Industry experts predict that the number of lawsuits against debt collectors will exceed 8,500 in 2009. The reasons may be legitimate or completely false.
Under the Fair Debt Collection Practices Act, consumers have certain rights and debt collectors have rules to follow. Some debt collectors don’t follow those rules and thus are subject to legitimate lawsuits. Grievances against debt collectors include such illegal actions as harassment by calling every day, contacting neighbors or employers about a consumer’s debt, threatening to sue, and threatening imprisonment or criminal punishment.
Other consumers file under the Fair Credit Reporting Act – when they’ve been unable to get legitimate errors removed from their credit reports they get fed up and take the problem into court. The credit bureaus do have a method in place so that consumers can correct errors, but sometimes the original creditor or its debt collection agency is unwilling to admit to mistakes.
For those consumers, filing a lawsuit seems to be the quickest, simplest solution.
The other group includes consumers who sue for monetary gain. Only a small percentage of those cases ever get into court, but the threat of going into court causes creditors to negotiate.
Defending against a lawsuit is expensive, and it doesn’t matter who prevails. Thus, some consumers who have spent without restraint and are now unable to pay the bills are using lawsuits as a leverage to force creditors into what amounts to paying them to go away.
A few of these cases do make it into court, but most are settled out of court, saving the debt collectors and creditors from expensive legal fees.
Interestingly, approximately 38% of these lawsuits are filed by “repeat filers.” At least some of these multiple filers are people who have gotten together with lawyers on a contingency basis to see what they can get from the creditors and debt collectors – and apparently there’s money to be made. Some consumers have filed more than 15 times.
Because serial litigants are a threat to collection agencies, one former collection agency owner created a service in 2008 to help collection agencies avoid these consumers. The service, called the “FDCPA Litigant Alert,” compiles federal and state court records of FDCPA and FCRA filings.
The list is updated twice monthly and can be purchased by collection agencies – helping them avoid those consumers who appear to be filing repeatedly in hopes of monetary gain.
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