I find the collections process to be quite fascinating. The federal government has taken a number of steps to regulate the collections industry in recent years, most importantly enacting the Fair Debt Collections Practices Act, which regulates what collectors can and can’t say to debtors. That being said, collection agents still engage in harassing and bullying behavior with the hope debtors will give them money just to be left alone.
While in law school I worked in the school’s Urban Legal Clinic. I represented low income people in a number of matters, but several in consumer debt issues. I got a good look at what a shady business collections can be and recently decided to expand my practice here in Rexburg, Idaho to help local residents deal with collections. One of the biggest problems with the collections industry is that it isn’t the actual creditor that lent money generally seeking repayment. After a certain amount of time businesses will write off the debt (basically call it a loss for tax purposes). Then they will bundle a number of these debts and sell them to a third-party collector, sometimes called a junk debt buyer. The third party will pay pennies on the dollar, so anything they collect is almost pure profit. It is a numbers game for them, so they buy a lot of debt and then pursue them until they hit a road block.
In eastern Idaho, collections attorneys files dozens of lawsuits daily which will largely go ignored. The basic timeline is this:
- Attorney files complaint and summons which tell the debtor they are being sued and for how much.
- Process server must deliver the complaint personally to the debtor or someone living in his household.
- If the debtor cannot be located, the suit will languish until a judge dismisses the complaint for inactivity.
- Once the debtor is served, he has 20 days to file an answer. This is the part where many debtors ruin their chances of defending themselves. Perhaps it’s just a matter of not knowing what to do. Maybe they think an attorney isn’t affordable, or they don’t think to call an attorney. Whatever the reason, the vast majority of debtors fail to file an answer at all.
- As soon as two weeks after the deadline to file an answer has passed, the collections attorney will then file for a default judgment. This means there will be not trial to determine if the debt is valid or to hear the debtor’s side of the story. If the defendant doesn’t file an answer, the judge will grant the default judgment as soon as it is requested.
- The collections attorney will then file a writ of execution, which allows him to garnish the debtor’s wages, freeze his bank account to collect funds from it, and have assets seized and order to be sold.
None of this needs to happen. It’s a dirty little secret in the collections industry that quite a few of these lawsuits would fail if the defendant put up a fight. If you have been sued by a third-party debt collector, do not ignore the suit. Call and I can help you defend yourself.