Can a debt buyer truly collect against me?
Can a debt buyer truly collect against me?
We are frequently asked if debt buyers can really collect against a consumer.
I’ve been a consumer protection lawyer for a long time, and a big part of my practice is dealing with these debt buyers who claim to have bought a debt.
They will tell you they have bought the debt, but is this true?
Do they have any right to collect?
Does it make a difference if they have bought or did not buy your debt?
The answers to these questions will help you determine whether the debt buyer can truly collect against you.
What is a debt buyer?
Debt buyers are companies like Midland Funding, Midland Credit Management, LVNV Funding, or Portfolio Recovery.
These companies claim that they have gone out and bought up massive amounts of debt.
They’ll pay maybe five or seven cents on the dollar for the debt.
They don’t just buy one credit card debt at a time.
They buy up a hundred million dollars worth of debt at any one time and only pay a few million dollars for it.
What do debt buyers do with this debt?
A few of them will try to sell this debt for a profit.
This is like buying stock, where you might buy a stock for $5 and then turn around and sell it for $7 to make a profit.
What the majority of these companies do is begin to collect on these debts.
They may try to collect the debt personally.
This means that if Portfolio Recovery purchases a debt, they will have someone who works for Portfolio Recovery call you.
Portfolio Recovery will write you a collection letter, and they will credit report.
Other times when these companies buy the debt, or at least claim to buy the debt, they don’t really have their own employees to collect. They’ll farm this work out to other companies to actually make the calls, write the letters, etc.
In this particular example, LVNV itself will credit report on you, but another company will be doing the rest of the collection work.
Does the debt buyer actually have the right to collect?
This comes down to two main questions: Do they own the debt and do you owe the debt?
If you do not owe the debt, they can have the best proof that they bought the debt but it is meaningless because you do not owe the debt.
Sometimes we’ll deal with a debt buyer and beat them in trial.
Then they will turn around and sell it to another debt buyer.
Now that second debt buyer owns the debt and decides to come after us.
Is this legal?
We won at trial.
The judge has said that we do not owe this debt.
This is all the proof we need.
The more common situation is where they say, “Did you have a Capital One account of $3,000?” and you might say, “Yes, I had a Capital One account although I don’t know the exact amount.”
But when Midland Funding or another debt buyer writes or calls you, do they actually own the debt?
To ultimately prove they own the debt, they need to show the contract.
We discussed this recently in our post about the Completeness Doctrine.
Often, the debt collector will only present one page of the Bill of Sale and claim this is enough.
This Bill of Sale is just a small part of a bigger document called the “Purchase Agreement.”
The Completeness Doctrine allows us to request that this entire document is submitted.
So, in trial, we’ve been very successful to say, “No, you have to produce the entire purchase agreement. We need to see what you bought and what representations were made. We need to see what you agreed or did not agree to do.”
Sometimes what they bought is not actually our debt.
Clearly, this is a problem.
Sometimes the representations made by the seller of the debt are “We make no promises or representations that anything we are giving you is remotely accurate.”
That’s why they’re buying it for 5 cents on the dollar.
Then other times the purchase agreement will say, “but you have to agree not to sue.”
This is also a big problem.
If they have agreed not to sue and are now turning around and suing us, this is a big deal.
So we want to see exactly what it says in the purchase agreement and the debt buyer never wants to reveal the full purchase agreement.
Ironically, it is easier to fight this when they sue you. Because they are the ones that have sued you, they have to prove that they own the debt and that you owe the debt.
They have to provide enough evidence to tip the scales of justice in their favor.
If they don’t provide the evidence, then you win.
What if they haven’t sued?
What if they are just calling and you answer the phone and request the purchase agreement?
You can do this, but I can almost guarantee that they will never send this to you. Most courts will not require them to do this outside of a lawsuit.
What if they write you a letter?
You could send a validation request back to them under 1692g of the Fair Debt Collection Practices Act (FDCPA).
The validation letter tells them you don’t believe they own the debt and requests proof.
You can request a copy of the purchase agreement in your letter, but they won’t send it.
They’ll send the Bill of Sale or an Affidavit, or some other document.
At this point, you can reply back that the Bill of Sale says it is part of the Purchase Agreement, and request to see the full document.
It is likely that they still won’t send this to you.
At the end of the day, most judges won’t require them to actually send you the purchase agreement in order for them to call you, write you, or credit report.
By taking these steps, you’re laying a foundation.
First, you are disputing this debt. If they do not mark your credit report as disputed, this is a big problem for them.
Under the FDCPA 1692 e(8), it says if a consumer disputes a debt then the collector must mark the account as disputed on the credit report.
Second, if they sue you they almost always say in their lawsuits, “…and the consumer, the defendant, you’ve never disputed this and it’s clear we’re supposed to win.”
Well, wait a minute. You did dispute it.
You have all these letters you wrote about proof and the purchase agreement to prove it.
They’ve never sent you the Purchase Agreement.
Then, when you are at trial and they don’t have the Purchase Agreement, a lot of judges will look at this situation and say this is not right.
The judge will say, “You claim that this consumer owes you this debt. The consumer has asked you for the Purchase Agreement as proof multiple times, and now you have shown up to my courtroom without this Purchase Agreement.”
Another strategy to use is to not ask for the purchase agreement until you’re at trial. In this article, I won’t get into the details or which option is better.
The point is that, one way or another, we will be asking the question: Does this debt buyer actually own the debt, and do I owe this debt?
Ultimately at trial is where they will have to prove that they own this debt.
We hope this is helpful to you!
If you live in Alabama and you have any questions, feel free to get in touch with us.
We would be glad to help you in any way we can.
You can reach us by phone at 1-205-879-2447, or you can fill out a contact form and we will get in touch with you quickly.
Thanks for reading!
midland funding has a collection against me on my credit report. i keep getting processor letters on my door, i can only assume its for them. its from 2016 when my life fell to pieces. should I dispute it on credit karma? say i have no knowledge of this account?
If you are in AL give us a call at 205-879-2447.
Either way, I would pull your actual reports — Credit Karma is helpful but it is not your real reports. https://www.annualcreditreport.com/index.action
I would write a dispute letter to Midland to see what’s going on or call your court to see if you have been sued.
If in AL we can look you up and see if there is a suit filed against you.
Hope that helps!