Few things are more terrifying than being sued for a large debt that isn't yours. A Kansas City woman recently went through that ordeal over a mistaken $1,000 credit card bill. However, Maria Guadalupe Mejia prevailed in court in a big way.
The jury at trial ruled against Portfolio Recovery Associates LLC, (PRA LLC), one of the country's largest debt collection agencies, for violation of the Fair Debt Collection Practices Act (FDCPA) and malicious prosecution of Mejia. Damages on the FDCPA count were $250,000, but the jury awarded a staggering amount of punitive damages: $82,990,000.
Michael McKeon, a spokesman for Portfolio's parent group PRA Group Inc., replied that the verdict "defied all common sense" and that they "hope and expect the judge to set aside this inappropriate reward." The damages seem likely to be significantly reduced, but the episode is still a victory for those unfairly targeted by debt collectors.
PRA LLC and similar debt collectors buy unpaid debts from financial institutions that have charged them off, often for pennies on the dollar. The financial institution has already absorbed the loss, so they are typically willing to take any money they receive in return. Meanwhile, the debt collectors aggressively pursue payments of these debts, potentially without regard for any expiration dates or even concerns about whether they are pursuing the wrong debtor (as in the Kansas City case).
Their tactics are generally to strike quickly and threaten action unless you agree to a payment plan or a settlement of part of the debt. If you do not cooperate, the debt collector may file a lawsuit against you to recover the debt.
Debt collectors hope that you evade the process server as a baseless attempt to ignore the suit, or dither about what to do. Process servers are required to make a reasonable effort to serve you with a summons, but merely avoiding the summons does not stop the suit from proceeding. If you do not respond after a certain time, the judge will declare a default judgment against you. At that point, it does not matter whether the debt was ever yours or not — it will be now. The response time limit is generally 20-30 calendar days, but it varies by state.
How do you make the best of this situation? You need to take correct action from the initial contact.
- Demand Written Notice – Debt collectors are required by the FDCPA to provide you written notice about the debt with specific information including the name of the creditor and the amount of debt owed. Do not engage them any further without such a notice or the serving of a summons. They will attempt to talk you into a deal.
- Verify the Debt – Is the debt really yours, and has it not been forgiven or discharged? If so, you really do need to work out a settlement with the debt collector. Assuming it is not yours, the burden is on the debt collector as to whether they want to sue you.
- Respond to Any Summons – If you are served with papers, you need to respond within the proper timeframe. Verify the rules in your state through your state Attorney General's office. They should also be able to help you verify which forms you need to fill out in response, although we strongly suggest seeking trusted legal representation.
- Proceed to Trial – The burden is on the debt collector to prove they own the debt and that you are the correct person to pay it. Yes, the trial is a hassle and a burden on you — but if it is an unfair one, make the debt company pay for their damages. (Don’t expect $83 million.)
The bottom line: make the debt collector verify the debt in writing, make sure that the debt collector respects your rights under the FDCPA, and do not ignore any subsequent lawsuit. Get suitable representation and show up in court as required. Do not give a collector the satisfaction of extracting undeserved money from you just to make them go away.
If you want to settle outstanding debts for less than what you owe, try our debt settlement tool.