Sue the Debt Collector and Win:
An Easy Step-by-Step Guide in How to Catch Collection Agencies Breaking the Law and then Suing Them.
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Are collectors harassing you? Congratulations! You have been handed a wonderful OPPORTUNITY. Yes, you heard me correctly. Here at last are the industry secrets that the collection agencies and banks DO NOT want you to know. As far as I know, this is the only book of its kind.
In the hands of too many people, this information will be the ruin of the collections industry. So tell all your friends and relatives about this book!
My name is Sam and I am a recovering collector. I spent three years working for a rather notorious law firm where I harassed people day in and day out. Sorry about that. Let me try to make it up to you here.
Representing three of the top five banks in the U.S., my former employer is one of America’s largest collections law firms. At one point I was their training manager. Like most people in management, I started as a collector. I was a good one, obviously. In this book, I will teach you how to:
1. Lure collectors into breaking state and FDCPA laws
2. Legally record these violations over the phone
3. Use those phone recordings to sue for damages
4. Settle your debts for pennies on the dollar
You may be in debt now but hopefully you won’t be after you follow my steps. Filing bankruptcy is to be done only as a last resort. And whatever you do, DO NOT turn your debts over to one of those debt settlement companies. They are all crooks. Every last one of them. You will regret it if you do.
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Disclaimer:
If you owe money, you are morally and legally obligated to pay it back. However, if collection agencies violate your rights, you are entitled to monetary recourse.
I worked for a collections law firm. As such, I am in a position to speak authoritatively about the laws that govern collections, as well as the inner-workings of this industry. I am NOT a lawyer and any information provided herein is given for entertainment purposes only. I am not responsible for anything that happens to you if my suggestions are carried out.
Is This Legal? Is This Ethical?
Yes, the strategies I will be recommending in this book are perfectly legal. Some would argue, however, that it is unethical to entrap collectors into breaking the law. I say hogwash! Most collectors routinely break the law anyway- with the full encouragement of management!
The laws that govern debt collections are there for a reason-1) to protect the consumer from excessive abuses and 2) to act as a deterrent in preventing collectors from committing these abuses. Unfortunately, these laws are not strong enough deterrents. That the laws are riddled with easily exploited loopholes is one problem (and I will discuss this later). The main problem, however, is that the existing laws are not being enforced. That is the fault of the consumers who, through ignorance of their rights, do not stand up and fight.
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While I have no way of providing accurate numbers on this, I would guess that out of 1000 debtors who pay the collection agencies, only one out of those 1000 will pursue legal action instead. Because of this, collection agencies and collections law firms view these occasional law suits as just another necessary business cost when calculating their bottom line.
Put simply – it pays for collection agencies to break the law! A fine paid out here and there is worth it when breaking the law results in more payments. If collection agencies ceased breaking these laws, their profit margins would drastically shrink. I imagine many-if not most of them- would go bankrupt. I can live with that. Can you?
So that brings us back to our original question: is luring collectors into breaking the law unethical? Not only is not unethical, I would say it is your civic responsibility. If enough people read this book and follow my methods, it would mean the end of these abuses forever. Wouldn’t that be nice?
The laws are there to act as a shield to the consumer. This book teaches you how to turn those laws into a sword! You are going to fight back against unscrupulous banks and their hired thugs (the collectors). What’s more- you are going to win!
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Two-Partv Notification States:
Do you live in one of the following 12 states?
California Maryland Nevada
Connecticut Massachusetts New Hampshire
Florida Michigan Pennsylvania
Illinois Montana Washington
If you live in one of the above 12 states, you are at a serious disadvantage. These are the 12 states where you cannot record telephone conversations without the consent and knowledge of the other party.
My whole strategy is based on secretly recording collectors harassing you. If you live in one of these 12 states, you will need to inform the collector at the beginning of the call that they are being recorded.
Once the collectors know they are being recorded, they will (most likely) be on their best behavior. It will be harder to get them to break the law, though by no means will it be impossible. The lessons outlined in this book will still be very useful to you.
Those living in Two-Party Notification States have other ways of amassing evidence besides recording the phone conversation.
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This will require enlisting family, friends or coworkers (or all of the above) to act as witnesses to this abuse. It is also important to remember to thoroughly document everything that happens. Times, dates, names, what transpired during the conversation need to be written down.
The Statute of Limitations (SOL)
As far as debts are concerned, the Statute of Limitations refers to the timeframe in which a debt is legally valid and can be sued. Once the debt has passed that timeframe, it is known as a ‘zombie debt’ and you are no longer legally obligated to pay it back. You cannot be sued, garnished or forced to repay debts past the SOL and any collection agency that tells you otherwise is lying (and thus breaking FDCPA).
Some collections agencies specialize in zombie debts that are past the SOL and I will teach you how to deal with these scumbags later in the book. Suffice to say, if a collection agency is trying to collect on an out-of-statute debt DO NOT PAY IT UNDER ANY CIRCUMSTANCES.
Each state has its own laws regarding Statute of Limitations. A list of all 50 states and their respective SOL can be found in the appendix.
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The Fair Debt Collection Practices Act (FDCPA)
Enacted in 1978, the FDCPA’s purpose is to eliminate abusive debt collection practices. As these are federal laws, the FDCPA applies to all 50 states.
The FDCPA creates guidelines under which debt collectors may conduct business, it defines the rights of consumers involved with debt collectors and it prescribes penalties and remedies for violations of these laws.
The FDCPA applies only to 3rd party collection agencies and law firms, not the original creditor. It protects individual debtors, not businesses who owe debts.
The entire body of FDCPA laws are in the appendix at the end of the book. Study them. I cannot do your homework for you. I will highlight the most commonly broken laws for you here.
Per FDCPA, a collector may NOT:
• call you before 8am or after 9pm in your time zone. Most collection agencies adhere to this rule. If they do not, it is usually due to human error on the collector’s part. For example, Tennessee, Kentucky and North Dakota are in more than one time zone. Some states like Nebraska, Florida or Indiana have a tiny section that is in one time
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zone, while the rest of the state is in another. If you live in one of these areas, it is possible a collector may illegally call you during prohibited hours on accident. Accident or not, it is a violation.
• continue to contact you after you have sent them a “cease-and-desist” letter. A C&D letter can be drafted by an attorney, notarized and hand delivered. If you don’t have the money for an attorney, simply write “DONT CALL ME NO MORE!!!” on a paper towel with a crayon. That will work too! Make sure you send it certified mail, so you have proof the collection agency got it. Make sure your put your name, address and phone number on the letter so they know who it is they are not to call.
• call you at work after you have told them not to do so. (if
you do not explicitly tell him not to call you at work, a collector can legally call you there). There are a few states and municipalities that DO NOT allow collectors to call your workplace at all. California and New York City (the city only, not the state) are two such places.
• call your phone repeatedly with the intent to harass you.
This is a grey area that collectors often exploit. Some states have laws that explicitly state that a debtor cannot call more than once a day, while other states are more vague on this point, (please refer to your individual state law). A good attorney should be able to argue that more than one phone call a day from the collector is
“harassment”- unless the debtor has explicitly given the collector permission to call more than once in a day.
• use abusive language. If in the heat of argument, the collector calls you a name such as “dead beat”, “loser” or uses any profane language, this is a violation.
• contact a debtor after it is known he is represented by an attorney, or someone with Power-of-Attomey. Verbally informing the collector on the phone that you are represented by an attorney- or that you have someone with Power-of-Attorney over your affairs- is sufficient to stop any further calls to you. If the collector continues to call after that point (and you have this on recording) then he has violated FDCPA.
• call the debtor after a request for written Validation of Debt has been made. Before a collection agency contacts you by phone, he must first contact you by letter. Once you receive that letter, you may then ask the collections agency prove- in writing- that you owe the debt. This Validation of Debt should show your signature on the loan contract as well as an itemized list of charges you have incurred. You must request this by mail, and they must send it to you by mail. If the debt collector contacts you before you have received
• make false threats. This means exactly what it says and it is yet another grey area easily exploited by collectors. This
is the area where most FDCPA abuses take place. I will be talking more about false threats later.
• use misrepresentation or deceit to collect the debt. This includes the collector pretending to be an attorney, a paralegal or even the attorney’s secretary when he/she is merely a collector. This includes the collector telling you that your debt is still legally valid when the debt is past the SOL (a common trick used by collection agencies that collect on out-of-statute debts). This also includes telling you the incorrect balance of the debt, the incorrect date it was last paid on or any other willful lie to get you to pay.
• disclose the debt to a third-party. Per Federal Law, a “third-party” is anyone other than 1) the debtor, 2) the debtor’s spouse or 3) the debtor’s attorney or power-of-attomey. The collector cannot legally discuss the debt with a third-party. A collector may call a third-party for the sole purpose of locating the debtor (when the debtor’s whereabouts is unknown). For example, a collector may legally call the debtor’s neighbor, distant relative, former employer, etc and ask them for the debtor’s phone number -or else ask them to pass a message on to the debtor to call back. Doing this is only legal when the collector does not have the debtors’ contact information. If the collector already has the debtors home or work number but calls the third party anyway- this is a violation. In addition, the collector may only contact the third-party once, unless the third party has given the collector incorrect information. Furthermore, a collector may not
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disclose the name of the company he is calling from unless he is asked first. (Some states have even stricter laws regarding third-party contact. I will discuss those states later).
Likewise, a collector MUST:
• read the mini-miranda at the very beginning of the call
before anything else is discussed. The mini-miranda goes like this: “This communication is from a debt collector. Any information obtained will be used for that purpose/’ The mini-miranda must also be present on all written correspondence from the collection agency. Failure to give the mini-miranda is one of the most common violations. The debt collector must give the mini-miranda every single time he calls you or you call him. Every single time. Let me say it again: every.single.time.
Again, the laws listed above are merely the most common FDCPA violations. There are many other FDCPA laws and you will need to study them in the appendix. Make yourself an expert.
For each FDCPA violation, the collection agency must pay a fine of $1000 to the debtor. In addition, collection agencies are liable to pay compensation for personal damages, if any.
If your lawyer is a good one, he can significantly increase your lawsuit settlement by arguing for personal damages. There are
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many cases where debtors have won judgments against collection agencies for hundreds of thousands of dollars.
State Laws
Most states have their own debt collection laws that go above and beyond the FDCPA. I am not going to include all of here. If I did, this book would turn into a 1000 page legal textbook. To learn your state’s collection laws, go to Google and do a search for Arizona state debt collection law, (for example) or the laws in whatever your state of residence.
Most collectors do not have a good grasp of the states’ individual laws. This is simply too much information for one person to know. Collectors often break these laws- sometimes knowingly, oftentimes unknowingly. Learn your state laws. This is where we are going to trip them up!
The next few pages give an overview of the most commonly broken state laws.
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Non-Garnishment States
1. Texas
2. South Carolina
3. North Carolina
4. Pennsylvania
If you live in one of these four states and a collector so much as implies he intends on garnishing your wages, he has made a false threat and you are entitled to another $1000. Garnishment is prohibited in these four states.
Here is an easy sample conversation you could use if you live in one of these four states:
You: What could happen to me if I don’t pay this?
Collector: It could end up in court.
You: And what happens then?
Collector: The judge could decide to garnish your wages, (the collector just broke state law and now owes you money.)
If that didn’t work, try getting straight to the point:
You: Could my wages be garnished because of this?
Collector: Why, yes they could! (There’s the violation!)
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Community Property States
1. Arizona
2. California
3. Idaho
4. Louisiana
5. Nevada
6. New Mexico
7. Texas
8. Washington
9. Wisconsin
In these nine states, your spouse’s debts are your debts -and vice versa. As the debtor’s spouse, you ARE legally responsible for the debt. The spouse can be sued and his/her wages can be garnished. However, this can only happen when the debt is question was incurred after the marriage. Spouses are not responsible for debts that pre-date the marriage. If the debt in question pre-dates the marriage and the collector tells you that you- as the spouse- are responsible- this is arguably a violation. To make it certainly a violation here is what you can say:
Spouse: When was this debt last paid? (do not use industry terms like charaed-off. for it may tip the collector off that you are wise to the game)
Collector: It was last paid in March of 2004.
Spouse: Well, we got married in 2006. Am I still responsible for it?
Collector: By law, yes you are. (Bam! There’s another fine.)
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Non-Communitv Property States
If you’re like most people and live in one of the 41 non-community property states and a collector tells the spouse he/she is responsible for the debt (which he often will), you have the collector on another violation.
You will need to enlist the help of your spouse to entrap the collector. When your spouse talks to the collecter, your spouse must pretend like he or she is intimidated. Never be combative or let on that you know your rights.
Here is how the conversation should go:
Spouse: I’m really worried about my husband’s/wife’s debts. What is going to happen to us if we can’t pay it? Can they take our house/garnish my wages/sue me? (Use one of those following three scenarios. We are fishing for false threats.)
Collector: Well, I can’t really say for sure (damn, he didn’t take the bait!) but as the spouse, you are legally responsible for his/her debts (Bingo! Another violation! One is better than none.)
See how easy that was?
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Non-spousal states
1. North Carolina
2. Iowa
3. Illinois
4. Massachusetts
5. Ohio
6. New Hampshire
These are the six states where the spouse is considered a third-party. That means the collector is not allowed to discuss the debt with the spouse under any circumstances.
If you are lucky enough to live in one of these six states, you can easily get the collector to talk to your spouse about the debt. Just have him/her answer the phone when the collector calls. There is a 95% chance that the collector will freely (and illegally) discuss your debt with your spouse. Now the violations are racking up! As you can see, it pays to know your state laws! Now go Google them.
Now that we know the laws, let’s learn about the collector who is calling you.
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Know your Enemy
The average collector is a high school graduate- some of them are not even that. Some are career collectors, most are not. Collection agencies have a fairly high employee turn-over rate. Let’s hope the collector calling you is a “newbie”. He will be far easier to manipulate.
There are very few barriers to getting a job with a collections agency. A good collector will be well-spoken, able to play psychological games to great effect, be in control of his/her emotions. These are skills that the more successful career collectors have anyway.
A collector must also be focused and driven to make many calls every day. Like any other job that lives or dies on commission, a collector should be highly ambitious and money-driven. Money-driven? Let’s not mince words here: Greedy! It is their greed that will be their undoing, as you shall see.
Every time a debtor pays a collections agency, the collector handling that person’s debt gets a percentage of the payment towards his commission. The collector must collect a certain amount before he starts accumulating commission. Let’s say his monthly collections quota is $30,000. For all debts collected above $30,000, he might get to keep about 5% of that for himself. Therefore, if he finishes the month with $50,000 in collections, that would be $20,000 above his quota. Five percent of $20,000 is
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his bonus check: $1000. On some slow months he may not even hit his quota- which means he gets no bonus check.
The last few business days of the month are usually when the collector is the most desperate to get those payments in. Depending on how desperate/greedy he is, he will be willing to break a few rules to get that money. Therefore, it is best (though not necessary) to lay our trap on the last few business days of the month.
Do not wait until the last or even second to last day of the month. We will need at least four business days to carry out our plan of action. (If you lay your trap towards the end of the month, don’t worry about it. He’ll still be willing to break the laws regardless).
A collector has huge leeway in deciding what your repayment terms are. He wants to get the most out of you as he possibly can before the end of the month. A skilled collector is good at ‘feeling out’ the debtor’s financial and family circumstances by asking questions. He usually knows when you are fibbing, especially when he has your credit report right in front of him when speaking to you. By looking at your credit report, he already knows who you pay, how much you pay, how much equity you have in your house, where you work and many other things.
if he thinks you are capable of it, the collector will tell you that your only option is to pay the full balance immediately. If you are 70 years old and living on social security, he will cut his losses and take what he can get. $25 is better than nothing.
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Preparation
Now that we know a bit about the person calling us, it’s time to prepare. First you are going to need to do three things:
1. Get into position
2. Record
3. Play Stupid!
Get into Position
You will be tipped-off when a collector is calling you when that unrecognized area code shows up on your caller ID. Or perhaps it says “caller unknown”. Whichever the case, you have about three or four rings to get into position. You need to be free of distractions when that call comes.
If the collector calls you when you’re having lunch with friends- do not answer. Let the collector leave a message. There will be plenty of other opportunities to lay your trap in the future.
Record
Once the collector has called at an appropriate time, go somewhere quiet. Before answering, turn your handheld digital recorder on (get into the habit of keeping the recorder on your person at all times).
When answering, place your phone on “speaker” with the volume all the way up. Place the phone on a flat surface such as a table
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about three feet from your face. Place your recorder next to the phone (test your equipment a few times beforehand so you know the best position to get a good recording).
(Please refer to the section “The Technology You Need” in the appendix for a thorough description of how to operate your equipment).
Plav Stupid!
You are now in position, your recorder is on and you are talking to the collector.
From the very beginning, you will need to play stupid. I cannot stress this enough. You are friendly and dumb- the human version of a golden retriever.
Talk a little slower than normal. Try not to use any of them fancy college words. And whatever you do, resist the temptation to argue with the collector or tell him that you know your rights. It may make you feel good, but you’ve just blown your cover.
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The Eight Steps to Entrap a Collector
Now that we have the collector on the phone, it is time to lay our trap. If it is a collection agency or zombie debt law firm calling you, here are the eight steps you will need to follow over the next few days. (If it is a law firm calling you about a legally valid debt, please skip to the next section)
1. Initial Contact
2. The Hard Luck Story
3. Promise the Moon
4. The Missed Deadline
5. The Third-Party Bait
6. The Closing Call
7. The Insult
8. The Cease and Desist Letter
Step One- Initial Contact
Cooperate with the collector when he calls. Take note of whether
he gives the mini-miranda at the beginning of the call. He
probably didn’t, though whatever you do, DO NOT call him out on
it. You are stupid, remember?
Answer all of his questions, though you may fib on some if you
feel it is necessary.
When I was a collector, I had to get what we call “full & complete
information” on the debtor once phone contact was made. Some
collections agencies insist on this, some do not. If you are dealing
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with one that does, here are some of the questions you might be expected to answer:
1. Your current address and two phone numbers where you can be reached.
2. Name of your company, your position, possibly your work number*
3. Monthly income
4. Spouse’s name (if you have a spouse) and his/her contact info
5. If you have a checking and/or savings account plus the name of your bank
6. If you own a 401K, life insurance, mutual funds or anything else that can be converted into cash
7. Your mortgage or rent payment
♦Calls at Work
If you are like most people, and your job reputation is important enough to you that you cannot risk getting calls from collectors- even if that means a much bigger law suit- here is where you can lie. When the collector is asking you about your work information, either say you are unemployed, or give the collector a fake employer and number. If you do this, you need to tell the collector that he is not to call under any circumstances.
Even if you do decide to give him your work number you should tell him that he is not allowed to call you there. If the collector calls you at work anyway, you will have him on yet another $1000 violation. Make sure to record it. When you do, you will have to get the collector to admit to calling you at work when you previously told him not to. Here is what you need to say when he calls (maintain your friendliness):
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You: Hey, I know we need to talk about this, but I told you I cannot receive calls at work. I’ll call you back later, but can you please not call me here?
He will either apologize for the call (unlikely) or he will tell you that he will continue to call you at work until the debt is resolved. Either way, the violations are beginning to pile up.
Calling you at work when you’ve told the collector not to do so is a more serious violation. This may result in personal damages that may be awarded on top of the $1000 fine. Harassing phone calls at work threaten your job standing, resulting in loss of reputation, being passed up for a promotion or getting fired. If you can prove to the judge that these calls caused serious harm to your well being, your award for personal damages could be tens, if not hundreds of thousands of dollars, depending on the severity of personal damages your attorney can prove was done to you.
It is common for collectors to continue harassing debtors at their workplace when they’ve been told not to. They may even go so far as to call your boss and disclose your debt issues with him. No debtor wants to be in this position. In the event you find yourself on the receiving end of this type of harassment, and you can prove it with recordings and/or witnesses, rest assured you will be getting a very handsome pay-out for personal damages when you take the collection agency to court.
Step Two: The Hard Luck Story
After the collector takes your information, he will then give you your repayment options. Whatever those repayment options are, tell him there is no way you can do it. Give him a hard luck story about how you lost your job, had your house foreclosed on, etc. Your hard luck story may not be a ‘story’ at all. It could be 100% true.
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Step Three: Promise the Moon
Ah, but there is a light at the end of the tunnel. However destitute you at-this-very-moment, you will need to make the collector think that you have access to a large amount of money, even if don’t. Even if your credit report, which he can see in front of him, is awful.
Give him a story where this large amount money is coming from: a rich family member is interested in helping you get out of debt. You have a 401K/mutual fund that you can cash out. You have a large law suit settlement/ insurance settlement coming your way due to a car accident last May. Your grandfather died and left you a huge inheritance, but you are still waiting on it to be finalized. You get the idea. The collector is now starting to salivate.
It is also important to make the collector think that you will be getting this large sum of money – not next month- but by 12 o’clock noon this Wednesday. Promise him a specific time (to the hour!) when you will be able to pay him that large amount of money. Make sure you have a reason why it is to be on this day and time. Now the collector’s greed is boiling over!
The collector is now 100% sure he will be getting a large payment from you on such-and-such a date and he has already calculated this payment into his commission check. It’s a foregone conclusion now- that money is his!
One thing to keep in mind- the collector may get suspicious if you promise to pay this large amount in full too easily. You need to put up a little bit of a fight. He is expecting you to do so.
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Therefore, if you owe $7000, tell the collector you will only have $5000 and ask if he can work out a deal with you. He will most likely offer you a settlement where he will forgive the $2000 and allow you to pay $5000 to settle the balance. Now that we have promised the collector how much we are going to pay on what date and time, it’s time to sit back and let the violations take their course.
Step Four: The Missed Deadline
What happens when the deadline comes and goes and he hasn’t gotten his payment from you? He’s going to be awfully frustrated, that’s what! So frustrated, in fact, that he is probably going to be breaking many FDCPA laws to get that money that’s rightfully his. From the time the payment deadline passes, the three days that follow should be rife with FDCPA and state law violations, and the best part is that you will have to do very little to provoke him. Sit back and let your answering machine and Caller ID collect the evidence.
Let’s assume the payment deadline you gave him was Wednesday at 12 noon. Here is a time line of what you might expect and what you should do:
Wednesday, 12:00 pm- the collector calls looking for the money. You don’t answer and he leaves a message on your answering machine. (I don’t think I need to remind you that all of these messages must be time-stamped and saved).
Wednesday 2:00 pm- the collector calls back. He may leave a message or he may not. If not, you need time-stamped proof that
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he called you twice in a day. Your phone carrier can probably provide the evidence (Violation Number One).
Wednesday 5:00 pm- the collector calls yet again. Do not answer. (Violation Number Two)
Thursday 8:00 am- the collector calls first thing in the morning looking for ‘his’ money. Don’t answer. Let him leave a message.
Thursday 12:00 pm- He calls again. Don’t answer. (Violation Number Three)
Step Five: The Third-Party Bait
Thursday 3:00 pm- He calls again. (Violation #4) This time have a friend or family member (but not your spouse, unless you live in a non-spousal state) answer the call- someone who is in on the scheme. Let’s just say the person answering the phone is your next door neighbor, Jethro, who happens to be watching your dogs while you are out.
Let’s hope the conversation goes like this:
Collector: May I speak to John please?
Jethro: John’s not in right now. Can I take a message?
Collector: Sure. This is Jim Dandy with the Law Office of Teddy J Picklesby. (Violation #5. A collector cannot disclose his company unless asked). I need him to call me as soon as he can at 888-232-4567. May I ask who I am speaking to?
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Jethro: This is Jethro. What this is concerning?
Collector: This pertains to an important business matter, (if he uses the phrase Important legal matter”, your attorney could argue that is an unlawful disclosure to a third party)
Jethro: He’s not in any sort of trouble is he? I might be able to help out if he is.
(Here is where the collector might disclose the debt to a third party (i.e. Jethro), resulting in Violation Number Six. If he is an honest collector who works for an agency where FDCPA is strictly enforced-he will not).
Collector: I am not at liberty to say. If you could please have him call me back promptly.
(get your friend to make one last attempt to lure the collector into breaking FDCPA)
Jethro: Does this have to do with one of his debts? I know all about this. Is there anything I can do to help him take care of it? John can be pretty irresponsible.
Collector: I’m sorry, I cannot say. But thank you for your time. End of call.
Don’t return the call yet. If he calls any more in the day, that is just more violations being racked up.
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Step Six: The Closing Call
Here is where we wrap up our plan. This should be your final phone conversation with the collector.
Friday 8:00 am- The collector calls again. By this time, the collector will be losing hope on this payment You should answer the call. Remember- you are friendly and dumb.
You: Hello?
Collector: John? This is Jim Dandy from the Law Office, (take note of whether he reads the mini-miranda. My guess is that he will not, resulting in yet another violation)
You: Hey John, what’s up man?
Collector: Well, you were supposed to get that payment out to me on Wednesday. What happened?
You: Dude, I totally spaced it. Sorry.
Collector: We need to get this paid immediately. Please get out your check book so we can take care of it now.
You: Hey, man- but, I don’t have the money right now. There were some… complications.
Collector: What’s going on?
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You: Well, it seems the payment I was counting on won’t happen for another two months. My bad.
Collector: Is there anyone you can borrow it from now and then pay them back when the money arrives in two months?
You: I don’t think so. Can I just pay you in two months?
Collector: Absolutely not.
You: Well, what happens if I don’t pay?
(Here is where the collector may indulge in false threats and other violations. Some additional questions you might ask him to keep the conversation going are: Am I going to get sued? Am I going to get garnished? If he answers with an unqualified “yes” on either of those questions, that is two more violations.
You: Well, I guess you’re just going to have to do what you have to do. I really don’t want to get in trouble but I can’t do anything else.
The collector will now try to cut his losses and get what he can.
Collector: I tell you what- maybe I can get permission to take some sort of good faith payment from you for the next couple months until you get the full balance, (the collector is now prepared to cut his losses and take what he can get)
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You: Sorry, Jim-1 am completely out of money for the next two months. I couldn’t even pay you $10.1 have to eat.
Collectonfaf. this point, the collector has given up hope and will part ways with you) John, you leave me no choice but to send your account on for further action.
The above is what he should say. What he will hopefully say is this:
Collector: I have no choice but to send this to our legal department for suit (if he is from a collection agency and says this, it is a false threat)
Other variations of this would be:
“I have to send this on for legal action”
“We now have to file suit”
“I will now be recommending legal action against you”
Again, if it is a collection agency calling you, they cannot sue. If it is a law firm calling you about a debt past the SOL, they can’t sue either. Any threats- even implied threats- of legal action are false threats that will result in more $1000 fines.
Step Seven: The Insult
After he makes his final threat to you- FDCPA violation or not- he will wait to see what your reaction is before hanging up. It is now time to drop the friendly act and tear into him.
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You: You are an asshole! You illiterate redneck! I’m not going to take this shit from a high-school drop-out like yourself!
Try to insult his character without crossing the line into racism or bigotry. Racist or bigoted taunts can be used against you- and remember, the collection agency is recording the call too.
What follows will hopefully be him venting all of his anger on you for wasting three days of his time.
Collector: Oh, yeah? At least I can pay my bills, you worthless deadbeat. (Violation Number…sorry, I’ve lost count)
Step Eight: The Cease and Desist
The final thing you should say to him is this:
You: You are hereby advised to cease and desist all further
contact with me.
Now hang up the phone. Immediately write a cease-and-desist letter, send it certified mail and if the collector ever contacts you again, you have him on even more violations.
Dealing with law firms who are collecting on valid debts
Again, if your debt is past the Statute of Limitations, this debt is not legally valid and the law firm in question cannot sue you. Thus, you can use the above steps I just covered to deal with these crooks.
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If a law firm calls you on a valid debt that is within the Statute of Limitations, you will have to be very careful. Their threats to sue may not be false threats.
How do we know if the threat to sue is false or not? You won’t know until you get sued (or not sued). If you file a complaint that the law firm made a false threat to sue you (because they never did sue), that law firm may at that point go ahead and sue you anyway (when they otherwise wouldn’t) just to invalidate your complaint. These sorts of law firms thus operate in a legal grey area where they can get away with making false threats and you have limited recourse against them.
In short, if a law firm calls you on a legally valid debt, you may have to pay them something. That is, of course, if you don’t beat them to the punch in filing suit against them. Let’s try to get them to break some laws so they have to pay you instead!
Where can we get these law firms to trip up? One way is by getting them to break your state laws.
Do you live in a non-community property state? A non-garnishment state? A non-spousal state? A state where calls at work are prohibited? If so, lure them into breaking these laws by using the methods I covered before. Remember to research your state laws to learn even more traps you can set for them.
In addition to using your state laws against them, you will also need to follow different steps when dealing with law firms collecting on valid debts.
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Here are the eight steps when dealing with these sorts of law firms:
1. Initial Contact
2. Hard Luck Story
3. Promise the Moon
4. The Missed Deadline
5. The Third-Party Bait
6. The Closing Call
7. Cutting the Losses
8. Negotiation (Settlement/ Best Possible Arrangement)
Steps One through Six should go exactly the same as I described in the above chapter, keeping in mind to also try luring them into breaking your state laws. Step Six should go the same up until you get to the part where the debtor is ready to cut his losses. Remember where we left off- you have now fallen through on your promise to pay him that large balance because your inheritance/insurance settlement/etc. has fallen though…
Step Seven: Cutting the Losses
You: Well, I guess you’re just going to have to do what you have to do. I really don’t want to get in trouble but I can’t do anything else.
Collector: I tell you what- maybe I can get permission to take some sort of good faith payment from you for the next couple months until you get the full balance.
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Step Eight: Negotiation for Settlement
Use the following strategy only if you have enough money to pay about 30% of your balance. It is OK if you do not have the full 30% now. If you can come up with the money in the next three to six months the collector should be able to work out a deal with you. He is in “cutting his losses” mode now and is willing to take whatever he can get. [If you cannot come up with 30%, please skip to the next chapter Step Eight: Best Possible Arrangement).
Keep in mind that the lower the settlement you request- and the more months it is spread out over installments, the less likely your settlement request would be approved. Do not expect to get a 15% settlement spread out over 12 months. It just ain’t gonna happen.
Like any type of negotiation, be it haggling for goods in an open market or buying a car, you must make a very low offer at first and work your way up from there. He will most likely reject your first offer. Also, remember to play up your “hard luck story”. The collector must believe it to be true. For many of you, it very likely is true.
For your first offer, I would start off asking for a 20% settlement over 6 months. The collector will probably say “no way” and make a counter offer of 40% over 3 months. You in turn counter-offer something between those two offers- 30% in 6 months (or fewer months if you can realistically do it).
In some collectors, 30% in 6 months was generally the lowest we could go- and to get approval for that, we had to get
.
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permission from the creditor itself. This required submitting paperwork to the creditor to prove that the debtor could not pay any more than 30% over 6 months. Sometimes the creditor would reject the request. More times than not, however, the creditor approved it.
Of course, if you can come up with the full 30% now, you may as well get it over with and pay it.
Before you pay anything to the collector, make sure the collector faxes you the settlement terms, which you must keep for your records.
Once the settlement has been paid in full, the collection agency must fax or send you a letter stating that your debt has been paid off. YOU MUST KEEP THIS LETTER FOR YOU RECORDS, for it is not unheard of for the supposedly settled debt to be sent out to another collection agency.
The owner of the debt has 6 weeks to update your credit report accordingly. The paid-off debt will then reflect a “settled in full” status on your credit report, which looks much better than the “default” status it reflected before.
If the collector in question broke FDCPA or state laws over the course of this negotiation process, you should go ahead and settle the debt as agreed upon and then sue them. That’s called killing two birds with one stone!
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A brief word about Debt Settlement Companies:
As I mentioned earlier in the book, these companies are all scams. No exceptions. Many of them are being shut down as we speak. There will probably come a day in the near future when federal laws are passed putting them all out of business. Do not believe their advertisements that they are somehow sanctioned by the government. Or that they are a part of Obama’s stimulus package. They aren’t.
Debt Settlement Companies are supposed to do everything I just taught you how to do above: negotiate settlements with your creditors (for a high fee of course).
In practice, DSCs make your creditors wait- sometimes years-before they pay off your bills. In the meantime, your creditors may very well sue you. We sued debtors all the time who mistakenly thought that by turning their debts over to a DSC, they were protected.
Turning your debts over to a DSC DOES NOT protect you from a law suit. In fact, it makes a law suit far more likely. So stay away from them!
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Step Eight- Best Possible Arrangement
If you DO NOT have the ability to come up with 30% of your debt at anytime in the next few months, then you need to pay something. This is to keep potentially ruinous lawsuits coming your way. Offer the collector what you can- $25/mo for example. If he refuses to accept your offer, send it anyway. He probably won’t refuse it though. He is in cutting his losses mode.
Hopefully, though, you have amassed enough evidence of the collector breaking the law that you will be getting a big pay out.
Pay him the $25/mo and sue him anyway.
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Gather all the paper evidence: the letters you received from the collection .agency, the post-office receipt from the cease-and-desist letter you sent certified mail (having a copy of this letter wouldn’t hurt either), the phone logs from your phone carrier, any written notes you have been taking – and most importantly-the digital recordings of all phone conversations you’ve had with the collector.
If you have strong enough evidence of law breaking (and you should if you have followed my instructions), a reputable attorney will take your case on contingency- that is, he will not charge you any money up front. Instead he makes his money by charging you a percentage (somewhere in the neighborhood of 30%) of your lawsuit settlement. Therefore, if the judge awards you $10,000, you keep $7000 and your attorney gets $3000. In the event you lose your court case, you owe him nothing.
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Make sure you hire an attorney only on contingency. Any attorney who asks for money upfront- or who asks to be paid even if you lose the case- is not to be trusted.
Once you have decided on an attorney, he or she will arrange a meeting with you in person where you will hand over all of the evidence and then sign a contract where you agree to the terms of representation. Now it’s time to sit back and let your attorney do his or her work.
What your attorney should do next is send a threatening letter to the collections agency in question. This letter will detail the abuses that took place and the incriminating evidence the attorney has in his possession to back up these claims. What will likely then happen is that the collections agency will offer to settle out of court. Now begins the back and forth negotiation between your attorney and the collections agency. Your attorney, getting a cut of your award, has an incentive to get the highest amount possible.
If a price cannot be agreed upon, or if the collections agency refuses to settle (they would only do this if your case is genuinely weak and the collection agency feels they could win in court), then it will go to court.
Almost all collection agencies settle out of court, even if the case against them is weak. On the small chance it does go to court, you will be expected to appear and take the stand. After both parties have argued their case, it is now up to the judge to decide what sort of payout- if any- you are entitled to. Assuming your case is valid (and it should be if you have followed my steps) then you will be getting -at the very least- $1000 for each clear cut violation that can be proven with evidence.
In the unlikely event your case does go all the way to court, you must not give the judge any impression that you intentionally entrapped the collector into breaking the law (even though you might have). The judge may not look favorably upon your case if entrapment is apparent (though you are still legally entitled to those $1000 fines no matter what. The law is the law).
In Conclusion
I hope you have found my suggestions useful.
I truly hope this book turns around the fortunes of the many struggling working people who, like me, have been hurt in this recession.
Lastly, I hope this book plays a part, however small it may be, in putting sleazy collection agencies out of business for good.
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Appendix
The Technology You Will Need
I am assuming that my audience has a working knowledge of current technology, and will thus not go to much into detail here. If what I am about to explain here is beyond your technical knowledge, please have a trusted friend or family member help you get set up. This stuff is really pretty easy.
First off, you will need an old-fashioned pad and pen to document everything that happens: time and date of call, name of collector, name of collection agency, bill in question, amount of bill, and notes on what transpired between you and the collector.
Next- do you have an iPhone, Blackberry, Android or some other type of 3G phone? It will come in handy if you do. Whatever kind of phone you have, you will need one that has caller ID. You will also need a away to keep a log of all the incoming calls you receive, along with the exact time and date those calls were made. You should already be keeping track of these calls on your notepad. For legal purposes, however, it is best to have a phone log that is harder to forge. Check with your phone company to see if they can provide you with an official hard copy of all the incoming calls you receive in a billing period. Most of them will. You will also need a handheld recorder that converts recordings into MP3 format or some other type of digitized sound file format. You will need the ability to transfer these sound files from the recorder to your computer. Later, you will need to send these sound files out as email attachments to your attorney.
The handheld recorder might have inferior sound quality and there is a real risk that the recording will be so bad as to be
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useless in a court of law. Therefore- you must test your equipment out a few times beforehand.
Therefore, you must record a few phone calls you make to a friend or family member to test the best angle/distance/position your handheld recorder should be placed for optimal sound quality.
It is not necessary to have an iPhone, but if you do, there is an app simply called “Recorder” made by Retronyms that can be purchased via the App Store for $0.99. There are a few competing apps that have similar functions, though I cannot vouch for their effectiveness.
You will also need to purchase from Retronyms recording time for $4.99/hr. I think one hour should be enough. Your total cost (the Recorder app plus one hour of recording time) will thus be $5.98. Due to legal issues, the Recorder App only works when you call someone, not when they call you.
WARNING: The app’s default setting plays a recorded message to the other party alerting them that they are being recorded before you start talking to them. There is an option in the ‘settings’ to turn this recorded message off. If you live in one of those aforementioned 38 states, it is your legal right to do so. If you live in a One-Party Notification state, turn the recorded message off I One last thing about the Recorder app: it will only allow a file with a maximum size of 5MB to be emailed from your phone. The average recorded phone conversation will be larger than 5MB. Thus, you will need to transfer the file from your phone to your computer via a wifi signal. The app will walk you through the process.
As I mentioned before, the Recorder app only works when you make a call. When the collector calls you, you will need to record him/her with your handheld recorder.
Ideally, you should have a 3G phone AND a handheld recorder. If you can only afford one, make it the handheld recorder.
So once again, here is a list of equipment you WILL need:
1. A handheld digital recorder (that has been tested out before using on the collector)
2. a phone with caller ID
3. A computer with internet
4. A way to get time/date records of incoming calls (preferably as a hard copy from your carrier)
5. A pad and a pen
And a list of things it would be extremely helpful to have:
1. A 3G phone (iPhone is best)
2. Recorder app + one hour of recording time.
Statute of Limitations by State
There are four categories of debts, each of which have their own Statute of Limitations. These four categories are:
1. Oral Agreements- There is no written contract between you and your creditor. Oral agreements are still legally binding, though harder to prove in court.
2. Written Agreements- You agree to repay a loan under terms spelled out in a document that has been signed by you and the person loaning you money. This is usually a less formal loan between two people.
3. Promissory Note- This is a contract you have signed with a financial institution that specifically spells out the interest, monthly payments and other repayment terms. Most mortgages and car loans fall under this category
4. Open Accounts- All credit-cards fall under this category, be it a Visa or MasterCard, a department store card or a gas card. These are revolving lines of credit with varying balances and no set monthly repayment.
I imagine most of my readers’ debts will fall under the Open Account category.
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State Oral Agreements Written Contracts Promissory Notes Open Accounts
Alabama 6 6 6 3
Alaska 6 6 6 6
Arizona 3 5 6 3
Arkansas 3 5 6 3
California 2 4 4 4
Colorado 6 6 6 6
Connecticut 3 6 6 6
Delaware 3 3 6 3
D.C. 3 3 3 3
Florida 4 5 5 4
Georgia 4 6 6 4
Hawaii 6 6 6 6
Idaho 4 5 10 4
Illinois 5 10 6 5
Indiana 6 10 10 6
Iowa 5 10 5 5
Kansas 3 5 5 3
Kentucky 5 15 15 5
Louisiana 10 10 10 3
Maine 6 6 6 6
Maryland 3 3 6 3
Massachusetts 6 6 6 6
Michigan 6 6 6 6
Minnesota 6 6 6 6
Mississippi 3 3 3 3
Missouri 5 10 10 5
Montana 5 8 8 5
Nebraska 4 5 6 4
Nevada 4 6 3 4
New Hampshire 3 3 6 3
New Jersey 6 6 6 6
New Mexico 4 6 6 4
New York 6 6 6 6
North Carolina 3 3 5 3
North Dakota 6 6 6 6
Ohio 6 15 15 ?
Oklahoma 3 5 5 3
Oregon 6 6 6 6
Pennsylvania 4 6 4 6
Rhode Island 15 15 10 10
South Carolina 10 10 3 3
South Dakota 6 6 6 6
Tennessee 6 6 6 6
Texas 4 4 4 4
Utah 4 6 6 4
Vermont 6 6 5 6
Virginia 3 5 6 3
Washington 3 6 6 3
West Virginia 5 10 6 5
Wisconsin 6 6 10 6
Wyoming 8 10 10 8
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Mortgage Asistance 877-227-4341 