When Debt Collectors Sue

Debt collectors have multiple means of collecting debt.  Two primary forms are judicial and non-judicial collections.  Judicial collections refers to collections involving the legal system, such as wage garnishment or debt collection lawsuits.  Non judicial collections refers to phone calls or letters sent by the debt collection company.

There’s been a surge in judicial collections; notably lawsuits.   Debt collection companies receive bulk portfolios of debt containing thousands of accounts, then retain counsel to sue consumers to collect the past-due debt.  Due to the mass transfer of accounts, the debt collection company receives minimal account information such as the consumer’s name, address, phone number, account number and last date of payment. Oftentimes the information is incorrect, out of date, or outside the prescription period/statute of limitations.  Consumers need to confirm the debt collection law firm is filing a proper collection action.

All states have deadlines for filing lawsuits.  In Louisiana (barring some interruption to the prescription period such as acknowledgment of the debt or lawsuit), a creditor must bring a lawsuit within 3 years on an open account (invoices for goods, medical services, credit cards, etc.); 5 years for a promissory note; and/or 10 years for contracts.   The prescription period begins to run from the day a cause of action arises and its judicial enforcement is possible.   Due to the sheer quantity of accounts, debt collection law firms do not always confirm the date of the account before filing a lawsuit.  It is not uncommon to find lawsuits on debt as old as 4-5 years (and sometimes even 15 years), and therefore barred by the applicable prescriptive period.

It is the collection law firm’s burden to show the consumer owes the amount of money alleged to the original creditor.  According to one court, “a plaintiff presents prima facie proof sufficient to support a judgment when they submit a statement or invoice of the account and an affidavit attesting to the correctness thereof.” Midland Funding, LLC v. Trahan, La.App. 5 Cir.2/21/13 (2013).

Further, confirm the collection law firm filed the lawsuit in the proper venue.  Collection law firms may try to file lawsuits in courts more favorable or accessible to them.  Pursuant to the Fair Debt Collection Practices Act, a debt collector can only bring a legal action in the jurisdiction in which the consumer signed the contract sued upon or the jurisdiction in which the consumer resides at the commencement of the action.  To enforce an interest in real property (e.g. land), the action must be brought in the jurisdiction in which the real property is located.

When sued, it is important to confirm the information alleged in the complaint.  Do you really owe a debt to the creditor identified in the petition?  Do you owe the amount alleged in the petition?  Finally, is the debt within the applicable statute of limitations/prescription period?