Friday, July 22, 2016

Do Debt Collection Agencies Progress Lawsuits to Trial?

The United States Court of Appeals for the Seventh Circuit has recently ruled that debt collectors are not violating the law if they file a lawsuit against a debtor but then do not go to trial; in fact, according to the ruling, even if debt collectors never have any intention of actually going to trial, they are still not breaking any laws, nor do their actions qualify as illegal “deceptive threats,” which are outlawed by the Fair Debt Collection Practices Act.  

The reasoning behind the Seventh Circuit’s recent ruling is three consumers who brought suit against debt collection agencies for filing suit against them without, according to the consumers, actually intending to take them to trial. The consumers argued that the debt collection agencies simply wanted to obtain a default judgment or settlement that they could collect on, proven by the fact that they later had the lawsuits voluntarily dismissed.

Both the lower courts and the Seventh Circuit eventually dismissed the suits brought forth by the consumers, saying that the collection agencies were within their rights and were not violating any Fair Debt Collection Practices Act laws. The court also ruled that filing a lawsuit does not mean that debt collectors are required to progress said lawsuit to a trial and that, furthermore, trials are not typically cost-effective, simple, or fast, which makes it understandable that many debt collection agencies would avoid trials whenever possible.

However, it is important for debt collectors to understand that other rules and laws related to fair and legal debt collection do exist, such as the fact that debt collectors are required to have and provide verifiable proof of the debt they are attempting to collect upon and its existence. Fortunately, though, in this one instance, the courts sided with debt collectors, which doesn’t tend to happen a lot. Thus, debt collectors are encouraged to continue doing their best to act legally and in the best interest of their clients at all times to avoid finding themselves facing lawsuits which may not turn out as well as this one.

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