Why write this book?
In 1992, I graduated from law school and took the bar examination. I had to pass the bar exam on my first chance because I had a business plan that needed my swift admission to the bar — I decided to start my own law practice straight out of school. Apparently, very few lawyers decide to start their legal careers in this way. For many lawyers, the fear of being “thrown to the wolves” can be a daunting, intimidating experience.
By starting my own law practice, I had to handle many different areas of law, because I had to take what walked into my door to keep it open. It happened to be that a lot of what came through my door was debt collection. Right away, I jumped into the debt collection arena, representing primarily creditors on a wide range of debts including landlords for rent arrears, building supply companies, doctors, and newspapers. Not too soon after, I began to handle claims for credit card companies, suing consumers who did not pay their accounts.
In 1992, when I would go to court and sit through a calendar call, I would hear the clerk call cases out, such as “Chase vs. …” “American Express vs. …” and “Citibank vs. …” If a case actually went to trial, the credit card company had a witness in court, ready to testify. Now, the calendar has cases brought by “XYZ Receivables Management vs. …” etc.
The nature of credit card debt has evolved over the last 25 years in different ways. Many people will recall the Savings and Loan (“S&L”) Banks’ debacle of the 1980s, where entire banks had to be taken over by the Federal Deposit Insurance Corporation (FDIC) and Resolution Trust Corporation (RTC). The FDIC and RTC came in to take over and manage the assets of the S&Ls, which included the liquidation of debts owed to the banks. A big industry was born at that moment — the sale of large portfolios of debts to companies who pursued the debts against consumers — that is, the debt buyers.
After the debt portfolios of the S&Ls were thoroughly processed, the debt buyers needed more inventory. Separately from that phenomenon, banks figured out that it was in their interest to wipe off of their books old, “charged-off” debt to increase the bottom line. By selling credit card debt portfolios to debt buyers for pennies on the dollar, the banks achieved their goal; debt buyers also achieved their goal of getting more food to eat.
Without turning this introduction into an ideological ‘pitch’ about the pros and cons of debt buying, this evolution has produced, among other things, the following results: (a) more aggressive forms of debt collection by third parties; (b) separation of the relationship between banks and their customers; (c) banks’ willingness to extend credit to consumers who can’t handle it; and (d) difficulties in figuring out which entity is really entitled to collect the debt.
Since the average credit card debt sought to be collected ranges from $3,000 to $7,000, the aim of the creditors is to settle with accountholders before litigation ensues. To be fair, settlements help the accountholders as well; they get to pay their debts and avoid hassle, including incessant telephone calls, letter-writing campaigns, and litigation.
My hope is that you will use this book as a guide in defending yourself against the credit card lawsuit. Your Court Street Lawyer’s Guide offers you sample pleadings and motions, along with descriptions of the defenses and procedures in the typical case.
This book is not intended to substitute for good legal advice, which is recommended. Many fine bar associations have legal referral services and pro bono legal service organizations geared towards defending these types of claims. However, many people will find that private counsel is too costly to retain to defend the typical collection case and legal service organizations are overwhelmed by demand. Separate from these constraints, the collection case lends itself well to streamlined events, pleadings and defenses, so this book ought to cover most of the situations that will arise in the typical case.
As I always offer in my numerous and various lectures and seminars, I encourage you to correspond with me with any questions or comments. I may be reached by phone at (718) COURT●ST (718-268-7878) or by e-mail at RichKlass@CourtStreetLaw.com. Thank you for using my book.