Debt Collection Litigation Tidbits

by Jeff Sovern

I've been pulling together some materials for a section in the next edition of our casebook on debt collection litigation.  Here is some of what I've found:

1. From FTC, Reparing a Broken System: Protecting Consumers in Debt Collection Litigation and Arbitration i (2010): “The system for resolving disputes about consumer debts is broken.” 

2. From Centurion Capital Corp. v Guarino, 35 Misc.3d 1219(A), 951 N.Y.S.2d 85 (N.Y.City Civ.Ct. 2012):

[D]ue process requires that this judgment should be vacated and the case dismissed. The plaintiff filed more than 13,700 cases in New York City Civil Court and in all of them, as this one, lacked the legal capacity to bring and maintain any of those actions. The fact that the plaintiff corporation is neither an authorized domestic corporation nor an authorized foreign corporation makes this underlying action defective. * * *

Added to this is the problem that there is no copy of the actual assignment submitted, and no proof that the defendant's account was included in the assignment of debts if it was a bulk assignment.

* * *

The complaint fails to set forth what state law governed the underlying credit card agreement. There is no statement as to what is the applicable statute of limitations and whether this action was timely commenced. There is no indication as to when the agreement was entered into, when the credit card issued or the date of the last payment. There is no indication as to how that amount due was calculated. There is no indication that Wolpoff & Abramson was licensed as a debt collector as required by the New York City Administrative Code § 20–490.

In the interests of brevity, I have left out other problems reported in the opinion.

3. In LVNV Funding Llc v. Guest, 35 Misc.3d 1232(A), 2012 WL 1957715 (N.Y.City Ct. 2012), the court imposed a $10,000 sanction on attorneys for a bringing debt collection case without sufficient proof and considered, but ultimately decided against, holding them in contempt.  The court wrote: ‘The Court trusts that plaintiff's counsel shall commence actions on behalf of assignee creditors in the future only after having received sufficient documentary or verifiable proof of the alleged claim and that they will adhere to future directives issued by any court before which they appear. Any future failure by plaintiff's counsel to comply with an order of this Court will not be tolerated.” 

4. One debt collector, perhaps dissatisfied with judicial reactions (like those above) to his cases, created a fake courtroom in which he issued illegal judgments against debtors.  See Ed Palattella, Erie Judge Bans Ex-Unicredit Chief From Debt Collection, Erie Times-News (July 12, 2012).  The collector later defaulted in a suit brought against him by the Pennsylvania Attorney General, was barred from collecting debts in Pennsylvania, and filed for bankruptcy. 

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