Today I’, talking with consumer attorney Jason Rapa from Pennsylvania. We talk about both debt validation and debt collector behavior.
Today, bad debt buyers are unable to cough up proof a debt is valid and actually legally collectable but depending on where you live, the inability to validate the debt can’t be relied on alone to prevent you from being sued for an old debt.
Debts as little as $90 have wound up in court with the consumer being sued. Unless you take being sued seriously you will lose and may have your wages garnished for even small amounts.
While validating the debt is a tool that might be used, Mr. Rapa advises to stay away from one of the many debt validation companies, that for thousands of dollars, tries to sell you a service to make debt go away through validation tricks. His advice, which is sound, is to instead find an attorney licensed in your state that is aware of how to handle collection issues.
Simply asking a debt collector to prove the validity of a debt does not stop collection activity and if it does, it is not uncommon for the debt to simply be passed to a different collection company to pursue the consumer.
Mr. Rapa says only a small percentage of debt sold by original creditors could be factually validated if push comes to shove. Debt buyers are paying pennies per dollar of debt knowing they are buying debt which could not be validated.
These debt buyers will then sue the consumer and hope to get a judgment. These companies know that when the average consumer is sued they simply stick their head in the sand and wind up losing simply because they did not show up to fight the claim.
Jason Rapa says that in his experience many of the lawsuits by creditors contain errors, incorrect facts, and just erroneous claims of amounts due.
During the interview we talk about several unbelievable real cases of how debt collectors try to scare, threaten and intimidate people into paying with threats of AIDS and public intimidation.
Below is a news story that includes Mr. Rapa and has the audio file of the collection call I mentioned in the interview where the debt collector threatens the consumer that unless he pays the collector will call his neighbors and claim he’s a pedophile.
Steve: I’m here today with Jason Rapa. He’s a consumer attorney in Pennsylvania, and he’s got some expertise in dealing with debt collectors and collection issues. And today we’re gonna be talking about debt validation, validating that debt. When the collector comes, you never know who’s bought it, and you don’t know if it’s a valid debt. Is that right, Mr. Rapa?
Jason Rapa That’s very accurate. A lot of the debts that are being sued out on and are being pursued are oftentimes they are not with the original creditor anymore. They’ve been sold for a fraction of what is alleged to be owed to other companies who have essentially no contract, no, excuse me, any type of documentation showing an agreement between the individual and the credit card company.
Steve: So this applies all across the country, of course, and you’re in Pennsylvania, but do different states treat this issue differently or do those creditors and collectors need to cough up the proof that it’s actually a valid debt?
Jason Rapa Well, I think not only do states treat it differently but courts within those states treat it differently. We’ve seen different results in different courts throughout the State of Pennsylvania, but I think for the most part most of the courts and many of the states are starting to recognize the fact that many of the debt collection lawsuits that are being filed are based on very flimsy proof or no proof that the debt is owed to the individual who’s claiming it. And also the amount that’s owed and due is based on either flimsy evidence or relatively no evidence at all.
Steve: So the consumer has any sort of advantage in if they are sued or dealing with debt collector in saying, “Prove it to me” or as you’re saying the different courts treat it differently, and a consumer could be sued and lose even though a creditor couldn’t provide proof. Is that right?
Jason Rapa I think regardless of the state, you’re going to be looking for the same types of things, one, that the debt collector can prove that they are the rightful owner of that obligation, some sort of documentation of bill of sale, which is not just a bill of sale that says we bought accounts listed in Schedule A on this date from Citibank or from Chase, but actually Schedule A showing that those accounts were actually included.
And I find I’d say 99 out of 100 times, the debt buyer will not provide that Schedule A or that Exhibit A to that bill of sale which shows what accounts are included. And the argument is often from the other side that it would divulge personal financial information about thousands of other individuals. I think the response to that is “That’s your problem not ours. Your duty is to prove that we owe the debt. So black it out, do whatever you have to, but you have to prove to us that we owe a debt to you, that you purchased the debt.”
Beyond that I think their obligation is then to show, well, how did that debt arise? Let’s see some statements starting at zero and getting to where they are now, being the amount that’s being asked for. Let’s see the cardmember agreement that says that there’s gonna be credit extended and what the rate of interest is, what the terms of repayment are, what the penalties are, those types of things.
Another thing that is under the Federal law (the Truth in Lending Act) is there had to be an application, so there should be an application for the credit. You can’t say there was a credit card without an application because the Truth in Lending Act specifically provides that banks couldn’t just send out credit cards to everyone. There’s no extension of credit without an application for it.
Next is that the charges were authorized. How can they prove that these charges are authorized to get to the number that they’re requesting?
Steve: There are people out there right now who are selling for thousands of dollars a service that they will make claims that your debt isn’t valid in hopes of making the debt go away. Is the consumer better off hiring one of these companies and paying thousands of dollars and hoping that happens or in contacting an attorney like you to take care of this legally and in the courts?
Jason Rapa I would not suggest going with one of those companies. Many times those companies are run by and staffed by individuals who have no legal education and may understand the theory but may not know how to put it into practice, especially in the particular court in which you’re in. My suggestion is to find a licensed attorney in your state, also that is familiar with these types of things, the consumer protection-type work, and to find someone who’s also comfortable with and understands the practices and procedures in that court in which you’ve been sued.
That is the best advice I can give is to find someone who’s qualified and qualified in a couple different ways. One, they’re licensed in the state to practice; two, they’re familiar with this area of practice and defending these types of things; and three, they’re familiar with the local practices in court in which you’re being sued because all of those things are of the utmost importance in being able to successfully defend one of these things.
Steve: Well, it sounds like validating the debt is a real problem no matter who you are if your debt has been sold. So what’s the first line of defense should a consumer attempt to validate the debt first or when would they use that technique?
Jason Rapa I think they can do it any time that someone is alleging or asserting that a debt is due and owing. I think you’re gonna have limited success in getting a debt collector to stop under the Fair Debt Collection Practices Act by just simply asking them to validate the debt. In many cases, they’ll either ignore that validation request, which could give rise to a Fair Debt Collection Practices Act claim or they’ll simply close down the account, send it somewhere else.
A lot of times the debt of these accounts that have been purchased from the original creditor are not always collected by the company that purchased them. They’ll ship them out to a third-party collector so in that circumstance, that debt may bounce around for a while, and the consumer may end up doing multiple disputes only to find that as soon as they dispute it, it just goes to the next collector down the line.
Steve: So what percentage of debt do you think is sold on this secondary market, sold by the original creditors that can be validated at all?
Jason Rapa The ones that are sold, I’d say a small percentage. I would really say a small percentage because you have to understand the industry, and the industry is “get it cheap, settle it high.” The more information you request when you buy those accounts, the more information regarding the debtor, the more statements you ask for, the more documentation you ask for, the more pricey the debt is.
So then that debt becomes less profitable because instead of spending – I don’t know – anywhere from $.01 to $.08 cents on the dollar, you may be spending $.25 or $.30 cents on the dollar on a debt that’s already delinquent and difficult to collect, so you may be spending more than that debt is worth. And there’s no certainty to that you’ll ever collect it, so I think the model for the debt buyers is to buy it cheap and primarily they’re looking for default judgments on a lot of these when they file lawsuits. They’re figuring that they file 100 cases; 80 of them will default.
Steve: I’ve noticed recently that I’ve seen more consumers who seem to be getting sued faster. Is that a result of this?
Jason Rapa I think it’s a result of our economy. I think many of the debt buyers and the creditors need the money faster. I think they also see that with the economy going the way it is that individuals, the longer it goes on, the less individuals are gonna have to be able to pay these debts. So I think it’s probably a reaction to the economy and the state of our economy.
Steve: So even though a creditor (a new owner) of the debt knows that, push come to shove, they couldn’t actually validate it, they’re still willing to sue consumers over this anyway in an attempt to get a judgment and then go on and garnish wages or levy accounts or do whatever they can. Is that right?
Jason Rapa Yeah. I mean, they really, unfortunately at least in Pennsylvania, they only have to prove it when challenged. If they file a complaint alleging that you owe a debt, and you never respond to those allegations, they win because you didn’t play the game. And unfortunately, many consumers do just that. They stick their head in the sand and hope it’ll go away, and what that does is it allows these companies to get judgments.
At least in Pennsylvania, those judgments are good until either the individual pays it, files for bankruptcy and gets that judgment discharged or dies, at which point the estate would have to pay for it or if there was no estate, they would simply disappear. So once they get that judgment, they’re in a much better position because you went from alleging something was due and owing to having an unchallengeable amount that’s due and owing.
Steve: Now consumers say that, “Oh, they’re not gonna sue me over $1,000.00 or $2,000.00 because it’s just not worth their time.” But they don’t know that large debt buyers have networks of attorneys. Do you have any sort of idea what the threshold, if any, might be for number to get sued?
Jason Rapa We just saw one where they sued on $90.00. They sued at a local small claims court on $90.00, and they did a bad job of it because it was actually $90.00, plus they added the court costs and things, but the total was under $200.00 is what it came out to be with court costs. So yeah, we see it anywhere from $90.00 like I said. I think that’s probably the lowest I’ve seen, and I have clients right now that owe companies $30,000.00 that haven’t been sued out. They’ll sue on $90.00, but there’s companies that won’t sue on $30,000.00, so your guess is as good as mine. I don’t know that there’s any mathematical or scientific equation for who they sue and who they don’t.
Steve: And you’re located in Pennsylvania, but do you handle cases all across the country when people have had Fair Debt Collection Practices issues?
Jason Rapa In some cases I’m able to co-counsel with other attorneys throughout the country in Minnesota, New York, California. Where I have co-counsel and I can then be admitted through their certification, and together we can represent a consumer in those states and be able to pursue recovery under the Fair Debt Collection Practices Act.
Steve: The problem is that it seems the penalty is only $1,000.00 per occurrence for a violation. Is it worth a consumer’s effort to sue and get so little?
Jason Rapa I think it absolutely is and it’s not just the $1,000.00. It’s $1,000.00 statutory damages per lawsuit plus the ability to recover actual damages: any out of pocket expenses, any emotional distress, any lost wages, any effect on relationships, those types of things. The debt collection industry would have us all think and have the courts think and rule that unless it’s a hard monetary damage that you have a receipt for, there’s no actual damages. And many courts have ruled against that saying that emotional distress is an actual damage. The difficulty becomes how do you quantify it? How do you value it? But there’s ways to do that. That’s something that’s decided by a jury in those cases.
The other thing is even if it is just a statutory damages case, it is well worth it for a consumer to do these things. One is because if the consumer doesn’t do it, there are no government agencies that are gonna on their volition go out and police these violations. And all it does is it gives these debt collectors the ability to go out and do these things without any consequence.
Steve: So if somebody’s listening and they have an issue. They feel like they haven’t been treated well by a bill collector, and they call up the local general practice Main Street attorney, and he doesn’t really wanna give them the time of day, who should they look for?
Jason Rapa My recommendation is they go to the NACA website, the National Association of Consumer Advocates, and that is NACA.net. And on that website there are listings of attorneys in almost every state, I am pretty sure, and multiple attorneys and it also gives you a little indication about what areas of practice that those consumer attorneys will handle and that’s a great resource for individuals who are receiving these types of calls.
Steve: So when should somebody actually make an effort to validate a debt instead of just using it as some trick or technique to get out of paying a valid debt?
Jason Rapa I mean, any time the individual is uncertain of what the amount that is due and owing is, I think they should request validation of the debt. In many cases, these debts haven’t been paid for months or years, and the numbers that are being provided to consumers are not numbers that they remember. I have one currently where they alleged that the individual defaulted on the debt in 2002, and that the principal balance was $4,000.00. In their 2009 lawsuit, filed at the end of 2009, they claimed $16,000.00 is the debt. Obviously, my client is completely unaware of what the true amount is.
The other issue is, well, what was the contract rate of interest? These obligations are governed by a contract and the terms in that contract, and one of the things that we noticed is that the cardmember agreement that they attached to the complaint and that they assert controls says a 24.99 percent interest rate. Yet in their complaint, they’re asking for 30.99 percent, so they’re asking for 6 percent more interest a year over all those years not to mention that there is a statute of limitations defense.
There’s other defenses based on the fact that it’s a debt buyer, and they may not be the proper party and interest to file the lawsuit. They may not have standing but there is a number of problems and a number of issues that a consumer is not gonna be able to get to the bottom of unless they ask the question.
Steve: Does it surprise you that there is such sloppiness in that case?
Jason Rapa Oh, not at all. I mean, whether it be debt collection law firms or foreclosure law firms, I think part of the problem is they have entirely too many cases. It’s a volume practice, and I think in their defense, they don’t have the opportunity to take the time to look at each complaint. Now, I don’t think it is a defense to not have the time. If you don’t have the time, you shouldn’t take on the clients.
It would be like a personal injury attorney saying, “Well, I have 10,000 cases. I can’t pay particular attention to yours. And yeah, I may have gotten the date of the incident wrong and the type of car you were driving wrong and who the insured was wrong, but you can’t blame it on me because I have too many cases.” You have to have the ability to properly represent each client, and unfortunately, their clients don’t seem to care that they’re doing a sloppy job.
Steve: So what do consumers need to worry about more right now, debts that can’t be validated or bad debt collectors?
Jason Rapa I think both because you’re gonna find when they’re attempting to collect these debts and the less success they’re having in collecting the debts, I think the more desperate they’re gonna become. So I think that they’re gonna throw more cases out there against the wall to see what sticks. I think they’re also gonna employ tactics that are more and more egregious in attempts to get people to pay voluntarily.
Because if they’re not gonna be able to validate the debt, then they’re certainly not gonna be able to prove it in a court of law, and then they’re gonna be wasting money trying to collect those debts. So from a financial standpoint, it’d be much more efficient for them to use very abusive and deceptive tactics in phone call collections to try and get people to pay voluntarily.
Steve: In your work in the documents you’ve been able to uncover, have you seen current pricing for the purchase of bad debts and does the price differ greatly if a debt is six months old versus a year old?
Jason Rapa Unfortunately, that’s something that they keep very close to the vest, and not many judges will entertain that when we attempt to uncover what it’s worth. On the other side, the other sometimes we’ll back off of a case when you push too hard about trying to find out what they paid for these debts. They’re very secretive about that. They wanna keep that very close to the vest, and the numbers I threw out previously are just based on folklore and things I hear, whispers around consumer law conventions and things like that so.
Steve: I listened to an audio clip that you have where a debt collector said. I think he was trying to induce the person into paying; that if they didn’t pay, that he would call their neighbors and tell them he was a pedophile.
Jason Rapa Yes.
Steve: Have you had any other examples that have been as egregious as that?
Jason Rapa I’ve had many, many examples of egregious conduct, but I have to say that is probably the most egregious, and at first, when you first hear it, it’s very egregious, but the more you think about it, the more egregious it gets. The more you talk to my client, the more egregious it gets because you realize the effect it had on that individual, on that individual’s relationship with his children, on that individual’s relationship with his neighbors, on that individual’s relationship with his spouse, on that individual’s relationship with himself.
Thinking that if he’s seen holding a child, is someone gonna think that he’s a pedophile or that he’s committing some kind of crime. And I mean, I think that is probably the most despicable thing I’ve ever heard, and I’ve heard some pretty horrible things. But the more I think about it, and the more I talk to my client and his family, it just gets worse.
Steve: Did that case get resolved?
Jason Rapa No, unfortunately, that case has not yet been resolved. We are still litigating it. We’re still in the process of taking discovery, taking depositions. Unfortunately, the people that we are pursuing with company and people we are pursuing have many heads. They have many different corporations to shelter assets. They have all kinds of things in place to try and prevent individuals from being able to do anything about this type of behavior.
Steve: I think that one example that comes to mind is a woman that called me and told me that a debt collector had called her home when she was out and told her two-year-old son that it was appropriate to write his name and phone number in a permanent marker on the kitchen wall.
Jason Rapa I’ve heard lots of terrible things. I had a case where they contacted the girlfriend of a consumer and said, “I need to know how many rooms are in your house.” And she responded, “I don’t understand why are you asking me that.” The individual responded that he was from a sheriff’s department, and that he needed to know what size truck to bring over to take out all their belongings.
And I mean, it scared her to death. She advised him that she had a small child, and they said, “Well, you and your child will be sleeping on the floor.” And then when she begged and pleaded with him about what she could do, they gave her the number of at another desk in the same collection agency and stated that you had to call a certain individual who was an attorney, and he could stop the process.
And then when she contacted that individual, he spoke down to her, asked her what kind of person would live with a person like this, would have a boyfriend like this, and asked her if he knew that the consumer had three or four other girlfriends and children and wasn’t she concerned about contracting AIDS. Where the debt collectors come up with this stuff, why they think it’s gonna motivate payment I don’t know. If their intent is to appall people, they are accomplishing it. How it translates to payment I don’t know, but that’s just one of many horror stories I hear on a regular basis.
Steve: So if somebody’s listening right now, and they happen to live in the State of Pennsylvania, how do they contact you?
Jason Rapa They can go to my website, which is RapaLegal.com, R-A-P-A-L-E-G-A-L.com. They can contact me right through the website directly into my email. They can also call. They can call our number (610) 377-7730 or toll-free number (866) 740-6117 and either myself or my brother, who’s also an attorney in the firm, will speak with them and talk to them about what’s going on because both of us handle the Fair Debt Collection Practices Act and collection abuse cases.
Steve: All right, well, thank you so much for your time today, Mr. Rapa.
Jason Rapa Thank you very much.