DEBT COLLECTION IN AMERICA: LIES, THREATS AND ABUSE

Debt collectors in the U.S. have been regulated by federal law since the mid 1970s under the Fair Debt Collection Practices Act. Surely enough time has passed that the rules for fair debt collection practices are understood and followed, right? Some law professors and other commentators have suggested that the pendulum has swung too far. They argue that debt collection lawsuits are multiplying and unfairly burdening the legitimate debt collection by seeking statutory penalties and attorney fees for hyper technical violations of the Fair Debt Collection Practices Act.

We want to offer you a different perspective based upon our in-depth exploration of the underbelly of the collection industry. What you dont see and what you probably dont know, unless you have experienced it first hand, is that the debt collection industry is built upon collecting money by creating fear and intimidation through false threats and lies. Much of the industry is built on collecting what has been called "Zombie" debt, ancient credit card accounts that have been charged off ten or more years ago, well past the time limit to bring a legitimate suit that could be proven by evidence in a court of law. Perhaps not surprisingly, all of the actual records of what has been bought and paid for on the credit card account have been lost in the mists of time. Consumers have moved and lost or destroyed their payment records rightfully assuming that the account has been satisfied. After all, who would wait ten years to collect a debt? These accounts are bought and sold between junk debt buyers for literally pennies on the dollar. Through the use of technology, including sophisticated autodialer systems, debt collectors can "reach out and touch" consumers in their home for just a few more pennies. The recent trend in the industry is to set up collection floors offshore, in India or Brazil, and pay ollectors the equivalent of a few hundred dollars monthly, with bonus based on their ability to extract money from American consumers.

We'd like to share with you the story of Manuel and Luz Fausto and their experiences in dealing with one debt collector, Credigy Services Corporation, based out of Suwannee, Georgia. What happened here, sadly, is typical of the experience of many consumers. In fact, during the trial, Credigy embraced the evidence of its conduct as lawful and appropriate. Credigy apparently has no plans to change its debt collection activities. This is especially troubling because Credigy is not a rouge operator. In 2006, it's parent was acquired by a subsidiary of the National Bank of Canada, and should be ashamed of these practices. Credigy showed no shame during the trial; when confronted with damning threats made by its collectors caught on tape, Credigy's corporate representative, a lawyer with ten years of experience who had appeared in more than fifty trials, claimed he wasn't familiar with the transcript and had only "glanced" at it. This same witness admitted that although he had "heard of" affiliate Credigy Global, he really wasn't familiar with it. When confronted with previous testimony, he admitted to being an owner of 50,000 shares of Credigy Global.

Manuel Fausto opened a Wells Fargo charge card at a local branch in 1992. The account had a credit limit of about $1,000. Mr. Fausto and his wife Luz made monthly payments on the account as agreed but the balance kept increasing. After asking (and being declined) at the local Wells Fargo branch to have the interest on the account "frozen" so the balance could be paid off, the Faustos received help from a local business that promised to negotiate a discounted payoff of credit card balances. The Faustos had no other credit card debt but paid the Wells Fargo account off in 1998 or 1999 with two money orders delivered to the local debt negotiator.

Seven years later, in August of 2006, the Faustos received a phone call at their home from a debt collector calling from Credigy Services Corp. The Faustos had no dealings with and did not recognize Credigy as someone they owed. The Faustos also received a letter from Credigy claiming that almost $17,000 was due on the account. The Fausto's made an appointment with a non profit legal clinic, the Watsonville Law Center, who wrote a letter for Mr. Fausto to sign demanding that Credigy provide a copy of the contract proving they owned the debt and some proof that the debt was actually unpaid. Credigy responded with a form letter restating the balance claimed due. The Fausto's brought the letter back to the Watsonville Law Center. WLC wrote a letter for Mr Fausto informing Credigy that since they ignored the request for information, that the Fausto's demanded under federal law that Credigy Cease and Desist all further contact with the Faustos.

Credigy continued to collect on the account, writing numerous letters and calling the Faustos home over 90 times. The collectors were calling from a Credigy affililate in Brazil and made repeated false threats to the Fausto's that Credigy would take their home and paycheck even though the time to sue had expired years before Credigy's first phone call to the Fausto's home. Mrs. Fausto tape recorded the last phone call from Credigy which documented false claims that the account had been reviewed in the legal department that the account was a joint debt owed by Mrs. Fausto also, that Credigy was a "Credit Agency" and that Credigy would report the account "forever" on Mr. Faustos credit file. Credigy's training manuals suggested to the Brazillian collectors, who were paid the equivalent of $400 monthly salary, to use the "coercion method," that credit reporting is the most important financial information for American consumers and to tell the consumer that their life will not be the same if the debt remains on their credit report. Credigy sued Mrs. Fausto claiming that its debt collection phone calls were confidential and seeking damages. Credigy admitted receiving the written cease and desist demand (sent certified mail) but claimed it made a "Bona Fide Error" in continuing its collection efforts. The jury heard testimony that the "Dispute Resolution Team" was confronted with stacks of dispute letters, was understaffed and told that no more resources would be made available because it cost the company money. This was especially troubling because the "Dispute Resolution Department" was ultimately supervised by attorneys employed by Credigy affiliate Stewart & Associates. Two employees in the "Dispute Resolution Department" testified that they left Credigy because the stress at work was making them ill.

The collection calls only stopped after a lawsuit was filed. Credigy had scheduled the calls to continue until the year 2020. No records from any source, including Wells Fargo existed as to what was charged and what had been paid on the account. A consumer from Illinois (a victim of ID theft) and another from New Mexico (former husbands account) testified that Credigy ignored their request for proof that the debt was owed and that Credigy continued collecting upon them after having received cease and desist demands.

Credigy's trial strategy was to attack the credibility of the Faustos and their nine children. Mr. Fausto had a second grade education and Mrs. Fausto received a sixth grade education. Neither spoke English. Credigy issued subpoenas to depose the majority of their children and sought banking, mortgage and medical records of them and their children. The trial court permitted Credigy to elicit testimony that Mrs. Fausto had been charged with driving without a license and hit and run of a child on a bicycle and that Mr. Fausto had been cited for driving with a suspended license and that the police arrived at his home to arrest him during the time period Credigy was making its collection calls. Credigy also introduced evidence that the Faustos borrowed a significant sum against their home in the name of their oldest son and that the house was the subject of a foreclosure several months after the collection calls stopped.

Following a nine day trial in the United States District Court for the Northern District of California, the jury returned a verdict of $500,000 against Credigy Services Corporation. The verdict consisted of $100,000 in actual damages and $400,000 in punitive damages. United States District Judge James W. Ware, who presided over the trial, specifically instructed the jury that they could only award punitive damages, if they found by clear and convincing evidence that Credigy Services Corporation "was malicious or in reckless disregard of the rights" of the Faustos. In order to be "malicious, the jury had to find that the conduct was accompanied by ill will, spite or for the purpose of injuring another. Reckless disregard required a finding of a complete indifference to the rights of others.

We are informed that the verdict is the largest under the Fair Debt Collection Practices Act on behalf of a consumer who owed the debt. The Fausto's are entitled to an award of attorney fees and costs as prevailing party under federal Fair Debt Collection Practices Act and the California Fair Debt Collection Practices Act.

The case is Fausto et al v. Credigy Services Corporation et al Case 5:07-cv-05658-JW.

Plaintiffs attorneys: David Humphreys and Luke Wallace of Humphreys Wallace Humphreys, P.C. Tulsa, OK; Balm Letona, Santa Cruz, CA and Ron Wilcox, San Jose, CA.

Defendants attorneys: Tomio Narita and Jeffrey Topor of Simmons & Narita, San Francisco, CA; John Gillespie and Jeff Lucas of Stewart and Associates, Atlanta, GA.

A jury trial is a search for the truth. Even though our civil justice system is often criticized, trial by jury represents the best way to discover the truth. Jurors are people, like you and I. Unlike those who criticize our justice system, an impartial panel of jurors do not bring a financially-motivated agenda to their decision-making. Any reasonable, fair-minded person, whether they be a consumer or business, should not fear placing their dispute in the hands of the jury. We believe that all of the talk about "runaway jury verdicts" is simply misplaced blame, almost always the result of a complete failure by lawyers to understand and explain the truth of their case to the jury. That being said, good lawyers know how to evaluate and settle their cases fairly. There should be no big surprises at trial. You deserve a realistic, truthful and full disclosure of the risks and potential benefits of putting your case before a jury

We are a different kind of a law firm. Our lawyers are ordinary people that can relate to jurors because we have not forgotten who we are. We have extensive training and experience to understand and tell our client's story. We do our best to fully understand the truth of our client's story and to share this truth with the jury. After all, how can a jury be expected to do justice if your lawyers have not taken the time to fully understand and tell your story to the jury?

Our results speak for themselves. We have earned a reputation for taking on matters that have drawn national attention. Before hiring just any lawyer to handle your dispute, ask yourself, "What happens if my case actually goes to a jury trial?" Before hiring a lawyer, ask him or her, "When is the last time you tried a jury trial? What was the result? What was the opposing side's offer compared to the verdict? How many times have you tried jury trials? Do you have any experience trying similar issues to a jury?" Trial by jury is a powerful equalizer in our society, but the truth is that the system works best for the party who does the hard work necessary to understand and speak the truth.