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Frequently Asked Questions
May a Collection Agency (or Lawyer) Purchase the Right to Sue in PA?
Yes. Like the federal Fair Debt Collection Practices Act, Pennsylvania law strictly regulates debt collection practices and has it's own Fair Debt Collection Practices Act of Pennsylvania, which is called the Fair Credit Extension Uniformity Act, which took effect November 30, 2021. PA also has § 7311, which governs Unlawful Collection Agency Practices. However, none of these laws preclude the assignment of debt to a collection agency, lawyer, or other party. In fact, § 7311 expressly allows the assignment of debt to a debt collector, providing:
§ 7311. Unlawful collection agency practices.
(a) Assignments of claims.--It is lawful for a collection agency, for the purpose of collecting or enforcing the payment thereof, to take an assignment of any such claim from a creditor...
That said, to comply with § 7311, all of the following is necessary:
"(1) The assignment between the creditors and collection agency is in writing.
(2) The original agreement between the creditor and debtor does not prohibit assignments.
(3) The collection agency complies with the act of December 17, 1968 (P.L.1224, No.387). This is known as the Unfair Trade Practices and Consumer Protection Law, and with the regulations promulgated under that act."
Thus, importantly, the assignee of debt in Pennsylvania must also comply with Pennsylvania's Unfair Trade Practices and Consumer Protection Law regarding consumer debt, and not make any false or misleading claims to a consumer regarding consumer debt. Actual "fraud" by the debt collector need not be shown. For more, click here.
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What are Duties of Debt Collectors?
Pennsylvania law provides:
(b.1) Unfair or deceptive collection methods.--It is unlawful for a collector to collect any amount, including any interest, fee, charge or expense incidental to the principal obligation, unless such amount is expressly provided in the agreement creating the debt or is permitted by law.
Thus, when defending any such claim, the defense attorney must pay close attention to the underlying debt at issue. Indeed, the defense must challenge every amount demanded that is not 100% consistent with the loan agreement. Pennsylvania's Attorney General also investigates violations of consumer protection law by junk debt buyers and otherwise.
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What Must Be Proven in Court - To Pursue Assigned Right to Collect?
The obligation to recover money from a debtor is a contract; plus, if that obligation is sold to a third party, that's another contract. Both contracts need to pleaded (detailed in the lawsuit) and proven (through evidence) at trial.
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How is the Underlying Contract for Financial Responsibility Proven?
As for the underlying contract for the payment of money, there can be obstacles to plead or prove it. This can be difficult. In fact, banks are notorious for failing to keep track of the actual signed application for an account. This can make it difficult to prove how and when the Defendant agreed to any particular terms. Thus, it can be problematic for the plaintiff to prove a "meeting of the minds" as to a particular interest rate or amount due for "late" fees.
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How is the Assignment Established and Proven?
Next, the Plaintiff -- who is pursuing a claim for assigned financial obligation --- must prove a valid assignment. Here, again, the Plaintiff must plead and prove that it paid something of value (consideration) for the right to sue. Plus, if the assignment involves a group of case (such as a bundle of credit card debt accounts involving hundreds of credit card holders) the contract proving the assignment much mention the Defendant's account with particularity. Otherwise, there is insufficient proof that Plaintiff has purchased the right to sue in this case.
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Why Would Anybody Purchase Junk Debt?
Good questions. It comes with substantial liability, as discussed above. This is especially if the purchaser of junk debt sues the wrong person, or makes a false representation. The right to pursue junk debt is sold for pennies on the dollar. In fact, the price is so low that when our Pittsburgh debt defense lawyers litigate these, the Plaintiff never volunteers how much it paid for the debt, without a fight.
I'm Facing Litigation in Pittsburgh, But Never lived There!
If you entered in a contract -- especially one you've forgotten about -- you may be surprised to learn it contained a clause allowing the creditor to sue you pretty much anywhere. This is called a "choice of forum clause" or "forum selection clause." Both mean the same thing. The creditor is likely located in Pittsburgh, and inserted the clause to make it convenient for the debt collector to sue on his "home turf." Call our lawyers who serve as local counsel, to learn how to challenge such provisions.
