Released: June 13, 2007

Debt collectors slammed by consumer lawsuits

Source: Sheri Qualters, National Law Journal

Debt-collection lawyers are increasingly being hauled into court as defendants in Fair Debt Collection Practices Act lawsuits by debt-burdened consumers who use litigation to fend off creditors.

Lawyers say the statute’s vague and broad language opens the door to cases against law firms, and a recent federal court decision that denied litigation immunity to a debt-collection law firm creates even more risk for debt-collection lawyers.

Other factors behind the trend include mistakes in court filings made by debt buyers - or their lawyers - who purchase debt from creditors but frequently lack enough information to avoid making false statements in pleadings.

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, which toughened the standards for consumer bankruptcies, is also contributing to the upswing in fair debt litigation because debt holders are seeking other ways to forestall debt collectors.

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