How to Beat Vulture Debt Collectors

In a bit of synchronicity, last weekend I had dinner with a buddy whose sibling recently was dunned by a buyer of junk debt. For those not familiar with this dark underbelly of the credit markets, these vultures buy consumer debt from banks (mainly credit card receivables) that the bank has written off. That means they don’t think it’s worth pursuing. At best it’s too close to the statute of limitations expiring or the documentation is questionable or the amounts are all wrong. Most of the time. it’s worse than that: the debt was never owed (they are going after the wrong person), the debt was paid off or discharged in bankruptcy, the statute of limitations has long passed.

The buyers of this debt pay pennies on the dollar and treat it like a lottery ticket. They sue, but have NO intention of spending any money on the case beyond making that filing. Their fond hope is that the borrower fails to respond, and they win a default judgment. With that in hand, they can garnish wages or bank accounts.

The flip side is any minimal credible response will beat back these claims. And remember, the burden of proof is on the debt collector to demonstrate that the consumer agreed to the debt, to provide a full record of principal, interest, payments, and fees, and to prove a complete and unbroken chain of title (sound familiar?).

An article by law professor Peter Holland is a superb guide on how to beat these cases. While the intended audience for this article is lawyers, it is highly accessible, and gives a sense of what an utter swampland this area is. He also stresses that it takes diligence rather than experience to pursue these cases:

Revealing the defects in these documents does not require a deep background in consumer law. It just requires a cup of coffee, your undivided attention, a yellow highlighter, and a red pen.

The article warns, however, that fewer than 1% of the consumers who respond in court are represented by counsel, and that they are typically not treated equitably, since debt collectors have convinced many judges that borrowers are deadbeats and that the rules of evidence don’t hold in small claims (as the article stresses, that is not accurate). Holland does not intend his article to be a guide to pro se defendants, but it can serve as a great guide for newbie lawyers or even law students to take on these cases. And he also points out that in the wake of the robo-signing scandal, many judges are more sensitive to assaults on the integrity of the courts than they once were, and it’s not difficult to depict some of the issues presented by these actions as being similar to those in robosigning cases.

Nathalie Martin of Credit Slips recounts some of the recommendations Holland makes:

1. Read the complaint and supporting documents very carefully. Is the named plaintiff the same party named in the documents supporting the debt? Is there any chain of title tying the plaintiff to the debt? Is the debt collector licensed in your state? Is the contract for the debt even attached to the complaint? How is the debt supported by evidence? If there is some document attached to prove the debt, can you read it? Was it generated after the fact? By whom? Has the statute of limitations run?

2. Know the elements of an “account stated” cause of action. These include the establishment of a debtor-credit relationship, an agreement by the debtor and creditor as to the amount due, and an agreement by the debtor to pay the amount allegedly due.

3. Carefully scrutinize the affidavit. Here comes the fun. Google your affiant. Many people who have signed these affidavits have admitted under oath to singing thousands of these in one day, and many have signatures on Google that will not match the ones in your affidavit. Look at your state’s affidavit rules. Of course these rules will require affiants to have personal knowledge and likely yours will likely not qualify as evidence. If the affidavit says this is true “to the best of my knowledge” the affiant is admitting to not knowing the real facts and the affidavit can be stricken from the evidence.

4. Master the relevant rules of evidence. No personal knowledge, no recovery. No proof of debt, no recovery.

5. Tell the judge why this matters. Many of these debtors do not owe these debts.

And there’s lots more, like investigating whether the plaintiff had a checkered history (felons on staff? violations of the Fair Debt Collections Practices Act? FTC fines? evidence of past use of fraudulent affidavits?) and putting the judge on notice of any findings.

Holland concludes:

Allowing debt buyers to run roughshod over consumers and the courts is a denial of due process. It enriched junk-debt buyers at the expense of consumers, legitimate creditors, and our judicial system…Trying and winning these cases will have the systemic impact of helping restore a sense of justice and fairness which lies trapped beneath the heavy weight of the junk-debt buyer.


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  1. Savanarola

    First and foremost, before you even get there, check the venue of the lawsuit. Under the FDCPA, 15 USC 1692 et seq., venue is only proper where the contract was made or where the debtor resides. You never have to do any of that if you can get the vultures’ first lawsuit dismissed for improper venue. And they will often try to file in some illegal spot to make it difficult for the debtor to appear.

    But really, the worst problem is sewer service. Many debtors have to fight an uphill battle because the judgment was obtained without ever serving them in the first place, but then you have so much to prove. That is their first and favorite tactic.

    1. RDP

      Very good point. And in terms of the article, I would hesitate before letting the judges hearing these cases off the hook, too. Not that I think Ms. Smith was implying that in this article. However, in NY State, at least, before granting default judgment, the court is supposed to review the sufficiency of the complaint and supporting evidence to make sure everything passes muster. Partly out of Due Process concerns, but also to prevent the courts from being used to perpetrate frauds. Like me from going to, say, Orange Supreme and claiming Ms. Smith promised to give me 3 points of royalties on her book sales, and I have this signed (forged) document here where she made such a promise, and then do sewer service to make sure she doesn’t find out until it’s too late, after I’ve already attached her bank account. Unfortunately, that doesn’t always happen. From my experience and anecdotes I’ve heard while in Florida, I sometimes wonder why the state even bothers funding a judicial system at all because many small claims judges just rubber stamp these cases without bothering to review the complaint. When pro se defendants do appear (even though small claims does not require being represented by counsel), more often than not, the judge will try to strong arm the defendant into a settlement with the plaintiff without regard to whether the debt is valid and legally enforceable. I think besides laying down some pressure on these bottom feeding collectors, we also need to make it clear to state bars and judicial organizations that we’re watching them too.

      1. Procopius

        RDP, I agree with you 100%, but I’m curious what benefit you think watching the courts has. I’m thinking particularly of places like Florida, which from many stories I’ve read (especially while following the Rothstein ponzi scheme story in Broward county) is so corrupt that they don’t even try to keep it secret. I should note that I’ve never lived there or had personal knowledge of any of that, but so many people tell similar stories I’m persuaded. Some (many?) of the “retired judges” appointed to process the “rocket docket” cases on the basis of a fee for each foreclosure they approve were very open in speaking of their unconcern for legal standards.

      2. fresno dan

        I agree 100%
        “since debt collectors have convinced many judges that borrowers are deadbeats and that the rules of evidence don’t hold in small claims (as the article stresses, that is not accurate”
        As noted during the robosigning scandal, it appeared to me that most Florida judges were unfit simply due to an inability to accurately perceive reality

  2. Nonanon

    Iceland is another example of junk debt buyers, after the country refused to bail out their banks.

    I don’t know what has happened in the ensuing time, but I expect that people who legitimately owe debt aren’t getting a free ride, nor should they.

    1. F. Beard

      but I expect that people who legitimately owe debt aren’t getting a free ride, nor should they. Nonanon

      Since “bank loans create deposits”, the banks are essentially counterfeiters. Hence no credit debt is morally valid – “legitimate”.

      Yet voiding the debt is no solution since credit creation cheats non-debtors too – via negative real interest rates. Hence Steve Keen’s universal bailout (which he calls “A Modern Debt Jubilee”) or something similar is much more just.

        1. Kunst

          Inside the (software glitch): Since “bank loans create deposits”, the banks are essentially counterfeiters.

          1. Kunst

            That would be left angle bracket right angle bracket. Hey programmer, don’t play games with special character patterns.

        2. F. Beard

          Could you at least vary your wording? Kunst

          Suggestions are welcome.

          Also my reply was to Nonanon, not to the general thread, so your complaint is a bit misplaced. It was apparent that he/she was NOT aware of the nature of bank loans so a short, accurate, succinct statement (even if boringly repetitious to others) was called for.

  3. Justicia

    Thanks for illuminating another dark corner of the fraud economy, Yves.

    One other ray of sunshine is Lawsky’s triumph. Today’s FT story is a victory lap for him and it really shows our AG who took a sucker punch.

    New York regulator strides into spotlight
    High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email to buy additional rights.

    Since his agency was officially launched last October, Mr Lawsky has secured settlements from banks including Goldman Sachs to help distressed homeowners by reducing their debt; forced insurers to pay hundreds of millions of dollars to beneficiaries of dead policyholders; and he has launched a wider crackdown on mortgage practices that allegedly harm borrowers.

    Along the way, he has threatened to supplant Eric Schneiderman, Mr Cuomo’s successor as attorney-general, as Wall Street’s most feared state regulator.

    1. monday1929

      With all due respect, Wall Street is happy to pay parking fines to Lawsky out of shareholder money while the man who can jail them dines with the latest Torturer-in-Chief.

    2. Warren Celli

      Psssst… the marks are losing confidence in the Wall Street scam, go wake up a few of those overpaid losers in the ‘Rule of Law’ scam…

      Yes! High quality global deception requires investment.

      Deception is the strongest political force on the planet.

  4. lyman alpha blob

    I’ve found that often the problem can be settled on the phone with the vultures using some basic mockery. These people try to threaten and scare you but if you can show you know what you’re yalking about they often back right down. About twenty years ago I had several small debts I had a hard time paying. I tried to get a debt consolidation loan and was told that I didn’t even owe the amount of the minimum loan they gave out, and then they denied me that saying I was too much of a credit risk. For $2500. I think the real problem was the couldn’t make any $$$ on such a small amount. So I said ‘the hell with it’, ignored the debts, chopped up my credit cards, and paid all my future bills on time.

    Few years ago I got a call from a collector claiming I owed money. Thought they had the wrong guy until they matched my soc sec#. When I realized they were comoing after me for $200 owed on a gasoline credit card from the early 90s for a company that no longer even existed, I just laughed and told them that if their company was dumb enough to puchase this 14 year old debt that had been passed around who knows how many times from a defunct company, that sounded like their problem now and not mine. I did encourage them to call back and I would be happy to waste some more of their time but in no way would they be getting a penny from me. They never called back and when I went to get a mortgage a few years later, I had a credit score of over 800.

    You can beat the system with a little patience and a willingness to stand up to these jerks.

    1. Walter Wit Man

      But these people prey upon people not knowing their rights. Many people are unaware of the statue of limitations and new rulings (by our fascist judiciary and legislatures) allows these scum buckets to send letters to people like you.

      So they can “collect” this “debt” and the “debt” will not go away without bankruptcy, but the debtor is not required to pay b/c of the statue of limitation.

      I know there are a good number of people that get confused and pay.

      Plus, they trick people into making $10 or $20 payments simply to restart the statue of limitations.

    2. citalopram

      You could also send them a “Fuck Off and Die” (FOAD) letter and see if the violate FDCPA and State Law. If they do, it’s 1000 dollars damages per violation for FDCPA.

      State law damages vary.

    3. Yves Smith Post author

      You need to read this piece. You are COMPLETELY MISSING the issue raised by the article and this post.

      You can talk to them all day, but if they go to court, which is what these vulture buyers do, you need to go to court and file a response and appear in court, or THEY WIN AUTOMATICALLY. This has NOTHING to do with the phone call harassment, etc. You’ll lose and have your wages garnished if you use your strategy with someone who has filed in court. And that is the strategy of these vulture buyers. They go to court, they don’t bother with other debt collection methods, which the previous debt owner presumably tried. They spend the minimum amount of money needed to win a default judgment. And if they do, even if they have the wrong Social Security #, etc., it’s vastly more expensive to get a default judgment reversed.

      1. jonboinAR

        But didn’t someone on the thread say they’re liable to do some kind of “sewer” treatment thing, where they get the judgement without ever having served you, and then it’s really hard to get it reversed?

  5. Walter Wit Man

    Great post.

    Another consideration is whether the plaintiff is seeking attorney fees.

    I think these debt buyers have mostly given up on seeking attorney fees probably because they don’t have the original paperwork, etc., and simply found it easier not to request this relief.

    If they are seeking attorney fees you could be running up the bill on yourself if defend yourself in a case you have no defense to. Filing an answer lands you in the middle of a court case and it can be quite scary to face a court case on your own.

    But if they aren’t seeking attorney fees why not file an answer and basic discovery asking for documents? Worth a shot in many cases.

    Hell, pepper opposing counsel with requests and work. Make these jerks work for the blood they are trying to get out of turnips.

    1. billiecat

      I’ve filed a few FDCPA cases against debt buyers, and they are extremely vulnerable to those claims. The problem is getting people to defend themselves. Often they have a vague memory of some debt and figure they owe it and start paying it off. Of course, it may not be their debt, the buyer may not actually own it, the amount may not be correct, and it may (usually is) all done up with a sham affidavit. But I can’t do anything for a potential client if I don’t get a call, and even if I do, it’s often AFTER a default has been entered, and often after the FDCPA’s short one year statute has been blown. The debt buying industry is largely based on defrauding the courts, and yet it’s plaintiff lawyers who get the bad rep.

      1. billiecat

        I forgot to say, if they are claiming attorney’s fees they damn well better have a copy of the contract that supports it. And if you file a FDCPA counterclaim along with your Answer, they probably will end up paying YOUR attorney fees.

    1. Kunst

      The powers that be don’t want that in the high school curriculum. Their entire business model is based on their expertise in an area in which their victims are ignorant. This is the crux of our dishonorable financial system (cf “liar loans” — who was the liar, the borrower or the preparer of the lying forms?), knowledge arbitrage where knowledge can be turned into money.

  6. rotter

    Keep in mind also that if you happen to find yourself served with a writ of garnishment\, that in most states you are allowed to claim a certain amount of property (including cash ie., bank accounts) as exempt from collection. You can do this for the same reason we do not (yet) put people in jail for debt – if one is made destitute and indigent by the process, one cant be expected to repay – In Maryland, for instance, you can claim as exempt from collection up to 6000 dollars in cash and 5000 dollars in other property (jewelry, computers and printers, a car, musical intruments, books, clothing). You have to go to court to do this, and you have to do this within 30 days of of the writ of garnishment. Also, since garnishemnt is very specific (there is no such thing as a one-for-all garnishment), the debt vultures have pay court costs every time they attempt garnishment. It shouldnt be a profitable scheme at all, and if everyone knew how to deal with them, it wouldnt be and these vulture collectors would focus on their more lucrative more respectable drugs, numbers and prostitution rackets. I may have mentioned this before, if so great, this is a perfect post under which to metntion it again.

  7. Warren Celli

    “While the intended audience for this article is lawyers, it is highly accessible, and gives a sense of what an utter swampland this area is.”

    The swampland is much larger than just Scamerica, it is a global swampland…


    “End the Vulture Culture

    Vulture funds are private companies that try to scavenge profit from the debts of some of the world’s poorest countries.

    End the Vulture Culture

    Vulture funds seek to profiteer by buying up the debts of heavily indebted poor countries at a cheap price, then trying to recover the full amount, often by suing through the courts.

    At least 54 companies, many based in tax havens, are known to have taken legal action against 12 of the world’s poorest countires in recent years, for claims amounting to $1.5 billion.

    This means money released by debt relief is going into the pockets of wealthy investors, not spent on health and education.”

    More here…

    Deception is the strongest political force on the planet.

  8. Hannibal

    Letter of debt validation:
    tried and poven, your ultimate weapon


    Your name
    Name and address: of Scumbag Collection Agency
    Re your ref # 12345555

    To Whom It May Concern:
    I received a notice from your organization on Feb.16, 2012, pertaining JOHN H. DOE,  a legal person-entity.
    In response to your notice, I am giving you notice pursuant to the Fair Debt Collection Practices Act, 15 USC 1692g Sec. 809 (b),  that your claim is without merit, disputed and validation of your claim is requested.

    I respectfully request that you provide me with competent verifiable evidence of this debt and show me I have a legal obligation to pay you.

    Please provide me with the following documentation:

     Provide me with documentation this debt even exist:
     Show me this is not a zombie debt and/or an expired SOL:
     Show me what the money you say I owe you is for:
     Explain and show me how you exactly calculated the “amount” you claim I owe:
     Provide me with documentation that show I agreed to pay you what you claim I owe:
     Provide me with a copy of the original loan application bearing my signature:
     Provide me with documentation showing you own or was assigned this debt:
     Show me that you are licensed to collect in my state: and
     Provide me with your license numbers and Registered Agent.    

    If your organization have reported invalidated information to any of the three major Credit Bureau’s (Equifax, Experian or TransUnion), said action might constitute fraud under both Federal and State Laws.
    Due to this fact, if any negative mark is found on any of my credit reports by your company or the company that you represent I will not hesitate in bringing legal action against you personally and your organization for the following:

      Violation of the Fair Credit Reporting Act
      Violation of the Fair Debt Collection Practices Act
      Defamation of Character
    If your organization is providing me with the proper and verifiable documentation as requested, I will require at least 30 days to investigate this information and during such time all collection activity must Cease and Desist.

    Also during this validation period, if any action is taken which could be considered detrimental to any of my credit reports, I will consult with my legal counsel. This includes any information to a credit reporting repository that could be inaccurate or invalidated or verifying an account as accurate when in fact there is no provided proof that it is.

    If your offices fail to respond to this validation request within 30 days from the date of your receipt, all references to this account must be deleted and completely removed from my credit file and a copy of such deletion request shall be mailed to me immediately.

    I am also requesting, in writing, that no telephone contact be made by your organization to my home or to my place of employment. If your offices attempt telephone communication with me, including but not limited to computer generated calls or correspondence from any third parties, it will be considered harassment and I will have no choice but to file suit against you.

    All future communication is to be conducted in writing and send to the address noted in this letter by means of USPS.


    do not sign but type your initials only, i.e. JB

  9. Paul P

    This would be a good class action RICO suit for US Attorney or Attorney General to investigate.

  10. PeonInChief

    Some years ago banks started reselling really old debt. And I mean, really old. Apparently one of these long-term debtors had once, a very long time ago, had our phone number. We got a couple of calls looking for him, and one of the collectors asked for my Social Security number, seeking “proof” that I wasn’t the debtor in question. I actually thought it was a scam, rather than just and idiot collection call. But then someone else called, trying to find the guy. If they did find him, I hope that he reminded them that the statute of limitations in California is four years.

  11. Luna

    A few months ago I was sued by LVNV Funding. I responded to the suit by asking for them to prove that they owned the debt to which they claim I owed. They responded by sending me a “Plaintiff’s First Request For Admissions To Defendant
    The questions were…..

    1. Defendant applied for and received a credit card from HSBC Bank Nevada Association.

    Response: True. I did apply for an account with HSBC. I have never applied for an account. nor rec’d any services from Plaintiff, LVNV Funding at any time.

    2. The HSBC BankNevada Asocciation credit card account was assigned to Plaintiff for value.

    Response: Deny

    3. Defendant has understood from the time the account was opened that use of the credit card provided by Plaintiff on
    Defendant’s Account results in Plaintiff making a loan to Defendant for the amount charged or cash advance requested.

    Response: Deny. I have never rec’d a loan or a credit card from the Plaintiff, LVNV Funding.

    Their request had 10 questions, but all were basically the same, trying to TRICK me into admitting that I owed the
    “Plaintiff”, which is NOT who I rec’d credit from. The Plaintiff was not HSBC, but LVNV Funding.

    Here’s a good one………..

    5. From the time that the account was opened, Defendant recieved monthly billing statements from the Plaintiff showing the amount of charges or cash advances incurred for that monthly period, along with any payments or credits to the account, and specifying the monthly installment due and owing.

    Response: Deny. I have never rec’d monthly statements from the Plaintiff, LVNV Funding. I have never had an account with the Plaintiff, LVNV Funding.

    Ok. That’s a good example of the questionnaire they sent me, which also had to be filed with the court. My court date was less than 2 months away at this point.
    What ultimately happened, was they dropped the suit against me, without even going to court. Why? Because they couldn’t prove that I owed them.

    The basic thing to remember here is that whatever they send you, read it over and over again. They will try and trick you into admitting the debt with the Plaintiff. But, in my case, I had never rec’d ANY type of credit card or a loan from the actual PLAINTIFF, which if you read my questions above, that is exactly what they were trying to get me to admit to. Which is why the lawsuit against me was dropped. The plaintiff couldn’t prove I owed them, and I never admitted oweing the Plaintiff. My debt was with the original company, NOT LVNV Funding!!

    I did this without an attorney. And in all honesty, I was only able to do this myself because of the articles I have read on the internet, just like the main story here.

    And no, I’m not a deadbeat. But sometimes you have to choose to have a roof over your head and food on your table over paying a credit card bill. Just a fact of life.
    I hope this info helps someone else.

  12. Luna

    And also, I never admitted to owing LVNV Funding ANYTHING!!!! Keep that in mind as you fill out your response.

  13. Haggard Ryder

    What ever happened to these collectors not being an injured party. They have not contract and they are not the original creditor, how can they come in claiming to have been harmed and have a wet ink contract with the debtor?

    I guess states have outlawed all of that good common sense stuff eh?

    1. Luna

      “Injured Party” would have been my defense if this had actually made it to court. Thankfully, it ended the way it did.

  14. Bill Lee

    Some great info here, in the original article and in many responses to it. It almost looks like a process that could be entertaining.

  15. lexia

    If you get a summons from the court – ANSWER IT! The plaintif has given you insufficient information, no contract or proof of debt has been attached to the summons.
    Address the summons – ask the court to dismiss for lack of information and/ or copy of proof of ownership or contract of the alleged debt -Frivilous Allegations -request dismissal of plaintiff’s claim. If you get a judgment by default in the mail, either from the court or the debt collector – run down to the court and ask for a copy of your court file- give them the docket number. See what proof they attached to your entry of judgment. Read the court rules on entry on Judgment. If it an open ended national credit card boA, chase, citibank, etc. federal and state rules apply. They must attach copies of the monthly statements, periodic interest rates, continueous running balances, terms and agreements, )make sure your name is on the top of the statement), etc. (look it up)! File a motion to vacate default judgment, Write down the court rule,and reason to vacate: insuficient proof submitted to support entry of judgment, go to Court on motion day, insist you don’t know what debt they are talking about and plaintiff failed to file required proof for entry of judgment – therefore dismiss. after dismissal court order, make sure you go to the court clerk and see that it has been removed from the entry of judgment records, (you don’t want this turning up 3 years later, because someone forgot to remove it from the court record books). Get copies of dismissal of judgment order and send it to all credit reporting agencies, make sure it is removed from your credit report.

  16. lexia

    I forgot to mention, the information I just submitted are if you are being sued by junk debt buyers like Midland or Lvnv funding. Also check out the affidavits that they attach to the entries of judgments …Pure Garbage! The affidavit can not stand up in court and can not take the place of actual business records. There is enough information on the internet for you to fight this by yourself, and you can do it without a lawyer. The one thing that these sleezy junk debt attornies are waiting for is for you to trip up on court rules or procedures…and even if you do, go to court anyway and insist on proof,and also, (I forgot- you want to see chain of assignments, and original purchaser0.

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