The debt buyer industry is very large and especially in the State of Tennessee. This issue is often confusing for consumers because they get sued and they have no idea who the Plaintiff is. These Plaintiffs have names like LVNV Funding, Portfolio Recovery, Jefferson Capital, Cavalry, and Midland Funding and they sound nothing like Bank of America, Wells Fargo, Capital One, or JPMorgan Chase Bank. So, when a consumer gets sued by these debt buyers they are often confused.
Here is how this whole debt buyer thing works. Consumers take out loans and get credit cards from original creditors. These original creditors are often banks. Consumers default on their debts and the banks sell these debts to debt buyers. They are sold in a large portfolio with other accounts and often sold for pennies on the dollar. Then these debt buyers file lawsuits in their name and not the name of the original creditor the consumer made the account with.
Is this legal? Yes. What’s happening legally speaking is the original creditor is assigning its rights to the debt buyer. In Tennessee, and in most other states as well, “[c]ontracts are generally assignable…” (Packers Supply Co. v. Weber, (Ct.App. Apr. 14, 2008, No. M2007-00257-COA-R3-CV 2008 Tenn.App. LEXIS 226, at *13). There are a few exceptions, but they typically do not apply to debt collection cases. However, the Tennessee Collection Services Act (Tenn. Code Ann. §62-20-124) put certain requirements on these assignments. (You can read all about it in my blog entitled TENNESSEE COLLECTION SERVICES ACT). What is really unfortunate is even though the debt buyer pays pennies on the dollar for the debt they have the right to collect the full amount.
The real problem with these debt buyer cases is consumers who are sued do not recognize the name of the Plaintiff and decide to ignore the lawsuit thinking it is a mistake. This leads to a default and default judgment and ultimately judicial enforcement. In other words, they start taking your stuff. This is a bad approach. If a person is named in a lawsuit, whether they understand what it is about or whether they recognize the name of the Plaintiff or not, they should respond. Preferably with a lawyer’s help.
Lawsuits filed by debt buyers are tricky and require a lawyer if success is at all a concern. Contact our office right away if you are sued in any Court in Tennessee. We can help.