Suing a Debt Collector? Now They Can Buy Your Lawsuit
Can a debt collector accused of crossing the line avoid liability by buying a consumer’s legal claim out from under her?
A federal judge in Las Vegas said yes. The case deserves attention because if the U.S. Court of Appeals in San Francisco affirms the judge’s ruling, you can be sure that more debt collectors will attempt this counter-intuitive maneuver to shield themselves from federal liability.
In March 2015, Patricia Arellano of Las Vegas received a notice from Clark County Collection Service (CCCS), a private debt collector seeking $370 in overdue medical bills. Arellano didn’t respond. CCCS went to court and obtained a default judgment against her. The bill grew to about $800, with costs and fees.
Next, Arellano sued CCCS under the federal Fair Debt Collection Practices Act. She alleged that the company had been misleading about how much time she had to fight the collection effort. She also alleged that CCCS's name illegally implied that it was affiliated with the government of Clark County, Nev., when in fact it is not.
Then came the really weird twist. Seeking to enforce its judgment, CCCS obtained a “writ of execution” under which the sheriff of Clark County was obliged to sell off Arellano’s property. But not just her physical property—the writ also covered her pending legal claim against CCCS. In an auction held last November on the steps of the Clark County courthouse, Arellano’s claim against CCCS under the Fair Debt Collection Practices Act was sold for $250. The buyer? None other than CCCS.
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http://www.bloomberg.com/news/articles/2016-08-16/suing-a-debt-collector-now-they-can-buy-your-lawsuit