Pretrial Litigation in Consumer Advocacy
By A.D. Sanderson

Owning a consumer advocacy firm can vary from delicately tricky to down right outrageous. The cases that walk through the door span the array from defending debtors in suits regarding old debts to helping people involved in Nigerian fraud schemes, with an assortment in between. Cases ranging from plaintiff suits involving the Fair Debt Collection Practices Act to helping consumers with discrepancies on repossessions consume a large portion of the practice, but the pretrial litigation varies depending upon which side of the fence the client sits.

DEBT COLLECTION SUITS

A debt collection suit generally involves a potential client seeking representation when they are being sued on a debt. The type of debt is generally credit card debt, but I have seen everything from gym memberships to check kiting as the basis for litigation.

Pretrial litigation remains relatively the same regardless of the type of debt central to a debt collection suit. The demand for a defense attorney in this arena is so high that the debt is placed into one of three categories before determining what tactic to approach the problem with. First, the client is assessed to determine what the worst case scenario would be in the pending litigation; this involves determining if the client is “judgment proof” or, in the event of a loss, the client would stand to lose anything should a judgment be entered against them.

Once it is determined that a client is not, in fact, judgment proof, the next step is to determine the viability of the debt. Has the statute of limitations run on the debt? Has the plaintiff complied with all of Oklahoma’s statutes in regard to collection on the debt? Has there been proper service? Are jurisdiction and venue proper? What affirmative defenses are available? Often clients are unable to help in the process of their own defense. Many clients cannot remember or do not keep accurate records to enable the attorney to determine the answer to most of the aforementioned questions immediately.

Oklahoma Statutes provide a modicum of protection where there was secured property involved. The defendant must have received notification of pending and post sale, right to redeem, and the property must be sold in a “commercially reasonable” manner.1 The arguments that these statutory requirements were not met provide affirmative defenses for a client that have resulted in the dismissal of pending litigation.

Oklahoma statutes provide few other defenses. Counterclaims, on the other hand, where legitimate, can be helpful in offsetting any reasonable amount owed (or not owed). The third step in assessing a case lays in potential counterclaims against the plaintiff and/or the collection attorney. All debt collection practices involving household or consumer debts are regulated by the Fair Debt Collection Practices Act2 (FDCPA), up to and including litigation, subjecting debt collection attorneys to the safety provisions provided by the act.

COUNTERCLAIMS

Counterclaims arise when a third party collector, and/or the collection attorney, violates provisions of the FDCPA. The counterclaims that arise are not compulsory counterclaims, which may be filed in the pending litigation, or may give rise to a separate suit, best filed in federal court. Generally speaking, FDCPA attorneys nationwide have found federal courts to be more receptive of FDCPA litigation than state courts.

The FDCPA can, and is violated in many, many ways; the most common of which involve suing the wrong debtor, filing suit in the wrong county, not providing proper validation and failing to cease communication with a debtor once the debtor is represented. Familiarity with the FDCPA is advised before handling of debt collection suits, and some technical violations of the act can easily be missed, foregoing potential claims a client might have.

PRETRIAL LITIGATION

Once the client has been determined not to be judgment proof and defenses are assessed, the remaining litigation is relatively the same regardless of the type of debt. The FDCPA provides debt verification provisions, as does standard litigation practices. Many times, a debt collection attorney cannot get their client to provide the proper documentation, and the case can be quickly dismissed.

Standard discovery requests are submitted, but often one or more motion to compel is required to either force the hand of the plaintiff into dismissal or presentation of proper documentation. More and more frequently, third-party debt collectors are the named plaintiffs in litigation, and said plaintiffs do not have enough documentation to verify that the person being sued is the correct debtor, that the debt is properly assigned, that the amount in controversy is accurate and that the statute of limitations has or has not run on the debt.

SUMMARY

Debt collection litigation is a growing business; while some firms maintain excellent track records regarding compliance with state and federal laws, some debt collectors inevitably find that violations of said laws are the ‘cost’ of doing business. The cost is at the sake of those often least able to help themselves. The result of a judgment against the wrong person or for the wrong amount can lead to many lost opportunities, including lost employment and credit rejection.

As more suits are filed involving debt litigation, the consumer advocacy section lags woefully behind in representing debtors. More and more attorneys should be encouraged to help those going through difficult financial situations.        

1. See 12A O.S. §§ 1-9-601 - 628.
2. See 15 U.S.C. § 1692 et seq.