To make debt litigation as convenient as possible for the consumer, federal law (FDCPA § 811) says the suit must be brought in the judicial district:
- where the consumer signed the credit or other contract that created the debt, or
- where the consumer lives when the suit is “commenced”, or
- where real property is located if the property secures payment of the debt.
But some consumer organizations say that there are still problems for consumers who must travel to distant courthouses in states with very large judicial districts.
- Current practice. Where do most collectors file suit? Does it depend on the type of debt, the amount of the debt, or something else?
- Size of judicial district. Are there consumer protection problems because of the geographic size of judicial districts? Where do these occur? Are any states trying to reduce the burden on consumers of traveling to courts that are far away from where they live?
In general, are there any unfair, deceptive, or abusive practices about where collectors file suit that CFPB should know about?
Comments46
Commenting is now closed.
josephusmyer
November 6, 2013 - 9:29am
Recently, courts have held that debt collectors can escape 1692i's venue provisions entirely by pursuing debt collection through arbitration instead. As the NAF studies reflect, arbitration has not proven a satisfactory alternative. I urge the CFPB to include in a rule language interpreting 1692i as requiring debt collectors to proceed in court, not through largely-unregulated arbitral forums.
Debt Neutrality Petition
November 10, 2013 - 12:42am
How about allowing arbitrators to not be bound entirely by the law, but also by common sense when it comes credit card defaults? Common sense tells us that if a Colorado flood washes away a community, those in the community are possibly not going to be able to pay their credit card bills for a few months. Common sense tells us that a medical emergency, being the victim of a hit and run accident, destruction of a home, or becoming an unpaid CareGiver for a family member should take precedence over the monthly payment requirement. This is not about debt forgiveness, its about declaring a debt neutral, no more penalties, fees or interest rate charges are applied to the debt, and the debtor agrees to pay off the debt in a reasonable manner, even if it takes 10 years to do so. Please Check out the Debt Neutrality Petition.
RBell
November 6, 2013 - 11:42am
Depending on the nature of the suit the closest court location to the debtor's home address.
Aaron Racicot
November 7, 2013 - 4:41pm
The court location should be in the city where the account was opened.
U.S. Marine
November 13, 2013 - 6:17pm
County in which it was opened or the county in which the debtor/Defendant resides. If filed in the imporper court a change of venue can be requested and in most cases granted by the court in which the suit was filed.
blish42
November 6, 2013 - 3:54pm
I am curious to know if the consumer is ever properly notified of the suit? Statistics show that something like 90% of the consumers don’t show up to court. I don’t think the real issue is where the case is held, but more to do with does the consumer even know they are being sued.
Moderator
November 6, 2013 - 4:04pm
Hi blish42, welcome to RegulationRoom. Most lawsuits to collect debts are filed in state and local courts. State rules decide the procedure for bringing and defending lawsuits. With that in mind, do you have ideas for how new federal rules could address these issues without interfering with states' control over state and local courts?
blish42
November 7, 2013 - 9:41am
Is there a way I can make a link to my comments? I have a few people that would like to come comment on my thoughts. They would like a direct link if that is possible? Some would prefer to not log in.
Moderator
November 7, 2013 - 3:25pm
Hi blish42, if you go to your profile page and click on “My Comments” to the right, it will bring up your comments and each of them has a permalink at the bottom. You can share this link, but anyone who wants to comment on Regulation Room will need to register. Thank you for sharing the discussion with others, and please let us know if you have other questions.
Aaron Racicot
November 7, 2013 - 4:43pm
To my knowledge, the process servicers must deliver or make an extraordinary effort to deliver notification to those being sued.
puterbug
November 7, 2013 - 6:54pm
I knew a man who was sued by a debt collector and he was not served. "Someone" was served, but not at his address and he was denied due process. He learned of the suit when it was a judgment on his credit report. He attempted to have the judgment overturned for lack of due process and the judge would not grant it. Unfortunate, but yes they are allowed to deny due process and get away with it.
Dazed and Abused
December 10, 2013 - 9:45pm
I was flat out lied to by the attorney for a credit card company who brought a small claims suit against me. I disputed the debt (and still do even after they garnished my wages) but they intimidated me into a payment arrangement then lied to me and said there was no court date anymore since I "settled". I was skeptical and called the clerk of court's office only to find out they lied and I did need to show up. I showed up for the court date, even as I argued that this court had no jurisdiction over me because I never lived in that county but no-one even the clerk's office would listen to me and I was denied the right to go before a judge. I was only given an opportunity to talk to the attorney for the credit card company and sign papers saying we had a payment arrangement. Long story short, I made 1 of 2 payments then lost my job.I called them immediately to tell them I would make the 2nd and final payment 2-3 weeks late because I had to wait for a final check. They told me okay, but unbeknownst to me,they went back to court without me and got a default judgement for $1600 on what would have been a $709 payment. iI never got notice of the court hearing nor did I ever get a copy of the judgement. I didn't find out about it until I got a wage garnishment notice from my new employer 2 1/2 years later....VERY humiliating! I also might add 2 things. My employer got the wage garnishment notice a week before I did so I couldn't even dispute it before my employer was involved. Second, I called the clerk of court's office in that county (3 hours from my home) and argued that you can't go to court without giving me a chance to defend myself and I shouldn't be forced to drive 3 hours each way to a county I never lived in. I was told by the clerk's office that they can file it wherever they want and I have to show up. I asked "So if they wanted to file this in California to be jerks you're telling me I'd have to get on a plane and fly to California to defend a $709 lawsuit???" She said "Yes." THAT HAS TO CHANGE.
Moderator
December 13, 2013 - 10:45am
Hello Dazed and Abused. Welcome to RegulationRoom, and thank you for sharing your story. Because it seems like you’ve encountered abusive practices from collectors, you may want to consider filing a complaint with CFPB. Their sample letters to debt collectors may also be helpful.
Rules about debt collection litigation are a complicated mix of state law and federal law, and CFPB doesn't have legal authority over absolutely every aspect of debt collection. But as CFPB moves to the next stage (coming up with specific proposals for new rules), it will carefully consider what commenters say here.
Dorothy Simmons
November 8, 2013 - 7:14am
I'm in agreement with that statement. Having worked for a Sheriff's Office where we served many debt collection processes, I found that not much effort is made to locate the proper address for the defendant. When we would find the defendant had moved, we would return it not found. However, the same cannot be said about private process servers who go out and post processes on the door without confirming they live there.
U.S. Marine
November 13, 2013 - 6:21pm
I believe that most Defendants are properly served. I review about 200-300 civil cases a month and very rarely is service done improperly. This does vary a bit from state to state but in my experience the majority of defendants have been properly served.
linalex61
November 6, 2013 - 4:45pm
I have 13 lines of he same debt on the credit bureaus. The first one was bought and passed down
Aaron Racicot
November 7, 2013 - 4:45pm
This is a problem that needs to be corrected. In this case, the line of credit is negatively affecting your credit a multiple of times even though it is one line.
U.S. Marine
November 13, 2013 - 6:27pm
This is a violation of the FCRA (Fair Credit Reporting Act) and can be corrected quickly by the credit reporting agency. If the credit reporting agency refuses, there are many Consumer Protection Attorneys that would happily take this case on contingency. This type of violation normally never sees the inside of a court room. A letter from a well known CP Attorney will likely get awards and the prompt correction of the credit report.
FixTheSystem
November 6, 2013 - 5:03pm
One business in particular needs to be investigated...Legal Recovery Law Offices. We sent them a letter asking for a copy of a signed credit card agreement bearing my signature to prove that I owned the credit card accout,
which they failed to do for a credit card they claimed we owed. Instead of following the FDCPA, they filed suit and their complaint included NO DOCUMENTED PROOF that I even own the account. Before any company is allowed to file suit, one document that should be in the complaint before a judge even will accept the filed complaint is a copy of the original credit card agreement bearing the defendants signature. All legal recovery attached with the complaint was pleadings with written accusations and no documented proof of the debt .
Moderator
November 12, 2013 - 3:15pm
Thank you for your comment, FixTheSystem and welcome to RegulationRoom. CFPB provides a page where consumers can submit a debt collection complaint directly to them about problems with companies. It sounds like you believe that filing an unsubstantiated lawsuit is a false or misleading representation made to collect a debt, see Unlawful collection practices subtopic 6 to discuss this more. CFPB could require that collectors have this sort of documentation before filing suit – but enforcing this in the lawsuit itself is the problem of state rules of pleading and practice.
debt collector
November 6, 2013 - 6:03pm
If the account was opened 20 years ago, the bank is going to hold on to this agreement for the 20 years?? That makes no sense. Either you have a dispute meaning you did not charge on the account and you need to file fraud charges or you owe the money and should have been sued for stalling. Sounds like they did the right thing.
CG
November 7, 2013 - 5:06pm
IF a bank is trying to pursue something 20 years later, sounds like a statute of limitations violation.
U.S. Marine
November 13, 2013 - 6:32pm
Unless the debt has been "re-aged" by a payment having been made or it is a judgment, it is certainly time Barred from collection.
stopwithspoofedcallerID
November 7, 2013 - 8:43pm
Innocent until proven guilty is the American Justice System. And the burden of the proof is on the one bringing the suit. Debt collectors need to get their act together before trying to file frivolous lawsuits.
michaelolenick
February 28, 2014 - 4:21pm
Yes, if the account is still open the bank must hold onto the agreement for 20 years. If the account went delinquent 20 years before litigation then the statute of limitations has long passed and the lawsuit is frivolous; it should be dismissed with sanctions.
U.S. Marine
November 6, 2013 - 6:11pm
I have often wondered why many times a Plaintiff/attorney may handle the hearings telephonically but the same is not available to the Defendant/debtor. This does not appear just. I suggest that most Defendant's choose not to appear because of the loss of wages or choose not to show at at all because they are intimidated by counsel. If given the opportunity to appear telephonically I believe that more cases will be heard.
SJDuPlessis
November 6, 2013 - 9:42pm
A debt collector did not litigate a credit card debt, but summarily garnished our joint checking account. It was two weeks later that notification was received from the debt collector. This occurred September-October 2012. Debt Collectors must provide advance notice of their intent to garnish a checking account. It took several weeks including an Order from the Judge to release the funds, only after the Debt Collector took all of a tax refund.
U.S. Marine
November 12, 2013 - 7:03pm
Moderator
November 15, 2013 - 5:01pm
Thank you for your comments SJDuPlessis. You may be interested in CFPB’s webpage on can a debt collector garnish my bank account or my wages. It also contains a link to their submit a debt collection complaint page. CFPB is interested in hearing consumer stories, particularly from servicemembers, that will help them improve consumer protections in debt collection. Could you tell us more about your situation? For example, how they garnished your wages without litigating?
bonzarel
November 6, 2013 - 10:24pm
I am not a lawyer, but I have noticed that credit card agreements often contain statements advising consumers that if suit is brought, it will occur in a specified jurisdiction or "as provided for by law." At the point where collectors start suing consumers is where many consumers say enough and hire a bankruptcy attorney. That does everyone a lot of good, right? The only winner in that situation is the bankruptcy attorney.
U.S. Marine
November 7, 2013 - 12:57pm
Depends on the type of Bankruptcy. If it is a CH 13 many times the creditors receive more money than if they choose to forgive a portion of the debt and settle direct with the consumer. This is because of the strict "means test" for CH 7.
dmelendez@kscfcu.org
November 7, 2013 - 10:01am
As a Director for Collections now for Kennedy Space Center Federal Credit Union, which is over 500 Million in asset size I try as I have for prior union to file suit closest to the Consumers current address. One method is to assign over to an attorney within the current residence-venue of the Consumer. In legal terms we attempt to get service when filing a suit out of state, its method is called obtaining if possible a Alien Juddgement outside from the County and or State the contract/note was originally signed. There are states in the Union that do note accept foreighn judgments. So recording a judgement obtained for example in Floirda and rerecorded in another State may not be possible.
Moderator
November 7, 2013 - 2:36pm
Hi dmelendez@kscfcu.org, thanks for telling us about the ways you try to file suit as close to the consumer's current address as possible. Do you find that this is easy to do most of the time, or is it often difficult to file the suit close by? Also, in your experience working with other credit unions, were their practices similar or different from what you do at KSCFCU?
tommc4
November 7, 2013 - 5:37pm
The current rules seem adequate, with the possible exception that debt collectors must be required to follow the rule, or risk a loss of the suit due to jurisdictional issues.
MER
November 11, 2013 - 9:29am
The state in which I practice does not allow jurisdiction based solely on where the contract was signed. As such, we limit our filings to the venues where we reasonably believe the consumer resides. The states typically define what is the proper court thereafter, whether its based on amount, location, etc. so even if there is a large judicial districts we do not have the choice to file elsewhere by local rules.
RHN91362
November 24, 2013 - 11:53am
I recommend that the option to bring a suit in the jurisdiction where the consumer signed the contract should be removed. In many situations, consumers may not actually sign a contract (e.g. credit cards), they may sign an agreement in a distant location (for medical payment at a hospital on vacation), or they may have moved in the years since opening the account. I believe the most consumer-friendly option is to file suit where the consumer resides at time of commencement (unless it concerns real property and then it should be where the property is located). With respect to geographic size concerns, it is important to note that many states are facing budget crises that affect the civil divisions of state courts. In one of our largest districts, our options for filing suit was reduced from 32 courts down to 2. If there is a concern for protecting consumers in this particular area, I recommend a section of the rule that prohibits collections from choosing a court venue with the intention of interfering with the consumer's ability to participate in the action. To prove a violation, the consumer (or regulatory agency) would need to demonstrate that the collector had no reason to file suit in that court other than burdening the consumer (thus demonstrating intent).
tommc4
November 24, 2013 - 6:35pm
I know this is not the proper venue, but I felt you should know that the email address listed on your contact page is not working; I have tried to send you material three times and it keeps getting bounced back to me with an invalid address message. The error message I get says that the mail cannot be sent to ga.regulationroom@cornellprod.onmicrosoft.com; I only used the address provided. Please reply via email with a valid email address. Thanks!
Moderator
November 25, 2013 - 10:45am
Thanks for notifying us, tommc4. I know we've been in contact directly about this, but please let us know if you have any additional problems.
tommc4
November 24, 2013 - 6:38pm
I believe lawsuits should be initiated in the jurisdiction in which the consumer resides, and that the case should be subject to the laws of that jurisdiction, especially concerning the statute of limitations. (Yes, I realize that a SOL defense is an affirmative one).
Tom Tiernan
November 30, 2013 - 4:15pm
Filing suit in the state that the consumer lives in is the most practical. If a state has a large district there is nothing that can be done unless judges want to allow tele-conferencing,, or phone conferencing. However, if that is allowed it should be allowed for both sides provided the evidence of the debt is supplied to the court in advance.
JohnEllis
January 20, 2014 - 10:18pm
The documentation sent to the defendant should include a link or instructions on how to proceed according to the rules of the course if the venue is incorrect.
StevenOren
February 13, 2014 - 6:58pm
This question is most interesting with respect to student loans. Unlike most other debts, student loans have the potential to be greater than $75k, which means a consumer can be sued in Federal Court under supplemental jurisdiction provisions. Additionally, should the current creditor be able to achieve complete diversity, the consumer can be sued in an entirely different state.
Moderator
February 13, 2014 - 7:11pm
Thanks for the comment, Steven. What, if anything, do you think should be done specifically to protect those with student loans above $75,000?
StevenOren
February 14, 2014 - 10:20am
I think the cost of education needs to be reduced to a more reasonable amount or repayment plans need to be income based.
As far as consumer protection, legal aid needs to be made available, affordable and effective, and consumers need to take time to really know their rights and stop complaining about harassment because that's a completely different cause of action than restitution.
Esok
February 27, 2014 - 4:44pm
I've heard multiple stories of summons being dropped off or served to the wrong individual and summons being mailed to old addresses when the new address was clearly available. I don't believe that a summons should ever be served by mail. If the debt collector wants to sue, they should be required to serve the person directly in the city and state in which they currently reside. It's an especially dirty tactic to serve someone by mail. It's unreliable and puts the debtor at a disadvantage.
gmt512
February 28, 2014 - 6:50pm
This is the problem. What account would stay open for 20 years after being delinquent. It seems to me this is just a way to prolong as long as possible the ability to harass people for very old debt. There needs to be time limits. This type of thing, re-filing debt, selling the same debt to someone else, and then adding it back AGAIN to the credit report is just an excuse to harass the heck out of people and do it legally. These are not good business practices. This is harassment. Once a debt is placed on a credit report -- or even sooner -- once the debt letter is sent, time should start running and this agency needs to set time limits that are reasonable. Creditors have a right to try to collect true, accurate debt. But what happens is the debt is wildly inflated, then it runs the gamut of various collection agencies until nobody even remembers its genesis. This is all to harass.