ahead and file suit; where if they don't know where you work and/or they don't know how successful a lawsuit might be, they'd rather re-sell it than pay for the upfront court costs.

Does having to file in the regular court, not small claims, sometimes prevent a collector from filing a lawsuit? Small claims is for suits less than $4000 and if the debt according to them, is $4001 or higher, they would have to file in regular court, which costs more.

AJJ I believe it would in some cases. If they have the original contract you signed then they will file suit.

In my case and my state they filed in small claims for $2,000 the limit. During that time they sent me letters saying it's not too late to settle out of court for $3,200. That right there is a big no no. It is claim splitting. The case was dismissed and now they filed it in the higher court and are asking for less than they did in small claims court $1,932.25 plus attorney fees and interest when they originally said in small claims the $2,000 included interest and fees per the original contract.

On top of that, they sent me 2 different contracts, not signed, from 2 different companies on the same debt. First one says Emerge Matercard with interest @ 18% and then now it's a Providian Mastercard with an interest @ 29.99%

I got them by the balls and I can't wait till I get these fools in court.

CA's can NEVER file themselves....debt collectors are not attorneys. They must refer to a law firm.

CA's generally do not have in house attorneys. The CA I worked for originally had an attorney working within our office under a seperate name that we referred all our accounts to. However somewhere along the line something occured that they had to relocate to a seperate office on another floor with a completely seperate phone and computer system.

There is a difference between a CA/JDB that bought a debt versus a CA that is working on contingency for a creditor. The CAs working on contingency really cannot sue because it's not their call to make. (Unless of course the creditor authorized them to go that route).

However, a JDB ... in a state like Wisconsin, that doesn't require them to have attorney representation and lets them sue pro se, why couldn't they file suit if they owned the debt?

For example, my company has an office in Illinois and an office in Wisconsin. In Illinois, we have to send our accounts to an attorney, because that's the law. But as for our Wisconsin accounts ... our collection manager takes files once a month and goes to the courthouse and files suit pro se. (He is not an attorney, has no legal background, but WI lets him sue on my company's behalf because he is an agent of the company).

So why couldn't a CA if they owned the debt?

Debt company sued for misleading customers
By Michelle Durand

Many customers of Freedom debt relief actually incurred greater debt through late fees and collection lawsuits because the San Mateo-based financial services company purposely misled consumers to get their business, according to San Mateo County prosecutors.

The Consumer and Environmental Unit of the District Attorney’s Office joined with the California Department of Corporation to sue Freedom Debt Relief, LLC, Freedom Financial network, LLC and company owners Andrew Housser and Brad Stroh. The lawsuit filed Oct. 30 in San Mateo County Superior Court claims the defendants engaged in unlawful business practices, including making false or misleading statements to consumers via the Internet and telephone to induce them to buy debt reduction services. The suit also claims the company violated the state financial code by operating without a business license from the Department of Corporation.

The business, located at 1875 S. Grant St. in San Mateo, advertised having approximately $1 billion in debt under management throughout the United States. The company advertised being able to negotiate a 40 percent to 60 percent reduction in debt to unsecured creditors but, according to prosecutors, instead made some customers’ situations worse.

“Instead of their debts being settled or reduced, many of the defendants’ customers suffered increased debt because of late fees imposed by creditors, referral to collection agencies or collection lawsuits. Some customers ended up in bankruptcy,” according to the suit.

Prosecutors want an injunction ordering the company to follow the law, pay restitution and pay civil penalties between $2,500 and $10,000 for each violation.

The company’s goal, according to its Web site, is to eliminate rather than simply lower debt. The plan for those who qualify, the site explains, is a “debt reduction program” which involves “affordable monthly savings obligations” to get consumers out of debt “in as little as 2 to 3 years.”

The founders have been profiled by numerous news organizations and were finalists for the 2006 Ernst & Young Northern California Entrepreneur of the Year award.

Consumers who believe they have been victimized should file a complaint with the District Attorney’s Consumer and Environmental Unit at (650) 363-4651.


Michelle Durand can be reached by e-mail: michelle@smdailyjournal.com or by phone: (650) 344-5200 ext. 102.