A report issued by the Consumer Financial Protection Bureau (CFPB) found that a debt buyer dismissed 70% of its lawsuits when the consumer filed a written answer to the lawsuit. 

As part of a debt collector examination, Supervision reviewed collection lawsuits initiated by the entity. Examiners found that in 70% of the cases, when the consumer filed an answer, the entity would dismiss the suit because it was unable to locate documentation to support its claims.

Junk debt buyers purchase nothing more than a list of names and amounts owed, but they do not receive any real proof of the debt.  They receive no copy of the credit card contract, no record of the payments and charges to the account, no copy of the multiple amendments to the contract, no evidence of whether the contract is written or oral, and no explanation of of how the finance charges were calculated. 

Despite the entity’s express or implied representations to consumers that it intended to establish that consumers owed a debt in the amount claimed in court filings, in numerous instances, the entity misled consumers because it demonstrably had no such intention.

Do we have consumer fraud issue here?  Debt buyers are intentionally misleading consumers by filing lawsuits they have no intention of litigating since they lack meaningful proof of the debt.

What about the remaining 30% of cases not voluntarily dismissed?   The CFPB report does not answer this question, but we may assume that the vast majority of those were settled before going to trial. 

Although I do find that many junk debt lawsuits filed by Midland Funding, Cach LLC, Portfolio Recovery, Sherman Acquisitions and others will be dismissed when a written answer is filed with the Court, the more common experience is that the debt buyer will hit the consumer with lame discovery requests to lay the groundwork for a Summary Judgment motion.  (“Please admit or deny that you owe the amount stated in the lawsuit.”  Hint, your reply should be Deny!) Failure to respond to such discovery gives the debt buyers the right to seek a judgment without any real proof of the debt.

The lesson here is that when you are sued by a debt buyer you should always file a written response to demand proof of the debt.