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Collection Attorney Should I Respond?

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Today I received a 30 day letter from a local collection attorney who is handling a deficiency balance from a voluntary surrender auto loan with a local credit union.  The balance is a little over 2k.  Should I respond to this with a DV letter or would I be better off leaving this alone? 

 

A while back the credit union sent me a letter showing the breakdown of what I owed after the auction.  I noticed that they must have manually added up the numbers owed. They had a breakdown of all of the fees and they clearly did not add the fees up correctly and were collecting on a larger total than what the numbers showed.  I am not sure if that really matters or not?  Thanks in advance for the help.

 

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Credit Union and local attorney COMBINED with previously being given numbers suggests you have litigation in the very near future. 

 

For all of the wrath CU's incur from some around CB, the reality is that they DO tend to protect the interests of members, which means actively pursuing funds owed to them. 

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How long ago did this happen? That will give you an idea as to whether or not you should respond to the collection attorney.

 

$2,000 is sort of a small amount for them to actually file a lawsuit over. Yeah, lawsuits have been filed over such small amounts, but usually they are not and the collectors just do letters and annoying phone calls.

 

Also, if this was more than 2 years ago, the odds are very low that a lawsuit will actually be filed. The OC (the credit union) is likely going to file the lawsuit within the first 12-24 months of you going delinquent. Of course they have the right until the SOL expires. But in reality it doesn't happen often the older it becomes. If it is old AND such a small amount, then the odds are VERY low that anything legal is going to happen.

 

So how old is it?

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what state are you in ?   

 

UCC laws aren't always uniform,  states vary these  

 

you need to read up on Title 9 secured Transactions 

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5 hours ago, RocketGoBoom said:

Also, if this was more than 2 years ago, the odds are very low that a lawsuit will actually be filed. 

It's a local credit union, they've shown their numbers and they are using a local att'y.  They're going to sue. 

I'd agree with you if it were a boilerplate attorney collections letter, but  It isn't. 

DV at this point won't do much good, they'll validate in front of the judge while you watch.  

If you owe the money, if they can legally collect it and can agree on the numbers...set up a repayment plan.  It's better than a judgment. 

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You want verification, not validation. They already gave you the name of the creditor and the amount, which satisfies validation. If the numbers  don't add up, like 2 plus 2 plus 2 equals 8, that is an FDCPA violation for mischaracterizing the amount of the debt. If you have an equal state law, You could have enough violations from this lawyer to wipe out the debt. I would not ask for any further verification in that case and give them a chance to correct their mistakes. Also, see if the contract has private arbitration.

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The OC is who is involved from what is described.  FDCPA is not applicable.  There might be State equivalents that aid the OP, but they won't find solace in federal law.  

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7 hours ago, centex said:

The OC is who is involved from what is described.  FDCPA is not applicable.  There might be State equivalents that aid the OP, but they won't find solace in federal law.  

 

The OP wrote:

Quote

I received a 30 day letter from a local collection attorney

 

If the attorney is regularly engaged in the process of debt collections, then the attorney is definitely governed by the FDCPA

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On 9/6/2018 at 5:54 PM, centex said:

For all of the wrath CU's incur from some around CB, the reality is that they DO tend to protect the interests of members, which means actively pursuing funds owed to them. 

 

Does that include wasting a lot of money on legal fees throwing good money after bad? Chasing people that are defaulting on debt usually doesn't result in much. There is a reason they defaulted ... they are out of money, or they lost a job, or they are having medical issues, etc.

 

85% of judgments result in $0.00 collected by the "winner" of the lawsuit. The math on squeezing blood from a stone doesn't change magically for credit unions. There is a reason that most defaulted debt doesn't result in a lawsuit. It is usually a waste of time. The vast majority of the time they only send it to collections and people only have to deal with phone calls and letters making threats.

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2 hours ago, RocketGoBoom said:

 

Does that include wasting a lot of money on legal fees throwing good money after bad? Chasing people that are defaulting on debt usually doesn't result in much. There is a reason they defaulted ... they are out of money, or they lost a job, or they are having medical issues, etc.

 

85% of judgments result in $0.00 collected by the "winner" of the lawsuit. The math on squeezing blood from a stone doesn't change magically for credit unions. There is a reason that most defaulted debt doesn't result in a lawsuit. It is usually a waste of time. The vast majority of the time they only send it to collections and people only have to deal with phone calls and letters making threats.

CU's are often just smart enough to know that no money today does not mean no money in eternity.  Those people WILL eventually get new employment or sell a house that has equity or want to buy a house, and that is when the judgement (which has been collecting interest at 8-10%) pays dividends (a term familiar to CU members).  And that judgement lives for a long time...

 

As to counsel involved, most used by a CU are not routinely engaged in debt collection.  They are usually local and practice with local members of the community.  Their bread and butter is NOT the slam dunk gathering of judgments against CU members who defaulted on their fellow members...

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19 minutes ago, centex said:

CU's are often just smart enough to know that no money today does not mean no money in eternity.  Those people WILL eventually get new employment or sell a house that has equity or want to buy a house, and that is when the judgement (which has been collecting interest at 8-10%) pays dividends (a term familiar to CU members).  And that judgement lives for a long time...

  

 

That is just silly. The math is no different for credit unions or major banks. Even judgments that are sitting out there are mostly meaningless. They are just pieces of paper buried in a county court file and often never seen again. If no effort is made to collect on a judgment within the first 12 months, then it is basically done and forgotten. It is low priority for everyone. The older it gets, the more forgotten it becomes. 

 

Trying to enforce a judgment is another fools game. It costs more money to have a lawyer do a debtors exam under oath. And often they find out the obvious, the debtor has very little money and zero assets. Or what little they do have is exempt under the state rules because they are living at the poverty level or below. Or their auto has no equity or it is a lease. Or the auto has so little equity that they cannot seize it.

 

Any bank or credit union that has been around the block a few times realizes that. That is why the vast majority of defaults do NOT result in a lawsuit. It is just scary letters and annoying phone calls.

 

27 minutes ago, centex said:

 

As to counsel involved, most used by a CU are not routinely engaged in debt collection.  They are usually local and practice with local members of the community.  Their bread and butter is NOT the slam dunk gathering of judgments against CU members who defaulted on their fellow members...

 

The OP (with 484 posts) said, "a 30 day letter from a local collection attorney" which seems to imply that it was a typical FDCPA Mini-Miranda type of letter. That sounds like a collection letter subject to the FDCPA to me. You seem to be making stuff up if you think the FDCPA does not apply here.

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Credit unions understand the math. 80% of judgments are never collected, but 20% are.  That 20% covers their recovery program and provides some additional return.  They aren't losing money, they do know how to count. 

 Their position is that they owe it to their members to attempt to recover losses by every means available, even if doing so is sometimes unsuccessful. 

Those I am familiar with locally not only sue, but sue 100% of the time.  Others may choose not to.  But...chances of being pursued are much greater with a CU than another financial institution.  This one appears to be gearing up to do just that.   

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I hope the OP does keep this topic updated for the next few weeks/months.

 

For something as small as a $2,000 balance I highly doubt this will result on a lawsuit. Of course they can always sue until the SOL has passed, but the odds are just very low that it will happen.

 

Edited by RocketGoBoom

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On 9/9/2018 at 8:47 AM, RocketGoBoom said:

I hope the OP does keep this topic updated for the next few weeks/months.

 

For something as small as a $2,000 balance I highly doubt this will result on a lawsuit. Of course they can always sue until the SOL has passed, but the odds are just very low that it will happen.

 

I will never understand why you and others believe that litigation won't occur on a $2K claim.  You (and others) ALWAYS seem to overlook that the amount is irrelevant when it comes to the ability to ALSO recoup costs OF the litigation.  Even if we presume a small amount of time (and these tend not to be complex cases), that ten hours at a few hundred per hour is ALSO included in the amount that continues to gather interest. 

 

You (and others) do a tremendous disservice by essentially telling people that they need not worry about litigation.  Most people have no clue how to defend themselves in court, which is precisely why so many people who handle their own defense see judgments render.  And those judgments can indeed live for many years.  As previously noted, MOST people are not going to be lacking for funds for the balance of their life.  Some will want to buy a house at some juncture (or sell the one they are in now), at which time the judgment WILL have to be addressed. 

 

Something that many ALSO conveniently overlook with respect to the CU defaults is that cross-collateralization is a very real thing, which means the person with many accounts with the CU could find their other accounts suddenly encumbered. 

 

The reality is that when a CU has engaged counsel, especially LOCAL counsel, you may reasonably presume that a process server will soon be a knocking...and a gavel will soon a be pounding. 

 

Oh, and to a different issue in the thread, the mere fact that CYA language is included to prevent OTHER frivolous pro se claims does NOT mean the attorney is subject to the FDCPA.  Inclusion simply means one less nonsensical claim to waste the court's time with. 

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3 hours ago, centex said:

I will never understand why you and others believe that litigation won't occur on a $2K claim. 

 

I get it that you are a lawyer and see a lot of lawsuits in your daily work. That is probably creating a confirmation bias which has caused you to incorrectly believe that most defaulted debt results in lawsuits. But you are wrong.

 

For the vast majority of debts, especially bad debt that is small and old, they just do collection letters and annoying phone calls. Creditors filing lawsuits is the exception, not the norm.

 

Most banks are not interested in spending $1,000 in court fees and legal fees to chase a $2,000 bad debt from a poor person that likely won't pay either of them. Yes, some banks do file lawsuits for bad debts. Most of them don't. Most of them use internal collections for 6 months, then charge it off and sell it if they can to a JDB.

 

The vast majority of bad debt only goes to collections and they trash your credit file with a negative. They try to extort you into paying them by skipping the legal system and just declare you guilty right away by tanking your credit score.

 

No thanks. I opted out of that system. Don't pay them and get it all deleted off of your credit files. Tell the CAs and JDBs to FOAD. That makes way more sense to me.

 

The civil court system in the USA is a waste of time. It is mostly a toothless process that can be easily manipulated and stalemated. That is why 85% of judgments result in the "winner" collecting $0.00.

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4 hours ago, centex said:

Something that many ALSO conveniently overlook with respect to the CU defaults is that cross-collateralization is a very real thing, which means the person with many accounts with the CU could find their other accounts suddenly encumbered. 

 

 

Straw man argument. Only an twit would leave their money in a checking/savings account at a credit union where they also defaulted on a car loan or credit card. The scenario where the CU can actually take the cross collateral I suspect rarely ever happens.

 

4 hours ago, centex said:

The reality is that when a CU has engaged counsel, especially LOCAL counsel, you may reasonably presume that a process server will soon be a knocking...and a gavel will soon a be pounding. 

 

 

The reality is that it is likely just a collection attorney that sends tons of collection letters and gets a piece of the action on whatever comes in from those letters. These guys are collection letter mills. There are local lawyers in every town that do it. 

 

The legal business is in crisis due to over production of lawyers from 200+ law schools when we really only need about 20 law schools. Local lawyers are desperate to avoid personal bankruptcy as online tools like Legalzoom.com (and others) take their bread and butter. 

 

Smarter doc review software is killing doc review $$$ contract rates for the third and fourth tier toilet law school grads.

 

There is a real crisis in the legal industry as the business model is imploding in recent years. The collection legal industry is the bottom of the barrel in terms of legal work prestige. The types of lawyers working in the collection industry are not exactly the top of their class. The lawyers you find working collections are usually from the 4th tier schools that accept any mouth breather that can obtain guaranteed federal student loans.

Edited by RocketGoBoom

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We are not discussing routine debt collection...this is a local attorney sending notice regarding their representation of a Credit Union.  They are OFTEN quick to litigate (as a cursory review just of the past month in one of my local Counties just demonstrated).  In EACH instance, they were using local counsel that does not routinely engage in consumer debt collection.  If anything, most work is in real estate and commercial litigation.  Some of the cases were vehicles funded as recently as the first two months of 2018 (THIS year).  One was a default in May with the vehicle being sold in early August.  Case was filed last Wednesday.  The attorney is actually officed about two miles from the residence of the defaulted debtor in that case...somewhat ironically, that office has also handled litigation filed by consumers. 

 

So again, it isn't confirmation bias but rather myself (and others) stating what we know to generally be accurate as it related to credit unions and a propensity to litigate.   

 

Oh, and that nothing claim...even if we presume that a $2K amount is sued for and balloons to $3500 with fees, it THEN has the potential to increase another $2500 or so across an eight to ten year period at the nominal post-judgment rate of 8%.  At some juncture, the CU will likely be willing to accept $4K-$4500 to resolve the matter when the judgment debtor decides they want to buy a house or has some other financial matter that needs to have the judgment cleared in order for the transaction to proceed.  

 

But keep telling people they won't be sued for a nominal amount like $2K defaulted to a credit union and where the notice has come from a local attorney.  I'm sure the three dozen or so in the past five weeks in Harris County that I found in my cursory seach will be so relieved that they are not at risk...oh wait...they DID get sued.  And all by local offices representing the local lender (CU's and banks) and where the paperwork is in order based upon the initial filings as imaged... 

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Did you receive ALL the required paperwork when you surrendered the vehicle?? Did you receive an accounting of the auction sale??

Read up on the laws for repossessions (even voluntary ones) here;

 

https://whychat.me/repoltr.html

https://whychat.me/repoltr.html#resource

If it has been more than 2 years from the date of the auction sale OR if you never received an accurate accounting of the transaction together with a claim for the deficiency, then they can't claim it now.

 

The repossession invalidated any possible claim on any default of the original loan.

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2 hours ago, centex said:

We are not discussing routine debt collection...this is a local attorney sending notice regarding their representation of a Credit Union.  They are OFTEN quick to litigate (as a cursory review just of the past month in one of my local Counties just demonstrated). 

 

<snip the rest of the pointless info>

 

 

You seem to be making a lot of fake conclusions based on the OP writing simply, "Today I received a 30 day letter from a local collection attorney". 

 

The OP didn't even tell us whether or not he was threatened with a lawsuit. All he wrote is that he got a 30 day type of collection letter for something that is about $2,000. This isn't exactly legal Armageddon. This is a silly collection letter from a local collection lawyer. The lawyer probably sends them out in bulk and gets a cut of whatever comes in.

 

The simple fact of the matter is that lawsuits being filed is the exception, not the norm. Most people doesn't have to worry about litigation because it is usually not cost effective for the creditor to sue poor people that have defaulted. It makes sense to file lawsuits against people that have evidence of home ownership and equity in their home in most states. The OP is defaulting on credit cards and autos. Not exactly a prime target for a lawsuit.

 

The VAST majority of these things are only going to result in collection letters and annoying phone calls. 

 

I get it. You see a lot of lawsuits filed in your county. Guess what ... there are 20x more defaulted debts in the same area that did NOT result in a lawsuit. They just got letters and phone calls and negatives on their credit files.

 

The real goal here is for them to send a scary looking letter on some schmuck attorney's legal letterhead so that a gullible debtor is scared into thinking "oh no !!! I am about to get sued". The goal is to scare the gullible ones into calling and arranging a payment plan. And being a lawyer ... you are helping to drive those fears.

 

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If this is the vehicle associated with a defaulted CC back in march, it's already been sent to collections with no resolution.  It's now been placed with a local attorney with the SOL ticking. 

I may not be a lawyer, but I know when I'm about to need one. 

Check out Why Chat's advice. 

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Rocket, This board and others are filled with thousands of posters who were sued by, among other things, credit unions. I am not aware of any database where you can go see how many accounts an OC or JDB has, and how many of them were sued upon. If you have this divine information, please post it.

 

Many JDBs and CUs now contract with an outside firm for the purposes of handling these accounts. They specify that the atty will do this exclusively for them, which makes him "in house counsel" not necessarily subject to the FDCPA. He gets a flat fee for his services.

 

It costs about forty bucks and a stamp to take somebody to small claims, where most of this stuff ends up.  If one person they sue has a job they can garnish for up to 2K, that covers fifty small claims cases filed. The numbers work in their favor, or they wouldn't do it.

 

All banks have formulas they use to determine whether or not to sue people. Obviously, there are cases where it would not be productive, but those are rare. We have had disabled people on SSDI here who were sued by Discover, for instance. Advising people to ignore dunning letters is inapposite to what the industry does and can produce for you.  For instance, a JDB duns you; immediately file for arb before you are sued. 95% of the time the JBD will walk away, but you don't LET them walk away. You send them a nicely drafted federal petition to compel arbitration.  At that point, they usually pay you to go away and cancel the debt.

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Even outside of small claims court, fees are not that substantial.  Attached is a copy of the current fee schedules in Harris County.  Other jurisdictions around the State are similar- Travis County fee schedule is ALSO attached.   

https://www.hcdistrictclerk.com/Common/Civil/pdf/Fee_Schedule_Civil_And_Family.pdf

http://www.traviscountyclerk.org/eclerk/Content.do?code=C.18

 

Thus it basically comes down to about $275 to file plus another $75 for service of process.  With e-filing, the process of filing a case is even simpler since you no longer have to pay for a courier to take the case to the Clerk's office to be filed.  These costs are taxed to the Respondent upon judgment rendering for the Plaintiff, in addition to the Plaintiff recovering attorney fees.  Most of the cases in Texas would be expected to be in the County Courts at Law, although some will be filed in the District Courts.  Both are going to have judges that typically know and understand the law, which is something you don't always get in the Justice of the Peace courts ("small claims"). 

 

 

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Most creditors don't sue. It costs a lot more than just the court fees and lawyer bill. 

 

Here is an article on the topic. The person who wrote it has a great deal of experience. It is based on his experience in the banking system and working with collection agencies and banks. The concepts are very similar to the thinking process that collection agencies and banks go through anywhere.

 

He estimated that only 1 in 10,000 collection accounts result in litigation.

 

Nine Reasons Why Your Creditor Might Never Sue You

 

https://www.consumerproposals.com/blog/nine-reasons-why-your-creditor-might-never-sue-you

 

I will highlight a few quotes for those who don't have time to read the entire article.

 

Quote

Creditors want to treat their portfolio of unpaid accounts as an asset and not as a liability. A creditor will never lose money hiring a collection agency to collect an account on a commission basis. As soon as the decision is made to sue a particular outstanding account then someone—either the creditor or the collection agent–is taking a financial risk of losing money because it will have to incur out-of-pocket expenses with no guarantee of ever recovering a penny from a debtor it has sued. If you owe more than $5,000 to a creditor and you own real property in your own name then you might be sued. Creditors, however, are often reluctant to sue people who do not own real estate because they cannot obtain a judgment against them and put a lien against a debtor’s real property which transforms the creditor into a secured creditor.

 

The author gave 9 reasons why most people are never sued.

 

It is not just legal costs. There are administrative costs for the creditor to manage the entire process.

 

Quote

 

You might not be sued because your debt is too small

Most large creditors will have a policy or guideline prohibiting the commencement of a lawsuit where an unpaid account is below a specific dollar amount. This is done as a cost-saving measure. The creditor does not want to waste administrative time, labour costs, and out-of-pocket expenses on small accounts because it is simply not cost effective to do so. At many large creditors this threshold might be somewhere in the $4,000 to $5,000 range. At other creditors this threshold might be closer to $10,000 or $15,000.

The fact that a bank or a credit card company might not sue outstanding accounts for less than $4,000 or $5,000 does not mean that they automatically sue accounts greater than these amounts. What it does mean is that large creditors in Canada—banks, credit card companies, utilities and large retailers—rarely sue someone who owes them less than $5,000. If you do owe a particular creditor more than $5,000 to $10,000 then your odds of being sued may increase substantially if you own real property in your own name.

 

 

There are numerous reasons for why you likely won't be sued. Read the article if you care enough to educate yourself. The author does a good job of walking you though many of the variables involved. 

 

Despite what you see in court, that is mostly just confirmation bias and falsely leads you to believe that lawsuits are common. That is not the case. Lawsuits are rare for unsecured debt defaults. 

 

The question you should be asking people here on CreditBoards.com is this. "Do you own real estate in your own name that has equity in it? Is the amount at issue greater than $5,000? If yes and yes, then your odds of being sued are much higher".

 

Telling a guy (like the OP) that he is going to get sued because he got a silly 30 day letter from a collection attorney about a $2,000 issue ..... that is just really lousy advice and way over the top. 

 

 

 

Edited by RocketGoBoom

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It is false economy to try and take guidance from someone practicing in Canada and apply it to the jurisprudence systems of ANY other country even when there are some similarities between the systems of law.  This becomes even MORE accurate when I offered examples of cases filed just in the past few weeks in cases in ONE jurisdiction and where the default event was relatively recent (including one where the consumer was actually current on payments but had otherwise breached the loan agreement). 

 

Further, it is even more diametrically opposed to what is seen in the United States in that there are PLENTY of examples even just here on CreditBoards of people who are not property owners and who got sued.  That list of examples grows exponentially when you take the time to actually see the lists of filings in a wide sampling of jurisdictions...

 

The REALITY is that Credit Unions CAN and DO litigate very quickly...this is part of what separates them from traditional bank default behaviors.  Credit Unions are responsible to a membership base, and many of those members are NOT happy when their fellow members walk a debt.  When they have attorneys involved, it isn't generally a case of all hat and no cattle.  Rather, once the letter from an attorney has come on a credit union matter, you can typically expect the Constable (or other process serving entity) to soon be knocking on the door or showing up unannounced in the work place. 

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