Debt buyers and lawsuit mills

​Old debts are big business. In fact, some actual judgments currently on the books do not even arise out of legitimate debts at all. Just recently Fredrick J. Hannah & Associates a law firm in Georgia agreed to pay $3.1 million after being sued by the Consumer Protection Financial Bureau (“CPFB”). They were essentially accused of running a collection mill. The lawsuit further alleged the law firm was run like a factory filing cases by the thousands with little review. The CPFB claims one attorney approved 130,000 lawsuits in two years. These lawsuits allegedly involved some of the largest banks including JP Morgan Chase, Bank of America, Discover, and Capital One filed in multiple States including North Carolina.

If you are being sued or are being threatened with a lawsuit it is important to ask for written verification of the debt. Even if the debt collector is above board and legitimate the debt may not be valid. Some reasons the debt may not be valid include:

1. Your information has been mixed up with another individual.
2. Identity theft.
3. Your debt may have been previously discharged in bankruptcy,
4. A debt buyer may not have the proper paperwork to proceed in Court.
5. The Statute of Limitations may have run. (often as short as 3 years in NC)
6. The amount of the alleged debt may include unlawful interest, penalties, or fees.

The other trap to be on alert for comes from unscrupulous debt collectors and straight up scam artists. All of the following below are indicative of scam and should immediately be met with a request for identification of the organization calling you and that they first send written verification of any debt before you agree to make any payments.

Scam indicators:

1. The caller threatens you with jail.
2. The caller says the police will arrest you that day if you don’t make a payment over the phone.
3. The caller says a lawsuit has already been filed. (They rarely call after filing a lawsuit)
4. The caller refuses to identify their name and/or company.
5. The caller refuses to send you written verification of the alleged debt.
6. The caller insists on payment over the phone or by prepaid credit card. (the prepaid credit card is a favorite of scammers because it is untraceable)
7. The caller claims to be from the IRS. (the IRS does not call- they will send a letter)
8. The caller claims to be an attorney. (attorneys almost never cold call- ask for their Name, State, and Bar number)

North Carolina has consumer protections above and beyond those provided under federal law. This is especially true if your debt has been sold to a third party debt collector such as Portfolio Recovery Associates, Unifund CCR Partners, or Encore Capital Group. A debt buyer actually owns the debt versus a law firm, which is usually just assisting with collection on behalf of the bank or debt buyer. Before a debt buyer may sue in NC they must comply with N.C.G.S. 58-70-150 which requires that the following be attached to the complaint:

1. A copy of the contract or other writing evidencing the original debt, which must contain a signature of the defendant. If a claim is based on credit card debt and no such signed writing evidencing the original debt ever existed, then copies of documents generated when the credit card was actually used must be attached. 
2. A copy of the assignment or other writing establishing that the plaintiff is the owner of the debt. If the debt has been assigned more than once, then each assignment or other writing evidencing transfer of ownership must be attached to establish an unbroken chain of ownership. Each assignment or other writing evidencing transfer of ownership must contain the original account number of the debt purchased and must clearly show the debtor's name associated with that account number.

 
If the debt does in fact turn out to be legitimate or you have be sued you should contact an attorney. If the debt is not legitimate you may want to file a Complaint with the CPFB or NC Attorney General or engage an attorney to file a fair debt collection violation against the offender. Other options include contesting the matter in Court, filing bankruptcy, and debt negotiation.