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Some Methods of Collection Defense for Consumers

Consumers who are sued by creditors and the debt collection law firms that they hire to file the lawsuits, have the right to defend themselves in court.  In some select states, third-party debt collectors are allowed to file suit on behalf of their clients who they are collecting for. State and federal laws provide the ability for consumers to defend themselves against lawsuits that are improperly or wrongfully filed against them, and to assert counterclaims against the companies that sue them.  Some consumers who are sued do not even owe the alleged debt that is being asserted as being owed by them, as some consumers are the victims of identity theft.  Below are a few of the options that consumers may have to protect themselves if they are being sued for an alleged debt.

Fair Debt Collection Practices Act (“FDCPA”) Claims and Counterclaims:

The FDCPA is a federal statute that protects consumers against unlawful actions that occur during debt collection. Under the FDCPA, there are many actions that a debt collector is prohibited from engaging in when attempting to collect on a consumer debt. Generally, debt collectors do not have the right to abuse or harass a consumer at any point in the collection process. Debt collectors cannot engage in many actions, which include but are not limited to:

  • Calling a consumer after 9 p.m. or before 8 a.m. of the consumer’s local time; and
  • Threatening to use violence or harm to an individual or their property; and
  • Using profane language; and
  • Suing a consumer in an area that is not in the judicial district where the consumer resides, and that is not in the judicial district where the contract was signed that gave rise to the debt; and
  • Making a threat that they cannot or do not intend to act upon; and
  • Falsely representing themselves as an attorney; and
  • Making false statements regarding the consumer’s debt.

If a debt collector engages in a prohibited practice while attempting to collect a debt from a consumer, the consumer will have the right to take legal action against the debt collector. If a consumer has been sued by a third-party debt collector, or by a debt collection law firm that is representing the creditor that allegedly owns the debt, and that third-party debt collector or debt collection law firm has committed a violation(s) of the FDCPA in regard to the consumer, the consumer can file a separate lawsuit against the third-party debt collector or debt collection law firm, or the consumer can file a counterclaim in court against the debt-collector or debt collection law firm for the FDCPA violation(s).

A counterclaim is a claim that a defendant in a court case can assert in response to claims made against them by the plaintiff. If a consumer has been sued in regard to a debt, the consumer can file their own counterclaim(s) against the plaintiff within the same lawsuit. A counterclaim can be filed for violations of a federal statute like the FDCPA, or for a violation of a state law. A consumer can file a counterclaim by identifying the unlawful actions that the creditor or third-party debt collector or debt collection law firm may have engaged in during the collection process.

Pursuant to the FDCPA, consumers who believe that they are being pursued for a debt that is not theirs, or that has an inaccurate balance, and so forth, have the right to dispute the alleged debt. Within 30 days of receiving a validation notice from a debt collector (a notice that a debt collector must deliver to a consumer within five days after its first contact with the consumer), a consumer can request validation of the alleged debt. After a consumer sends this request in writing to a third-party debt collector or debt collection law firm, the debt collector is required to stop all of its collection practices against the consumer until it can provide information to the consumer that validates the debt, such as the name and address of the original creditor and the outstanding balance that is owed.

While there is no time limit for the debt collector to validate the debt, they cannot resume their collection activity until they do so. If a third-party debt collector or debt collection law firm violates the FDCPA, such as by failing to validate a consumer’s debt and continuing to pursue them for payment, the affected consumer can take legal action by filing a lawsuit or FDCPA-counterclaim against the offending debt collector.

If a consumer files a successful lawsuit in regard to the FDCPA, or a FDCPA-related counterclaim in a lawsuit in which they have been sued by a third-party debt collector or a debt collection law firm, they are entitled to receive up to $1,000 in statutory damages, as well as actual damages, reasonable attorney’s fees, and costs.

In some instances, if a consumer’s FDCPA-related counterclaim is successful, but the alleged debt is in fact a valid one, and a judgment is entered for the plaintiff in regard to the alleged debt, the damages owed to the consumer can be subtracted by a judge from the amount that the consumer is ultimately found to owe to the creditor. It is also possible in some instances for the amount of damages that a consumer is owed to be greater than the amount that they owe to the plaintiff, resulting in a positive award for the consumer. 

Identity Theft Protections:

If a consumer is the victim of identity theft and the identity thief opens a credit account or makes fraudulent charges in the consumer’s name, it is possible that debt collectors will try to collect outstanding payments in regard to the fraudulently activated accounts. In order for a consumer to defend themselves against debt collection stemming from identity theft, the consumer should dispute any unauthorized transactions, notify their alleged creditors, and file a police report as soon as they are aware of the theft. If a debt collector begins to contact a consumer who is an identity theft victim, the consumer can send a letter to the collector asking it to cease and desist contacting the consumer, and to alert the collector to the identity theft to try to permanently stop further contacts. However, this letter may not get the creditor to stop asserting that the consumer owes the alleged debt, and the creditor and debt collector might take other actions to try to collect the alleged debt.

If a consumer is then sued by a debt collector or a debt collection law firm acting on a creditor’s behalf for a fraudulent debt, they could dispute the debt (a right provided to consumers by the FDCPA) by sending to the debt collector a consumer dispute letter and an Identity Theft Affidavit, which is a form provided by the Federal Trade Commission that allows consumers to try to prove that identity theft has occurred. Additionally, a consumer could also submit any supporting documents that they may have in order to further prove that the identity theft occurred, including, but not limited to a police report, proof of identity, and any collection letters that they may have received. The debt collector should then inform the original creditor that the creation of the debt might have resulted from identity theft. Accomplishing these tasks could possibly provide a consumer with a valid defense in regard to a debt they are being sued for, but if the collector continues with their collection efforts – or even from the beginning of any collection efforts – a consumer should consult with an attorney, as the decision to rule in a consumer’s favor or not based upon the sufficiency of any alleged evidence provided to the court ultimately rests with a judge or jury.

Observing the Statute of Limitations Period for a Debt:

The pursuit of the collection of a debt in court can be limited by a debt’s statute of limitations period.  The statute of limitations period is the amount of time that a party has to file a lawsuit in regard to a claim for relief.  In regard to debts, a creditor only has a certain period of time to sue a consumer for nonpayment of a debt.

Different types of debt have different statute of limitations periods. For example, the statute of limitations period can be different for auto loan debt, credit card debt, medical debt, and mortgage debt, amongst other types of debt. Different states can also have different statute of limitations periods for different types of contracts and different types of debt.

Once the statute of limitations period for a debt expires, a creditor cannot successfully sue a consumer for nonpayment of the debt. If a consumer promises to make a payment on an alleged debt, or makes even a small payment, it could potentially restart the clock on the statute of limitations period.

If a third-party debt collector or a debt collection law firm were to sue a consumer on behalf of a creditor for nonpayment of a debt, outside of the statute of limitations period for the debt, it could be deemed a violation of the FDCPA in regard to the debt collector, and it could also be deemed a violation of a state consumer protection law in regard to both the debt collector and the creditor depending on the state. A lawsuit against a consumer can be dismissed in court, in the court’s discretion, if the lawsuit was filed outside of the statute of limitations period for the debt.

Some of the places that a consumer can look to for help or answers to questions:

The law(s) and statute(s) discussed above can change. So, in the state that a consumer resides in, a consumer protection agency, the Office of the Attorney General, and/or a consumer protection attorney who is licensed in a consumer’s respective state can help a consumer in getting help, up to date information and interpretations, and/or with determining the answers to their questions in regard to the aforementioned laws. The Consumer Financial Protection Bureau can assist as well.