Debtor Bites Collector Over Stale Debt

It was the collection law firm that paid, not the debtor, when they sued a disabled man on a stale debt without facts to validate the claim.

The 9th Circuit upheld an award of actual and punitive damages totalling $311,ooo  in favor of the card holder under the Fair Debt Collection Practices Act in a case called McColllough v. Johnson, Rodenburg & Lauinger when the law firm proceeded with suit, ignoring evidence that the statute of limitations had passed.

Debt no longer dies a decent death when it gets old.  It gets sold, often again and again, to the financial equivalent of scavengers, and it lives on as zombie debt.  Legally, it should be uncollectable;  but the fact that the statute of limitations is an affirmative defense rather than an element of the plaintiff’s case, make scenarios like this case possible.

The plaintiff in the original collection action had purchased the debt from Chase and engaged a collection firm to sue on a debt on which there had not been payment since 1999.  When the defendant answered, asserting the statute of limitations, and the debt buyer told its attorney it had no documents to the contrary, the law firm persisted for several months before dismissing the collection action.  The FDCPA suit followed against the law firm, not the debt buyer.

Points worth noting:

  • If the debtor had not filed an answer, the debt buyer would have won.  So, the statute of limitations is not self enforcing.
  • The debt buyer had no documents to support its claim and when pressed, dismissed the collection suit.
  • The law firm was not entitled to rely on its client’s assertions, when information in its own file was to the contrary.

It’s my hope that courts will follow in the footsteps  of the McCoullough trial court and award meaningful damages in these cases;  the statutory $1000 is hardly just compensation to the debtor.  But without attorneys facile in FDCPA law, the rights of the public fall to the debt buyers.

Image courtesy of TheAlieness GiselaGiardino²³

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