HOWTO send vulture debt collectors packing

"Defending Junk-Debt-Buyer Lawsuits" is a paper written by Peter A. Holland of the University of Maryland Francis King Carey School of Law and published in the May 1 issue of Clearinghouse Review. It's a clear, short, absolutely readable (and indispensable) guide to fending off speculative lawsuits from vulture debt-collectors. These are the debt collectors who buy up bad debts that banks and other creditors have written off (because there's insufficient evidence that the debt exists in the first place, or because it's past the statute of limitations, or because the debtor has been through a bankruptcy). Then they bulk-file lawsuits against the debtors, hoping that they won't show up in court to defend themselves, so that the vultures can win judgments and use them to go after houses, cars, salaries and so on. As Naked Capitalism's Yves Smith puts it, these vultures are buying up a lot of scrap paper, hoping to find a lottery ticket.

It's surprisingly easy to fend off these bottom-dwellers, though. They have to prove that you owe them money. A brief moment spent scrutinizing the documents filed against you is usually enough to find evidence that will get the case dismissed. Holland's paper explains in detail just what to do to get these vampires to flee from your door:

Read the complaint and accompanying documents multiple times, highlighter in hand, while looking for intentional deceptions, errors, and omissions that could help your client prevail. First, look for defects on the face of the complaint. For example, the named plaintiff might be a different corporation from the entity named in the supporting documents. This occurs with surprising frequency. Second, if your state requires debt buyers to be licensed as debt collectors, check whether the debt buyer is licensed. Suing without a license creates standing issues, and, according to an increasing number of courts, it constitutes a violation of the Fair Debt Collection Practices Act.16 The junk-debt buyer is subject to the Fair Debt Collection Practices Act because the junk-debt buyer allegedly acquires the debt after default.

Third, look for the failure to prove the existence of (or the terms and conditions of) the alleged underlying contract. Failure to prove the contract is the rule rather than the exception. Often a contract is not even attached to the complaint. More often, some well-worn photocopy sample of a terms-and-conditions mailer is attached. This sample is often illegible, and almost never signed by the consumer. On close inspection, the printing date on this document often reveals that it was generated years after the account was allegedly opened. Also, the terms and con- ditions submitted may not be from the original creditor identified by the junk-debt buyer but are presented to make the claim appear supported.

Fourth, the debt buyer is usually unable to prove a complete and unbroken chain of title. Without a valid chain of title, the debt buyer does not have standing to sue.

Defending Junk-Debt-Buyer Lawsuits (via Naked Capitalism)

(Image: Vulture, a Creative Commons Attribution Share-Alike (2.0) image from 7704782@N07's photostream)


  1. ok but with the exception of debts still pursued after bankruptcy, we are still talking about debts that are actually owed, yes?  Not debts that have been created out of thin air?  Is there actually a situation in the US where debts that never existed are created by fraudsters, or are we talking about money that is actually owed, and the debtor is trying to get out of paying?

    1. There has been at least one case of a house the owner bought outright, without a mortgage, being repossessed for mortgage default.

      In that case, I think it went something like this: The previous owner and the mortgage issuer agreed the house was underwater, and that it could be sold for less than the outstanding mortgage amount so that they could all collect the most they could reasonably expect to.  The mortgage was then closed, by mutual agreement, for less than the nominal outstanding principal.  The buyer had the full amount in cash, and so did not take out a mortgage.

      Meanwhile, the option to foreclose had somehow been acquired by a different company from the option to receive payments.  Some other company believed it still had the right to foreclose under a mortgage that had stopped receiving payments (since it didn’t exist), so they got bailiffs to padlock the house and seize and sell off all the new owner’s furniture, computer, clothes, etc.

      EDIT – I didn’t have the details exactly right, but the overall theme is right – record keeping was so sloppy that a debt that hadn’t existed in half a year still resulted in a foreclosure.

      If the documents filed in these cases are so sloppy, they presumably include at least some “debts” of a comparable nature.

      1. man if there was ever a time when title insurance was warranted, that would be it.    I’m Canadian… and I’ve heard of friends of friends buying property in the US ‘cuz of all the foreclosures bringing amazing deals, but I always warn them to lawyer up and get ironclad title insurance because of how screwed up things are.

        but that’s (hopefully) a truly exceptional case.  I think I heard that episode of This American Life btw.  

        1. as someone currently house-hunting thanks to all the deals out there (however ill-gained they may be), this is my nightmare scenario.  definitely going for the title insurance.  similarly, a friend of mine bought a house with a lot of back taxes owed on it, and what was a reasonable house payment somehow ballooned into a not so reasonable one as a result.  being a grownup is some scary shit sometimes.

        2. man if there was ever a time when title insurance was warranted, that would be it.

          Title insurance is loaded with so many disclaimers, they rarely have to pay a claim.

    2. Debts that are already paid, debts that never existed, debts that are merely being demanded of the wrong person, all of these are fairly common in the US, yes.

    3.  No. As the paper explains, many of these debts are the result of identity theft, or have been paid already but incorrectly filed, or etc. These are debts that the creditors have sold for $0.01-$0.04 on the dollar, which gives you a sense of how much confidence they have that the debts are any good. The vultures are penny-stock speculators, asking courts to accept robosigned documents and ignore the rules of evidence so they can take away peoples’ houses.

    4. Not necessarily. The NY Times just had a long piece about this:

      In some cases, someone owes a small amount of money, and the records show they owe a large amount. In others, bills were paid, but they are presented as if they were not.

      (Also, bankruptcy law changes a few years ago make it possible for debts to be collected of all sorts after bankruptcy in a way that used to be impossible.)

  2. If I ever find Pamela J. W______,  whose alleged debt has gotten me at least three calls to my cell phone a week for the past four years, I’ll pass this on to her.

    1.  I get a robot calling for somebody with the same first but different last name as me. The message is funny. Something like “Press 1 if you are this person. Press 2 if you can bring this person to the phone. Press 3 if you know how to get in touch. Press 4 if you used to know him but now don’t know where he is. Press 5 if…”

    2.  I used to get a lot of debt-collection calls to a new cell-phone number also. I tried ignoring them but they continued. So I started answering the calls, or returned the messages, and explained respectfully to the person on the other end that I was not the person they were looking for. The calls soon stopped and I haven’t had one in years.

    3. I get calls for Ed F. Ed F. lived in a house in San Francisco. I moved into the house after Ed moved out. I moved into that house in 1989. I’ve never met Ed, but I get his debt collection calls.

  3. Oh, my — having filed bankruptcy, I’m a tad concerned here.  If I have documentation that bankruptcy has been completed,  all debts listed under the bankruptcy have been discharged, and no new debts incurred, surely they have no standing to sue for debt, right?

    1. Standing, no. Default judgement that ends up creating some sort of new debt obtained when you don’t show up in court because they sent a summons to an entirely incorrect address? Quite possibly. 

    2.  This article is all about people who have no standing to sue, suing anyways in the hope that you’ll fail to respond, so they can collect a default judgement.

      In the US, it takes a concerted effort and a good bit of money to defend yourself successfully against a frivolous lawsuit, and it’s easy to make a misstep that results in the aforementioned default judgement.

  4. Heh, this happened to me this past month with an old credit card debt. I live paycheck-to-paycheck and couldn’t find a way to pay it off despite it haunting me for years. 1 was served papers and negotiated with the lawfirm on the phone. He told me out of a 2k debt I owed him 17k. This was for “fees and interest” that he refused to give me details on. I negotiated down to a 2,500 settlement but I had to take a loan against my 401k to do it. I suppose I could have gone to court, but I felt better paying what I originally owed.

    That isn’t exactly interesting in itself, but what is was the fact he must have done some research and had it in his head that since I “owned” a company at some point (it was actually just me alone, freelancing design work), I had piles of cash laying around. He even mentioned a couple paintings I did over 10 years ago. He got very upset when I told him it was just me in that company name, and sighed with disappointment. It was the creepiest phone conversation I’ve ever had. From that, it seems they also become worse if they think you have the tiniest small business to grab on to.

  5. I have a rather common first and last name. I have never missed a payment in my life, but a lot of debt collectors call me. I try to fix the situation over the phone with mixed success. Next time it may be more fun and possibly profitable to shout “You will never collect a penny from me” and hang up. In the event that I am sued, harassed, or suffer credit damage as a result, it would seem that I would have grounds to counter-sue for compensatory and punitive damages. The downside is that most of these “companies” would just fold and reopen.

    1. There are 23,000 of me in the US alone. Several of them even have Social Security Numbers rather similar to mine.

  6. It happened to me …. long story short – credit card, behind on payments, managed to settle and clear the debt …. which was THEN sold to someone who sent me letters demanding payment (even though it had been paid off), who then sold it to ANOTHER firm, who did the same thing (writing me letters, threatening hits on my credit report, demanding payment, etc.), til the last ‘owner’ of my ‘debt’ actually took me to court over it – but didn’t bother to show up himself, he telephoned in as a conference call with the judge (??!!??) with me on the witness stand (he was in the same state (FL), but the opposite end) …. 1. they could not prove ‘chain of title’ of the ‘debt’, 2. none of the firms EVER responded to my written replies, showing evidence the debt had already been cleared, and 3. when I showed the judge the ‘debt paid in full’ and written letters to these various firms, the lady judge went off on this vulture debt collector right then and there, in court, over the phone. Case dismissed!

    1. Great. You “won”. You were still out for your time and money to defend yourself over a non existent debt. Getting chewed out over the phone by a judge isn’t enough incentive for the debt collector to change their illegal practices. Serious fines and risk of imprisonment should be the consequences that these sleazeballs need to face.

      1.  Put a bounty on these fraudulent bastards scalps I say!  Why should they feel safe, when they live their lives pursuing people fraudulently.  Give them a five minute head start, and see if they run.

  7. If you get sued you should immediately have a lawyer examine the complaint.  I haven’t read the paper, but my view is that it would be an extremely bad idea to believe that a non-attorney reading this document would be equipped to be able to respond to a lawsuit.
    Further, defending yourself pro se is sort of a legendarily bad idea in general (see Mark Twain’s comments on this subject).

    1. And be sure to ask the lawyer to demand that the plaintiff pay the defendant’s FEES and COSTS as punishment for filing a frivolous lawsuit.

  8. I’ve never been sued, but I have had a few debt collection agencies hound me over the phone regarding some fraudulently-obtained DirecTV service obtained by others using my name and SSN.

    It’s quite a distressing feeling, knowing that these creeps are allowed to hound you at all hours of the day and night, for no good reason.

  9. Would it be worthwhile to counter-sue when confronted with a frivolous suit?  I’d think an attorney could at least collect a significant fee this way.

  10. I saw something recently regarding this sort of situation in the UK that said that once a debt was sold on, it was considered to have been fulfilled, ergo there was no debt for the collectors to collect on. Does anyone know if that’s correct?

    1. No.  The debts are sold on to debt collection companies who aggressively chase you for higher and higher payments even though you have been paying what was agreed without fail.  All correspondence to them goes ignored including requests for statements of account.  These people are pure evil, as are the creditors who sell on debts.  My other half got into financial difficulty before he met me and is still having issues over it more than 6 years later..

  11. A debt  collector harassed us about someone else’s debt (same name as my husband) and wouldn’t believe they had it wrong.  They threatened to have papers served, etc. etc.    It wasn’t even our debt and it was hard to deal with.

    Their calls came through as unknown name.  We contacted the phone company because the calls should not be coming through  (we had that kind of call turned off).   But debt collectors (and others) can now pay the phone company to let them through, trumping the service we are  paying for and not getting.

    They also prey on the elderly.  My mother in law’s finances have been a mess to clean up.   We never could fix some things no matter how hard we tried.

    No call doesn’t seem to work any more.  It just gets nastier and nastier out there.  

  12. I’m so happy to see someone writing something about this. I’ve had multiple companies (but actually the same vulture reinventing itself over and over) chasing me for over 14 years, even after the original company concluded that they had made a mistake and there was no debt. After that, it was considered an “uncollectable” and they were not allowed to sell it as a bad debt, but they did, so it goes on and on. There is something a bit fraudulent going on here.

    Companies who buy bad debts and try to collect them keep them going, as the author described, like zombies. Of course if someone has a valid debt they should pay it, but most of what these companies are involved in is bad or uncollectable debt and it’s gotten out of control.

  13. I get calls every so often for credit card debt I incurred long ago, and for which the statute of limitations (4 years in Cali on a breach of contract) passed at least 6 or 7 years ago.  it’s usually from a caller that is in southeast Asia, but who works for a US Company.  they first tell me the call is being recorded, to which I always respond, “That’s ok because I’m recording it too.”  that usually ends the call.  If not, then I like to remind them of a quote from a US Supreme Court case, the name of which now escapes me.  It goes something like “If not by replevy, then not by hand.”  that means that, once the statute of limitations has passed on collecting the debt by way of suit, so has it passed on trying to collect it by means short of suit (by hand).  I also like to use foul and offensive language, so that they know how it feels.

  14. When my ex-wife and I divorced, between the two of us we had about 45K in credit card and consumer debt. 25K in my name and 20K hers, and that’s how we split it. I have no idea what she did with hers, but I know how I took care of mine.

    I walked away from it.

    It was easy, I changed my address and my phone number, screened my calls, and would not answer any mail. Once I started down that path, there was no looking back. No contact whatsoever with collection services. Not one thing that would give them any hope of a nickel or a dime. (Rule #3 – If you can be found, you can be controlled.)

    My friends and family got to be on good terms with my answering machine, though it helped that I worked odd shift hours at a factory, and when I was home I was usually asleep. I did pay attention to the content of the calls and mail sent my way, once they figured out my new address and phone number. I was watching for any legal notices that said “No more threats. We really are taking your dead beat ass to court.” They never came.

    As the years rolled by, and I waited for my debts to cross my state’s statute of limitations on debts and credit reports on those debts (7 years), I watched my debts migrate from one collections company to another. I saw one debt, hardly my largest, get sold to three different companies after the original lender gave up. I got letters that appealed to my moral duty to pay off my debts. I got offers as low as .50 on the dollar. “For a limited time we have been authorized to settle this account.” But I knew this was a trap. Any communications, any payment agreements, any acknowledgement of a debt, and they’d come for me with dollar signs in their eyes. (There were two bills that I did have to pay off. They were to organizations that could come for my ass if I didn’t pay up: the IRS and The Phone Company.)

    What did this cost me? 8 years of living without credit. 8 years of having to *gasp* live within my means. But learning to live on what I actually had in the bank, and not on future earnings that had not been earned yet, was a valuable lesson. It was tough, it was not easy, but I learned how to live frugally. Ten years later, I bought a car and paid off the loan ahead of time. I have a credit card that is wisely used. I have a credit history that now sparkles. Most importantly, I have taken a hard lesson to heart and changed my behavior.

    I’m sure there are those of you who will curse and flame me for my immoral act of not paying my debts, and how my actions indirectly hurt others. But after the actions of American banks and businesses in the economic disaster of the last few years, I say so what? I’m just following the example set by our leaders. If Banksters can walk away from their mess and get bailed out, so can I. And that’s just what I did. F U Wall Street!

    TL:DR – Guy walks on debt and gets away with it. 10 years later everything is golden.

    1. I ate oatmeal two meals a day for five years and wore clothing with stitched up holes all over them to pay off my debt.

  15. Once a debt has been sold off, one of the worst things you can do is settle up with the original creditor — it just gives you a false sense of security.

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