In a typical lawsuit — car wreck, slip and fall, products liability, etc — each party pays for its own legal fees.

But in most Federal consumer protection laws, the defendant, if found guilty, must pay for the consumer lawyer fees.  We will get into the reason for this in another post but for right now let’s look at why this motivates guilty debt collectors to do the right thing.

The Debt Collector Must Pay Its Own Attorney

Many collectors have insurance that pays for some or all of the attorney fees for the collector.  But some don’t.  And even if there is insurance, it is noted how much money is being spent on the “defense” of the case.  While often defense attorneys cut a discounted rate to get a large amount of business, it is still hundreds of dollars per hour being spent to defend the collector.

In Addition, The Consumer Lawyer Often Is Paid By The Collection Agency

Not only does the collector (or the insurer) pay for its own lawyer, but it can be required to pay for the consumer’s lawyer if it loses the case.  I can’t speak for other consumer lawyers in Alabama but our hourly rate is $400.  I have been practicing since 1995 and Stan Herring has been practicing since 1997.  We have numerous jury trials, six and seven figure verdicts, and we teach consumer law to lawyers in Alabama and around the country.

So the collector, if it loses, can pay its lawyer hundreds of dollars an hour and us $400 an hour.

The Collection Agency Must Evaluate Whether It Is Guilty Early On

Given the attorney fee costs, the collection agency has to honestly answer the question “Did we do anything wrong?”  It could be an illegal collection letter that the debt collector sent.  It might be false credit reporting that violates the law.   Over the years we have often sued the famous large debt buyer “LVNV” for illegally collecting on debts after it loses its collection lawsuit against an Alabama consumer.  There are many other examples of what is wrongful conduct but the point is that the collector has to look in the mirror and honestly assess whether it broke the FDCPA.

If so, then it faces:

• Statutory damages of up to $1000;
• Compensatory (actual) damages for mental anguish, credit reporting damage, etc that might be on the lower end $5000 or $10,000, or could be on the higher end in the six figures;
• Costs of the lawsuit that it pays and that the consumer incurs — deposition expenses, travel expenses, etc. that can range on the low end in the hundreds of dollars to tens of thousands of dollars on the high end;
• Its own attorney fees — just filing an Answer to the lawsuit and setting up the file will be thousands of dollars and taking a case to trial will be tens of thousands of dollars; and
• The consumer’s attorneys’ fees — in a simple case that we file we have thousands of dollars at the beginning and to take a case to trial we will normally have well over $100,000 in fees.

So, what does this mean?

The debt collector better figure out if it wants to fight or not.  If it knows it is guilty, then it is better to fairly resolve the case early rather than let the fees and costs continue to rise.

When A Collector Knows It Is Guilty, The Motivation Is To Settle As Quickly And Fairly As Possible

The price of the case will go up every hour that is worked on the case.

The collector says “We’ll make you fly to New York to take three days of depositions.”

Our response is “OK.  That’s going to be about 40 hours of work.  So making us do this will increase our fees by $16,000 and the case will most likely get better as well.”

So a case that might settle for $15,000 now goes up to over $30,000.

We have had cases that could have settled for under $10,000 end up settling for thirty times that value because the collector wanted to pound its chest and fight and “teach you Alabama lawyers a lesson not to fight us.”

OK.

We had a lawyer in Atlanta tell us one time “If you don’t start taking less on your cases, we will make you spend a lot of time fighting it.  I’m serious John — we will make you do this.”

My response — “So you are threatening me with the ability to make a lot more money on the case?  Odd, but that’s fine.  Let’s do it.”

It is one thing for the defense lawyer to get caught up in some ego issue with threatening us but most debt collectors are shrewd business people and understand if they have been caught breaking the FDCPA, better to resolve the case early on and keep the lawyer meters from running….

Final Thoughts — Fee Shifting Encourages Early And Fair Settlements By Collectors

Here’s the bottom line — when we sue collectors and they know they have been caught — they start counting the cost.  They may not like it, but they figure it is better to come in and pay $5,000 or $15,000 or even $100,000 early on rather than facing the full value of our case plus six figures in attorney fees and expenses.

Our clients feel, and so do we, that when collectors approach us early on about settlement, that we should do what we can to work with them to get it resolved quickly and fairly.

Now the lawyers and collectors who want to pound their chest and gouge their collection clients for lots of fees to show off how tough they can be, we don’t feel any obligation to cut them any slack.  Our clients are annoyed that these abusive collectors and their lawyers won’t admit their error and make it right and this causes the collector to have to pay a price.

But most collectors are reasonable once they have been sued — and remember we don’t normally ever negotiate before suing a collector — and they will decide to act in a reasonable way to resolve the case fairly and early which is often in the best interest of both the collection agency and our client.

If we meet and you decide to go forward with the case and we agree to accept the case, then we handle these types of cases on a contingency basis so you don’t need to bring us any money.  We look to the debt collector who we are going to sue to pay our legal fees ultimately.

If we meet and you do not want to go forward with suing the collector or if we do not agree to accept your case (we only have room for a limited number of cases every month), then there is also no charge.  We don’t charge you for our time.

We do expect that you will come to the meeting prepared.  In a normal FDCPA type of case we need you to bring the following:

• All collection letters for any debts you have;
• Copies of all voicemails you have received from any debt collectors;
• Your credit reports from www.AnnualCreditReport.com; and
• A timeline of what has happened between you and the collection agency that you are seeing us about.

The reason we need all of the information listed above is that is what will enable us to give you an opinion on whether you have a valid lawsuit and whether we can accept your case.

So bring all of the information listed above and leave your checkbook at home….

A deposition is where you give testimony under oath.

The lawyer for the debt collector asks you questions.  You answer truthfully.

We are there with you.

The point of the deposition is the debt collection agency has the right to ask you questions to find out what you know, to find out about your damages, and to find out what happened in your interaction with the collection agency.

While it is natural to be nervous, giving a deposition is not a painful process as long as you follow our recommendations (assuming you are our client) and you are prepared.

Keep in mind that we will also take the deposition of one or more people from the debt collection agency and they will have to answer our questions under oath.

Taking depositions is one of the steps to getting to trial where you will have a jury decide whether the collector broke the laws and, if the collection agency did, what amount of damages should be awarded to you.

As we show in the video above, however, you can break down each question that comes your way into a four part process:

1. Make sure you hear the question;
2. Make sure you understand the question;
3. Make sure you think about the truthful answer; and
4. Only answer the question asked.

Now, there is a lot more to getting ready for a deposition.  Sometimes we will spend several days getting our clients ready for deposition.

The point is you will be prepared for the deposition if you meet with us and follow our suggestions.

By the way — the fact that you feel nervous about your deposition is a good thing.  The deposition is important and being nervous or concerned shows that you care about how you do.  And a successful deposition is simply one where you tell the truth on each answer you give to each question asked.

If you had no concern in the world?

It would mean you didn’t care.

We want our clients to care because the case is important and the truth is important to our clients.

We understand that a consumer who is considering hiring a lawyer to file an FDCPA lawsuit will want to know certain things about the lawyer, including if the lawyer has ever actually filed a suit.

This is because there are many lawyers who say “we handle FDCPA cases” and what they really mean is they negotiate with, but don’t sue, abusive debt collectors.

That may be a fine approach — but it is not our approach as we sue abusive debt collectors and then talk with them if they are interested in settling the case.

Over the years we have filed hundreds of suits against collectors.  If you live in Alabama and want to know if we have sued the collector you are dealing with, or if we have handled a similar type of suit, feel free to pick up the phone and call us at 205-879-2447 or fill out our online contact form.

You can see some of our lawsuits at our site Alabama Consumer Protection — we know some consumers like to read the actual lawsuits (Complaints) so we have some of our cases online.

Unlike the FDCPA, the TCPA applies both to original creditors and debt collectors.  While it does (rarely) regulate calls to home phones, we want to focus in on calls to cell phones.

If your client never gave permission to the original creditor (or the collection agency) to call his or her cell phone, and if the calls are being made by an auto dialer (computer dialer) or if they are made up of prerecorded messages, then the TCPA has likely been violated.

An example of these types of calls would be where you pick up the phone or your voice mail picks up the phone and there is a prerecorded message such as “please hold for the next available representative” or “if you are not [then recorded or computer says “John Watts”] then hang up immediately.”

The beautiful thing about the TCPA is that it has enormous potential damages.  The damages are $500.00 or $1,500.00 per call.  We have several cases against auto finance companies where we have between 200 and 400 calls.

If your client gave permission to the original creditor or to the collector to call the cell phone, then the safest thing to do is to have them send a letter (certified mail) revoking permission.  Often the companies will not honor the letter unless the client gives an alternative number.  It’s the way that the auto dialer system is programmed.  It must have a phone number and the representatives are not allowed to delete one without replacing it with a new phone number.  Of course, your client has no obligation to give a telephone number, so what we, often see is these companies will continue to attack your client’s cell phone.

While the law is that oral revocation is sufficient, there are some judges who say the revocation has to be in writing.  So we suggest having your  clients revoke any permission in writing along the lines of a dispute letter to a debt collector.  To repeat it:

“I dispute owing any debt to you.  If you think I do, please send me proof in writing.  Don’t call my cell phone number of (xxx)xxx-xxxx and if you think I ever gave permission to call it, I revoke that permission.”

Have your clients document the calls.  Save the voicemails.  If the calls are automated “Please hold for the next available representative” then your clients can note each missed call.

The TCPA is a powerful weapon that abusive companies hate.  I mean, they really really despise it…..  Because it takes away their ability to, in effect, tazer your clients multiple times a day.  ”Put them on the dialer” — they know it drives people crazy to have their cell phone blown up with calls.

We have a lot of information here about the TCPA and calls to cell phones that we hope you find useful.

Holloway & Moxley normally represents the following companies in lawsuits:

• Capital One
• LVNV
• Midland Funding
• Portfolio Recovery

They represent others but these are the ones we see the most often.

If you are getting contacted by Holloway & Moxley — take it very seriously as you are most likely just about to get sued.

Review what we have said about talking with collectors and sending letters to collectors and learn more information about what happens with debt collectors sue you in Alabama.

Taping a call that is illegal to tape – a two-party state.

We suggest you do not tape record phone calls with collectors — it is unnecessary and potentially dangerous to do so.  There have been people threatened with prosecution by unethical collectors and district attorneys — the threat is you must drop your case or face criminal punishment.  Totally illegal and unethical but that’s reality.

Don’t give these abusive collectors the chance to hurt you in this way.

Taping a call that is appropriate but the matter in which the taping is done suggests that the consumer was trying to set up or entrap the debt collector.

We never recommend trapping or tricking debt collectors.  That’s not right and there is no reason.

If you are dealing with an honest collector, they won’t break the law.

If you are dealing with a dis-honorable collector, they will be eager to break the law.  No need to help them.  All you need to do is always act honorably and document what the collector says and threatens.  These guys who are willing to break the law don’t need your help — they can blow past the lines of legality by themselves just fine….

Failing to understand what a business debt is even if it is personally owed.

The FDCPA only applies to consumer debt.  Make sure you tell your lawyer what the debt is for so your lawyer can help you understand if the FDCPA even applies.  If you hide this from your lawyer, you may have what appears to be a good case go up in smoke.  So it needs to be figured out on the front end what type of debt you are dealing with…..

Hiding from us the fact that you have been convicted of a crime.

If you have been convicted (pled guilty, etc) of a crime, that may come out in the trial.  That’s fine.

As long as we know about it.

If you have done your time — you have paid the price — then we find the overly eager unskilled lawyer who wants to beat you up over this in front of a jury to be ineffective.

But.

But if you hide your crimes.

If you try and fool us and fool the debt collector lawyers.

Then you can lose your whole case.

Once you lose your credibility, you lose your case.

Remember Martha Stewart didn’t go to jail for insider trading — she went to jail for lying about it afterwards.

Being dishonest about any aspect of the case.

To expand on the last point — be honest.  Don’t exaggerate or stretch the truth.  Again — if you lose your credibility, you lose your case.  That simple.

This is why debt collectors who break the law make sure poor witnesses — they seem incapable of not lying and when the jury realizes this abusive collector has lied to the jury, it’s over.

Being abusive towards the debt collector which could be a very negative thing and could ruin a good case.

Remember, you wear the white hat.  You are the good guy.  Don’t cuss out the collector.  Don’t lie to the collector.

Let it be a stark contrast between how respectful and truthful you are and how arrogant and abusive and dishonest the collector is….

Blogging about the case or talking about some on social networking site or doing anything that would be inconsistent with the claim of actual damages and emotional distress.

Don’t talk about your case.  Its fine for the public record of the complaint to be out there but you don’t need to go into any level of detail (or generalities) about your case.  You have hired us to present your story.  Let us put the facts together.  Don’t try and do it yourself.

You may say something that you mean in an innocent way that destroys your whole case.  Best rule of thumb — don’t talk to anyone in any way about your case unless we tell you to….

Just talking about the case or talking about strategy or talking about plans in the case to anybody other than us.

Related to the last point — don’t talk about the strategy of the case.  Don’t take a letter or email we send you with our thoughts on the case and share it with your uncle or brother or anyone else.

If you do, you may have caused our communications to become unprotected and no longer privileged and you may have given away the strategy to the abusive collector.

Talk to us and no one else.

Statute of limitations runs.

If you have a potential case, have an FDCPA lawyer look at the case.  There is a one year statute of limitation that can sometimes be tricky to figure out when it starts.  Don’t wait too long and lose the right to bring your case.

Here is a sample for you to consider….

VIA CERTIFIED MAIL, RETURN RECEIPT REQUESTED

List the agencies

Dear Sir or Madam,

I am disputing the Portfolio Recovery Associates account that is on my credit report with you.  It is the only Portfolio Recovery account listed.  The account number is 12345678xxx according to my reports.  To help you, I’m enclosing the page of my credit report where this account is listed – I have circled it for you.

I settled this debt with Portfolio Recovery in January.  This completely resolved the debt that I owed.  So I don’t know why this is listing a current balance owed of $3500.  I also don’t know why this is showing up as being late in the months after January.  If I don’t owe anything, how can you and Portfolio Recovery say that I am late?  That’s impossible and doesn’t make any sense.

But regardless of the reason, please delete the balance owed and make it show that I owe zero and delete the history after January in which I paid this account off.  Please make sure this is corrected and stays corrected.  If you can’t get a straight answer out of Portfolio Recovery then just delete the account.  I do not want false information on my credit reports.

I’m enclosing a letter from Portfolio Recovery acknowledging receipt of my settlement payment and that the account is settled and I do not owe any more money.

If you or Portfolio Recovery (who I’m copying with this letter) decide you want to keep this account on my credit reports, please explain to me in writing why you are doing this.  Same for Portfolio Recovery — explain why you are keeping this.  To all of you — show me the documentation that explains how I can possibly owe money when I have settled the account.  I’ll be shocked and disappointed if you keep false information on my account and don’t even make an effort and explaining why you are doing this to me.

But I’m confident and hope that you will remove this false information from my credit reports. If you have any questions or if you are confused in any way by my request, please write to me at my address or call me at ____________ or email me at ______________.  I’m trying to make it easy for you to get in touch with me as I must have this false information removed from my credit reports.

Thank you for correcting this error.

Full Name

Full Address

All phone numbers

Email

DOB

SS

Enclosures:

Recent power bill/bank statement/etc showing your name and address

Letter dated 1-15-12 from Portfolio Recovery

Copy of Driver’s License

Copy of Credit Report showing Portfolio Recovery Associates account

cc: Portfolio Recovery Associates (list full address from credit report)