After a debt buyer dismissed a case with prejudice that it had filed against one of our clients, a simple question was asked of us – “Since I won, shouldn’t this be taken off my credit report?” As we pondered this question, it occurred to us that our client had asked a critically important question. If you win your lawsuit in Alabama (i.e. the case is dismissed with prejudice), then why should the collection agency or debt buyer be allowed to keep telling the world through your credit report that you still owe the money when a judge has just ruled you do not owe the money?
[Updated November 2011 — you can read a more indepth article here at Sued By A Debt Collector and you can also read a recent lawsuit our client filed against LVNV for this very issue.]
This is one of our longer posts but we hope you will stay with us as the terrible problem in this state is only increasing – mass lawsuits are being filed by debt buyers who have no intention of providing any evidence that you owe the debt. Alabama consumers need to know they do have options when dealing with these kinds of companies who not only sue you but want to destroy your credit as well.
The more we thought about this the more we realized how wrong and defamatory it was that debt collectors and debt buyers would continue to allow a balance to show on the credit reports of someone who has won their case. Let’s look at the facts and see why this is true:
A collection suit in Alabama claims that the consumer owes money due to a breach of contract or due to an unpaid “open account” or under an “account stated” or “stated account” theory. (Please note this “account stated” is a twisting of the law and is not, in our judgment, a legitimate theory but that will be a post for another day).
As we previously noted in a blog post about the two essential things to remember when sued (which the Consumerist was kind of enough to mention), the debt collector or debt buyer must show that you (1) owe the debt to someone and (2) the debt buyer owns the debt (i.e. the “someone” you owe the debt to is, in fact, the debt buyer). In our experience, debt buyers are either unable or unwilling to prove both of these. They love to attempt to show that Alabama consumers owe somebody some amount of money but they typically ask the court to presume, to assume, to speculate, that the money is owed to the debt buyer. Thus, the critical factor most debt buyers ignore in court is to prove that they own the debt.
When debt buyers fail to show that you owe the debt and that they own the debt, many judges will dismiss the case with prejudice. Often debt buyers will agree on the morning of trial to dismiss the case with prejudice. (We believe they wait until the morning of trial in a last gasp attempt to hopefully get a default judgment against the consumer if the consumer or her lawyer does not show up at court).
OK, we have a dismissal with prejudice in Alabama. What does that mean? Alabama case law is clear, in our opinion, that a dismissal with prejudice in this context means “an adjudication on the merits” of the suit. So, remembering that a collection suit says you owe the debt buyer money, an adjudication on the merits means the court has determined (adjudicated) that you do not owe money to the debt buyer.
If you do not owe money to the debt buyer, then why would any debt buyer continue to report to the credit reporting agencies that you owe money to the debt buyer? This is the critical question. We have filed several lawsuits (here and here) seeking to find out what the sworn answers will be from debt buyers who have continued to tell the world that our clients owe money after a judge told the debt buyers our client did not owe the money. As you can imagine, having this type of false information on your credit reports is very distressing and causes a great deal of damages.
On July 25, 2007, we filed the case of Shields v. First Resolution Investment Corporation (a debt buyer), Equifax Information Services, Experian Information Systems, and Trans Union. You can read the complaint by clicking here on our website. The lawsuit lays out the wrongful conduct of this debt buyer and the credit reporting agencies.
Until we get the interesting responses from the debt buyers when we depose their corporate representatives, we offer the one explanation that we believe is most likely.
Debt buyers report balances to the credit agencies because it is one of the most effective means of collecting money from Alabama consumers. As we have discussed elsewhere, our credit reports are the only report cards that matter as adults. Credit reports and scores affect our ability to obtain insurance, credit, jobs, rental housing, etc. To have a collection account on our reports can be devastating. This is particularly true if the account has been re-aged, a particularly nasty tactic of many debt buyers not constrained by honesty and by the law.
Thus, even when a collector or debt buyer loses its case against you, it still wants to wrench money out of you even though you don’t owe it. The best way to do this is by keeping the account with a balance on your credit report and updating it every month in order to blackmail you into paying it off.
What the debt buyers and debt collectors are counting on is that you will pay despite the hardship and pain that paying a debt you don’t owe may cause you. What causes the debt buyers and collectors great pain, however, is when you catch them doing this and sue them. Since the credit reporting agencies are the enablers by allowing or even encouraging false debts to be placed on your credit reports, we have sued them as well. Remember, a credit reporting agency such as Equifax, Experian, or Trans Union has an obligation given to it by Congress (through the Fair Credit Reporting Act) to investigate your dispute. If a judge says you don’t owe the money, how hard is that investigation? This is why we have sued the credit reporting agencies when they ignore what an Alabama state court judge says about you not owing the debt.
So, if you win your collection case (i.e. it has been dismissed with prejudice), one suggestion is to dispute the accuracy of the credit report entries that show you owe money to the particular collector or debt buyer. Tell the credit reporting agencies that you were sued, you denied owing the debt buyer any money, you won your case and you want this false information off of your credit report. Give them the name of the case, the court the suit was filed in, the contact information for the court, and even the name and number of the collection attorney so the attorney can be contacted to verify the case was lost. Hopefully the credit reporting agencies and the debt buyers will honor their commitment under federal and state law and will remove these false entries from your reports. If they don’t, feel free to contact us or another experienced consumer lawyer to explore all of your legal options as you seek to minimize your losses and obtain compensation for your losses. You might also provide needed incentive to the debt buyers and credit reporting agencies to start following the law in this area….
Update as of February 3, 2008 – we are continuing to find these debt buyers refusing to correct the reports. They claim they don’t even know a suit has been filed against our client and they claim they certainly don’t know the suit was lost! How is this possible you ask? These debt buyers send hundreds of files to a national collection law firm. After that, the debt buyers have no idea what is happening. The national collection law firm makes the decision on which cases to file suit on and divides those up among local firms in each state. As we understand it, the local collection firm that actually sues you has no control over what to do – they report and answer to the national firm. So when the case is lost (i.e. you win) the local firm reports to the national firm. This takes time. The national firm then may or may not tell the debt buyer what happened.
So, when the credit reporting agencies contact the debt buyer after your dispute (you sent it certified mail and included all the information we suggested above, right?) the debt buyer simply closes its eyes and says “verified – the person still owes the money” without ever checking with the national or local law firm. Their excuse rings so hollow! – “We didn’t know we sued so how could we know we lost? We file thousands of suits every month – we can’t possibly keep up with all of this!”
If you have won your case by getting the collection suit dismissed with prejudice or the judge ruled in your favor after a trial, please contact us if you would like our help. We are building up a listing of all the times we have sued these companies to see how many times they will continue to say it was just a mistake and they knew nothing – let’s make them remember this is a painful way to do business.
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