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How to Sue Debt Collectors
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Now that you are aware of what happens when debt collectors violate the FDCPA and you have some recorded phone calls, credit reporting violations, and false or misleading statements by a collector, what do you do then?
You sue them.
Nothing gets a company’s attention like slapping them with a lawsuit. As the saying goes, it’s all fun and games until someone gets sued.
From here, you have two choices and both will take you to the courthouse:
- You can retain a lawyer to represent you, or,
- Do it yourself.
I’ll explain both.
Retaining A Lawyer
If you retain a lawyer, the standard agreement is for the lawyer to take the case on contingency. That means they only get paid if you win or settle. If they are unwilling to work on contingency, at worst you would have an agreement that you pay the $350 filing fee and then the attorney takes the rest of the case on contingency. The typical settlement is around $3,500, so you can expect to pocket an easy $1k with the lawyer taking the balance. Usually, you’ll file the case in Federal court, which means the case will get resolved in 2-3 months.
When selecting a lawyer, you can’t just go with any lawyer, you will want a lawyer experienced in consumer law. They could be great at drafting wills and personal injury cases, but they likely have never seen a consumer law case in their career. In fact, the better the lawyer is, the less likely they are to have any clue about consumer law. There are a few good lawyers out there who do have consumer law experience, and you just have to shop around and find them. Check out the National Association of Consumer Advocates (NACA) for a lawyer in your area.
Why Suing Works
Debt collectors are terrified of lawsuits because a single lawsuit can cost tens of thousands of dollars in legal fees. If they lose the case, not only do they lose their own costs for defending against the lawsuit, they have to pay the attorney’s fees for both the defense and plaintiff as well as the judgment. Many of the smart companies would rather pay you $5,000 once as a settlement and be done with it. Collectors are in a high volume, low margin business and will have to collect on a lot of accounts to recover a $3500 average cost of settlement. (Getting sued a lot tends to drive up a collector’s insurance premiums too!)
Consider the response to a Forbes article by a Joel Lackey, President of National Credit systems who wrote regarding FDCPA lawsuits:
“The number of these suits has increased dramatically over the past few years, and the merit of these suits are typically laughable with absolutely no damage suffered by the debtor. The primary reason for this is that attorneys have become aware of the fact that a third-party debt collector cannot win when sued. It is simply a matter of how bad you are going to lose. Even if you win in court, you have lost big-time in that it will likely cost you tens of thousands of dollars to prove your case.
Let’s see, settle for $4,000 even though you did nothing wrong and the charges against you were completely unreasonable or fabricated, or roll the dice to prove your innocence and spend $30,000 in the process. That is, $30,000 if you win, and by the way, you will have no meaningful chance of recovering any of your costs.”
You Must Have A Case
I am not suggesting you fabricate a lawsuit because, quite frankly, you won’t have to. If a collector is going to violate the FDCPA, they will do it early and often. If you have documented violations, particularly recorded phone calls, you have a very solid case and I wouldn’t be shy about running with it.
This is also defensive strategy. If you are sued by a debt collector who has violated the law, counter-sue and watch them offer to pay you to drop the entire matter.
Debt collectors are so scared of being sued that they are creating databases to track people who counter-sue and actively avoiding them. Take a look at WebRecon.com and National FDCPA Litigation Tracking Resource.
Do It Yourself Lawyering
If you can’t find a suitable lawyer or you don’t want to split the potential winnings, you may need to take the case on your own. I recommend Federal court vs. state or small claims, because the judges in the lower courts are generally not familiar with the laws and court rulings in question. Plus, you don’t want it to be a first time for both of you.
Each federal court has a free pro-se litigant manual that includes sample forms, flowcharts, and explanations of the legal terms you may hear. If you have the time to invest in it, give it a shot, you may find it is worth your time in the endeavor. It will be a time investment to become familiar with everything so take that into account. Also, many of the lawyers representing the debt collectors do not respect pro-se litigants and may try to talk down to you. Take advantage of forums like Debtorboards for advice, that’s where other litigious consumers hang out and are more than willing to provide some assistance.
In reality, going without representation can be a blessing and advantage, since you don’t have to worry about legal bills, caseloads, and you don’t have to settle for a quick settlement. You can wait for a bigger payday, as the side faces a growing mountain of legal bills. Lawyers tend to want to go for the quick buck and the low hanging fruit and tend to overlook suing the individual employees and such.
Do you have any experience with or read stories about people successfully suing debt collectors?
(Photo: umjanedoan)
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Are you able to record the phone call without their permission?
Chris,
I’m not an attorney, but here is what I understand. Most states have a policy requiring only one party to know they are being recorded, so as long as you know you are recording you should be okay. (I believe this is to prevent things like wiretapping)
Some states have different policies, so you’ll want to do some research.
Chris,
Start here. But verify the info. Has state by state guide.
http://www.rcfp.org/taping/
saladdin
I just wrote up a post, to be published next week, referencing that site. It’s very comprehensive.
Sure you did. This is just like when I invented the internet and somebody else took credit.
I turned on my house phone 8 months ago (I have never owned a cell phone) and I get 2-3 calls a day from collectors looking for the people who used to have the number. I thought about recording them but decided to threaten to kill their dogs instead.
saladdin
Chris,
You definitely want to google it because my state for example, considers recording calls illegal if BOTH parties aren’t informed.
In most states you can record without permission or notification and in every state, you can record after hearing “calls may be monitored”
Aah, English. What a wonderful language. They’re trying to be sneaky, but are (probably) giving up their rights when they say that.
Does anyone know of any case law that upholds this theory?
I doubt there is much caselaw on the issue as recording is hardly challenged by anyone, and I think few people would argue they didn’t know there was a recording…after they stated that they would record the call…
Very informative post! Thanks!
I have used the free student legal services offered by the university for this. They wrote a letter to the collector stating they represented me and all correspondence must go through them from that point on. They stopped contacting me immediately and stopped pursuing the debt (which was wrongfully connected to me).
As an attorney who works as a district court law clerk, I have to seriously question the wisdom of the DIY lawyering discussed in this post. I certainly would not consider litigating a case without legal training as a “blessing and advantage.”
From my work in the court, I see pro se filings three or four times a week. I would say that 90% of the time they are ineffective at best and financially dangerous at worst (judges can issue financial sanctions for frivolous arguments, etc). Pro se litigants rarely win, and are usually booted out of court on a procedural technicality.
All this is to say, you are better off with a bad lawyer than no lawyer at all. Yes, you are probably smarter than the lawyer. It does not take supreme intelligence to practice law with reasonable competence. But the lawyer knows court procedure, pleading standards, negotiation techniques, etc, that most pro se litigants don’t. Unless you have a lot of time and energy to devote to learning the Rules of Civil Procedure, finding statutes, researching case law, drafting a complaint, serving process, surviving a motion to dismiss, etc., you would be better off going with a contingent fee lawyer who does this stuff everyday.
DIY lawyering is, I think, a little like DIY surgery. Yeah, with the help of WebMD and some library books you might be able to pull it off, but why would you want to?
You want to know why people DIY? Because there are some of us who want to use the legal system but can’t afford a lawyer. Small claims and traffic court are two examples that we “average” folks would love to hire a lawyer. But when lawyers charge $500-$1000 when we want to challenge a $250 traffic ticket it’s not feasible. These courts are very casual anyway it’s not a murder charge, which I would hire Perry Mason for.
Comparing surgery with lawyering is a little silly. And by the way, my last dcotor’s visit was last month and I brought in pages from web searches which caused my doctor to prescribe a better medicine then what I had been on.
saladdin
Legal training is no huge blessing or advantage. All you know are the procedures. You can go to debtorboards and pick that up in 2 weeks.
Maybe your pro-se litigants haven’t been to debtorboards. Judges aren’t looking to sanction pro-se litigants unless you do something like write a “motion to kiss my ass” or something like that. Yes, it’s been done and yes it is unwise.
I’m running about an 85-90% win-loss ratio right now, so I must be superman or your stats must be off.
Your bad lawyer vs no lawyer isn’t true at all. bad lawyers will lose your case and waste tons of money along the way. I can lose a case on my own. I don’t need to pay anyone to do that.
The ONLY thing lawyers have you on are procedures. They don’t generally know anything about consumer law, which gives you an advantage. As far as negotiation techniques, lawyers are terrible at that generally, and I’ve got a good one: my way or the highway.
Process serving and surviving a motion to dismiss aren’t hard at all. I’ve heard the same lamo arguments from financial planners who say that you should trust them with your money because they are so smart and well versed and so forth. want to beat 75% of all financial planners? buy an index fund. Want to beat a lawyer? Sue pro-se.
Going to court and cutting someone open are two vastly different things.
Maybe pro se isn’t for you. Go ahead and spend $500+ an hour on a $200 ticket. Going pro-se works for a lot of people.
While they don’t have to, Judge I’ve seen gives quite a bit of leeway to a pro se litigant. Rather than censuring you, they’d let you know what you did was wrong, why, and maybe even give you a suggestion on how you should have done it, as long as they don’t get the suspicion that you’re trying to pull a fast one on them.
I agree, judges tend to explain what you did wrong if you ever make a mistake and usually give you a chance to fix it.
Creditboards has a pretty good “I’ve been served” forum that could be useful for DIY lawyers.
saladdin
Thanks everyone!
The average award is $3,500, but you can only expect to receive $1,000? I thought lawyers only got 1/3. It almost doesn’t sound worth it to give up most of the money.
Hmmm…I, too, used an attorney to write a nastygram to a collection agency that had been hounding me for a debt that wasn’t mine (in fairness, my name is about as common as John Smith). Perhaps I should’ve pursued a lawsuit instead? Eh…they haven’t called me since my attorney’s letter, so I guess I’m happy with that. I am in a pre-paid legal plan, so the attorney was already paid for.