A recent speaker at the Michigan Institute of Continuing Legal Education had talked about suing on purchased debt. He said that a debt buyer does not have to produce a witness from the originating creditor in order to prove his case at trial. While that may be true, its equally true that most debt buyers do not get enough information to successfully sue on their debts. For example, most debt sellers do not have supporting credit card statements and/or even credit card contracts. Usually, they just sell a spreadsheet of names, addresses, social security numbers and balances due to unsuspecting debt buyers.
Another major fact is that everyone in the industry knows that Asset Acceptance is the proverbial 600 lb gorilla in this business. Asset Acceptance gets first crack at almost all newly charged off debt. They have relationships and contracts with major banks and such. Everything that they reject goes into the open market to eventually be pursued by other asset purchasers.
I was a bit disturbed when this ICLE speaker informed the audience that it is not necessary to produce a witness on behalf of the originating creditor. As an example, the following colloquy could be expected when a debtor’s attorney cross examines the Plaintiff’s witness. You can easily see how a debt buyer’s witness at trial would crumble.
Debtor’s counsel (“DC”): Who do you work for?
Plaintiff’s witness (“PW”): ABC Debt purchasing company.
DC: How much did you purchase this debt for?
PW: $300.
DC: According to your complaint, you state that my client owes you $5,000. Is that true?
PW: Yes.
DC: Because your company purchased the debt, it did not originate this debt, did it?
PW: No.
DC: Do you have any personal knowledge to show that my client incurred this alleged $5,000 debt?
PW: No.
DC: Do you have any signed credit card statements to show that my client incurred this debt?
PW: No.
DC: Do you have any signed agreement between the original creditor and my client to show that my client agreed to pay these charges?
PW: No.
DC: Do you have a breakdown between principal and interest as to how you arrive at the $5,000 balance?
PW: No.
DC: Do you have any proof at all to show that my client incurred these charges other than what you think someone may have told you?
PW: No.
DC: So, to recap, you are testifying that you have no personal knowledge of the alleged debt. no documents to support it,no proof that my client even incurred these charges and no accounting as to how you arrive at that number, right?
What court is going to award a Plaintiff anything on this? All you have is a witness who can testify that he bought something that was allegedly a debt that was owed by a debtor. That witness cannot testify that the debt is actually owed by the debtor or that debtor even had a contract to pay for these debts.
Buying debt, in my opinion, is a con. It is so tempting to purchase a $10,000 for a measly $600. Boy, if someone purchases that debt and collects it all, they stand to make $9,400. Now wake up. If a debtors attorney stands up to a debt purchaser in court, the debtor purchaser usually ends up eating the $600 purchase price plus costs.
We have crushed numerous debt buyers at court in this fashion. Of course, only those debt buyers who thought that they had nothing to lose (because we offered them such low settlements) took us to court.
Frequently, these cases are settled with a demand for documents. There are few firms that are notorious for filing these complaints and then walking away after the first document request.
If you get sued by a debt purchaser, don’t sweat it. Hire an attorney and fight it.