Make Debt Collectors Prove They Own What They Say You Owe

We’ve mentioned how if you’re being pursued by a debt collector, you need to make them prove that you owe the debt. Alabama Consumer Law Blog notes the other half, that you need to make them prove that it is they they actually own the debt, what is called having “standing.”

When we defend clients in court on these types of cases, the debt buyer has yet to show up with a witness (imagine – suing someone in court and having NO witnesses!) and the debt buyer refuses to produce at trial the alleged “purchase agreement” where they supposedly bought the debt.

If you really owe the money, you have a moral and, until the statute of limitations passes, legal obligation to pay the debt. Just make sure the person claiming standing really has a leg to stand on. — BEN POPKEN

Alabama Consumers Sued By Debt Buyers Or Collectors – Two Essential Things To Remember [Alabama Consumer Law Blog]
(Photo: Getty)

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  1. gorckat says:

    I goofed awhile back and sent a letter to a debt collector acknowledgeing the debt and said I’d pay it back.

    Is it too late to request them to prove the debt? If it turns out they don’t own it, could I get whatever I paid them back?

  2. samuraimonkey says:

    not all debt collection firms are debt buyers. Make sure to ask them if they bought the debt or if they are contracted as a third party.

  3. blitzfitness says:

    I’m currently going through this now myself, and I was wondering. Do I have any protections due to the fact that I’m attempting to repay the debt through a third-party?

    I can’t remember at the moment whether it’s debt settlement or something different (the company is called Superior Debt), and I was wondering if utilizing that type of service would be seen as A) Acknowledgement of debt (which I assume it is), and B) shows that I am attempting to repay said debt.

    Either way, however, that is very interesting info. I never would have thought to question whether or not the debt is owned by the collectors.

  4. Initial debt contact should come with a notice that says something like this (the form may vary a great deal, and obviously it’ll say things other than “law firm” when peeps other than law firms are collecting):

    NOTICE REQUIRED BY
    THE FAIR DEBT COLLETION PRACIES ACT
    15 U.S.C. §1692

    1. Amount of Debt: $2000.00
    2. Name of Creditor: Corporation, Inc.
    3. Unless you, within thirty (30) days of receipt of this notice, dispute the validity of the debt or some portion thereof, the debt will be assumed to be valid
    4. If you notify in writing the creditor’s law firm in writing within thirty (30) days of the receipt of this notice that the debt, or any portion thereof, is disputed, the creditor’s law firm will obtain a verification of the debt or a copy of a judgment, and a copy of such verification or judgment will be mailed to the debtor by the creditor’s law firm.
    5. If the creditor named herein is not the original creditor, and you make a written request to the creditor’s law firm within thirty (30) days from the receipt of this notice for such information, the name and address of the original creditor will be mailed to you by the creditor’s law firm.
    6. Written requests should be addressed to DEBT COLLECTOR FULL NAME AND ADDRESS.

    BE ADVISED THAT DEBT COLLECTOR IS ATTEMPTING TO COLLECT A DEBT, AND THAT ANY INFORMATION OBTAINED WILL BE USED FOR THAT PURPOSE.

    ———–

    An honest debt collector will provide you with a clear enough description of the debt in the initial contact letter that you can identify what, exactly, you’re being accused of not paying for. Writing for debt verification will get you a copy of the applicable documents (bills, statements, receipts, etc.) proving the debt so you can contest them if necessary.

  5. quantum-shaman says:

    @blitzfitness: There are “debt settlement” companies and debt counselors. Here’s the difference: AVOID THE FORMER AT ALL COSTS. They are allegedly putting your payments into an escrow account, but most of the time they just keep the money and guess what, you still owe your creditors. The debt counselors will negotiate on your behalf with your creditors for reduced interest rates, reduced or eliminated late fees, and lower payments. I am sure there are some shady deals there too, but you can find a reputable debt counselor easily through their trade association which is aadmo.org. Debt counselors are typically not-for-profits. Also don’t settle for the first one you can find! Their monthly fees vary, and a really good one may actually REDUCE their fee for you. Another possibility, if it’s an unsecured debt, is to just let it go to collections. The debt counselors will not take anything in collection. But once its there, the only thing they can collect on is the actual principal, which might potentially be a much lower dollar amount.

  6. brooklynbs says:

    This is good advice and exactly what I did a few years ago.

    I got dragged into court by a debt collection agency for a $5K credit card debt (from a business venture with a bad partner). It was pro se court, so I represented myself (I’m not a lawyer, not even a college graduate).

    First, I successfully argued that the debt collection agency improperly attempted to subpoena me. That reversed a court-imposed garnishment of my wages and sent the matter back to square one.

    Next, I told the debt collection agency that they needed to show me the paper trail, beginning with my signature on a document opening the account, and including all documentation regarding the sale of my debt (this particular debt collector had bought my debt from another debt collection agency).

    Back to court we went, and the debt collection agency failed to provide the paperwork. In court, I argued that my credit report was already showing inaccurate information (there was a bogus address listed by one of the three credit rating firms) and that I could not simply take a debt collection agency’s word that they owned debt that I actually ran up. The judge tossed the case, saying that the debt collection agency needed to show documentation.

    A few months later, the debt collection agency took me to court again. I went and their lawyer came late – after the judge had already called the case. The clerk had already signed the paperwork dismissing the case, but I agreed to negotiate with the debt collection agency’s lawyer at the urging of the clerk because he said he would just re-file the case.

    In the end, I negotiated a $5K debt down to $1K. I also got the debt collection agency to agree, in writing, to send letters to the credit rating agencies saying that the account had been paid in full and closed in good standing. I received copies of the letters to the credit rating agencies and my credit report accurately reflects the closure of the reports.

    Common sense + research saved my ass.

  7. not_seth_brundle says:

    “they own” or “you owe”?

  8. “they own” because companies often sell difficult-to-collect debts. They may first use internal debt collection, and if that doesn’t work, they sell the debt to a company that buys debts. I’m not sure what the standard rate is, but the debt-buying company will pay a certain percentage of the owed debt to the company, who recoups, say 30% of the missing money from the debt-buying company. Then the debt-buying company owns the debt and tries to collect it from you (the debtor); they make their profit by collecting a greater percentage of the debt than what they paid for it, so they have every incentive in the world to keep going after you. If they bought your debt for 30 cents on the dollar, they’re going to try to get you to pay 50 cents on the dollar — or, ideally, 100% of the debt.

    This is typically where debt collection gets really nasty and shady and aggressive.

    The other way companies do it (after exhausting internal debt-collection attempts) is to hire a debt collector that keeps a flat percentage of what it collects; the original company still owns the debt in that case.

  9. raindog says:

    When I went through a rough patch due to my own deadbeat client, I ignored all the communications from debt collectors (sucked for my friends who block outgoing caller ID, but everything has a price) and continued paying what little I could afford each month directly to the original creditors. They kept cashing my checks, the agencies kept pestering me but I never gave them the time of day, and eventually things got back to normal, though obviously I closed my accounts because the cards were useless to me.

    I would have been screwed if I hadn’t been able to pay a little each month, but when that option’s available, why do people talk to collection agencies at all?

  10. FLConsumer says:

    Does anyone actually know how much debt collectors buy & sell the accounts for?

  11. FLConsumer,

    I know that around here, if you HIRE a debt collection agency or law firm, they typically take 30% to 50% of recovery, which seems to vary based on the industry (which I presume is because of ease of collecting or availability of other legal remedies, like liens).

    I don’t know how much debts are bought and sold for, but that’s the local “for hire” range.

  12. rekoil says:

    FLConsumer: I’ve heard numbers well below 30% – as little as .05-.10 on the dollar.