Consumer Debtor’s Defense Clinic: What to do if you are sued for a credit card debt

Consumers are sued all the time by debt buyers of credit card debt that cannot prove their case. Debt buyers are firms such as Sherman Financial Group, Unifund, Asset Acceptance Corp, Encore, and Portfolio Recovery Associates. Debt buyers frequently pay as little as two cents on the dollar for these claims.

Debt buyers frequently receive only minimal information about the consumer’s debt. They often do not have a copy of the contract, records of communications with the consumer, payment histories and dispute records. As such debt buyers often try to win their cases with affidavits containing inadmissible hearsay. They bring complaints with causes of action that are based upon something other than breach of contract such as stated account which may have a shorter statute of limitations.

Hiring an attorney may cause the debt buyer to simply stop pursuing the case. When debt buyers pay pennies on the dollar for thousands and thousands of cases, they figure why spend a lot of time on one. In two studies conducted in New York and Massachusetts, approximately 80% of consumer collections actions result in default judgments. The New York study found that in 99% of the default judgments entered, the materials underlying the judgment were faulty and did not meet the standard for entry of a judgment if anyone would have raised an objection.

For instance, affidavits filed in the case to prevail at summary judgment must satisfy hearsay requirements. The affidavit must be from someone with personal knowledge who can attest that the record was made at or near the time of the occurrence set forth in the record and that the record was kept in the regular course of business. Debt buyer employees should not be able to introduce business records produced by the original creditor. Debt buyers should also be precluded from proving a fact by a conclusory affidavit. A consumer can represent themselves pro se or hire an attorney to fight the lawsuit on their behalf.

Key factors to analyze include:

  1. What are the causes of action?
  2. What are the statutes of limitations for each?
  3. Is there a choice of law clause?
  4. Is there a signed contract attached to the Complaint?
  5. Are any of the exhibits missing?
  6. Is the Affidavit of Amounts Due signed by the debt buyer’s own employee?
  7. What, if any, business records are attached to the Affidavits?
  8. Do Affidavits and attachments meet requirements of the business records exception to the hearsay rule?
  9. Are there factual disputes such as some or the entire amount has been paid, the collector agreed to accept payments in full satisfaction of the debt, certain charges were unauthorized, consumer never received the contract etc.?
  10. Are all fees and interest charges asserted allowed by law?
  11. Does the consumer have any counterclaims for improper debt collection?

Some of these areas can be complex and new case law often changes how the judge will view the case. An attorney skilled in consumer debt defense will know how to assert hearsay objections to exclude evidence by the collector. Counterclaims and defenses are usually deemed waived if not timely brought in the initial response. It is important to seek legal counsel shortly after being served with the lawsuit so all claims can be preserved. A consultation with an attorney should also involve discussions to protect the client’s assets, and a determination whether a client is judgment proof or if bankruptcy should be considered particularly when there are multiple creditors.