In my experience, debt buyer lawsuits lack significant pieces of information
that establish a prima facie case. Because debt buyers often receive very
little information about the debts being purchased, it may be difficult
to demonstrate what I consider to be key elements of a case.
One of the first key elements that debt buyers will have difficulty proving
is that the specific debt is owned by the debt buyer. The debt-purchasing
industry is not like a brick-and-mortar specialty store. Instead of selecting
individual debts to purchase, debt buyers purchase large packages of debts,
often for pennies on the dollar. In this sense, the debt-purchasing industry
is more like a trip to CostCo.
A debt buyer may be able to demonstrate that it purchased a large bundle
of debts from Wells Fargo, but proving which debts are within that bundle
is much more problematic.
There are several ways in which a debt buyer will try to establish that
a debt is owed. The most basic method is called "account stated."
If a debt buyer tells a consumer that he owes $5,000.00, and the consumer
does not dispute the validity of the debt within 30 days, then the debt
buyer will claim that the consumer's silence is equivalent to a validation
of the account stated. This approach does not work in every jurisdiction,
and does not conclsusively demonstrate that the debt buyer purchased the
specific debt related to the consumer. It requires a significant logical
leap -- that being able to recite an account balance demonstrates legal
ownership of the consumer's repayment obligation to the original creditor.
Being able to demonstrate the legal ownership of the consumer's repayment
obligation is much more difficult for debt buyers. In my experience, the
"proof" of account information is a single page printed from
the debt buyer's database. It lists the name of the original creditor,
the name of the consumer, and the total balance allegedly due on the account.
Sometimes it also lists the original account number -- in other situations
it does not.
Thin evidence of ownership is generally sufficient for a debt buyer because
very few consumers challenge the amount owed and even fewer fight the
debt buyer's lawsuits.
This thin evidence can be attacked. Courts have found that the obligation
to repay a credit card company arises when the card is used -- each individual
transaction creates a new contract. Since most debt buyers cannot substantiate
individual transactions, they cannot establish that the individual consumer
owed the debt. This is why it is important to pay attention to how the
claim is pled. If the debt buyer is suing for breach of contract, then
demonstrating that the individual contracts existed is an essential element
of the claim. If the claim is based on an account stated theory, then
the individual transactions may not be as important.
If you are receiving mail from a debt buyer or have been sued for an old
debt by an unfamiliar company, then you may want to consult with an attorney
to explore your options.