DEBT COLLECTORS & ORIGINAL DEBT

Attorney Myers:  I’m being sued in small claims court over a debt from a company I never heard of.  I know that I have some past bills.  I went through a divorce, an illness and a layoff.  The name of the company that brought this claim in court against me is someone I honestly never heard of or have in any of my records.  Can this happen?

Answer:  Yes, this happens all the time.  There are companies that buy portfolios of consumer debt from credit companies, financial institutions and even other debt buyers.  Then, they “outsource” the actual direct collection of the overdue accounts to yet another company.

The collection company may or may not have records going all the way back to your account.  You have a right to request this.

If this sees the light of day in a courtroom, the entity pursuing you now may or may not be able to provide proper evidence.

In court, collection attorneys bear the burden of proving the existence of a debt and that the debtor owes a certain amount.  In a case brought by an entity not the original creditor, they must also prove that they actually own the debt.  Every link in the chain between the company you originally had an account with, and the entity now collecting the debt must be proven by admissible evidence.  Debt collectors must demonstrate that they are the valid assignee.

In an actual case, a consumer had an old account with a ‘big box’ store.  The store’s finance company sold the account to a national ‘account specialist’.  This entity sued.  At trial, the portfolio handler offered evidence of the debt in the form of an affidavit claiming to prove all the charges.

An affidavit, being an out of court statement offered to prove an essential element, is “bald hearsay”.  In this case, the trial court admitted the affidavit under a hearsay exception known as the business records exception.  The affidavit attempted to go all the way back down the path upon which the account had been passed along from the big box store to the collection entity.

The problem here though was that the affidavit was prepared specifically for the purpose of the lawsuit.  It was not an actual record of regularly conducted business activity, like, say a payroll record, an account receivable or a bill of lading.  This was an affidavit prepared specifically for the litigation.  So, on appeal, the collection judgment was overturned.

The case of LVNV Funding, LLC v. Mastaw, was decided on April 30, 2012 in the Tennessee Court of Appeals.  However, that state’s business records exception is fairly similar to such evidence rules in many other states.

© 2012 Eagle Tribune Corporation.  Appeared in Derry News “About the Law”.

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