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  1. #1
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    Default How to Raise My Affirmative Defense

    My question involves collection proceedings in the State of: California

    I have come across the below affirmative defenses though am questioning whether this is valid for my particular credit collection lawsuit. The specific question I have is related to how I should word the below defenses if they are applicable. I do not know the substance of the agreement between the assignor (original creditor) and the assignee (Junk Debt Buyer JDB) In my lawsuit, the attorney does not give reference to any outside agreement between the original creditor and the JDB.

    In the first affirmative defense, I have read that the debtor does not have to have notice or approve of the assignment from an assignor to an assignee. Is it proper for me to allege that the statute of Frauds has been violated when I do no know if a contract was executed between the assignor and the JDB? Secondly to evaluate whether a violation of the Parole Evidence Rule applies in this situation? Thirdly, does Lack of Privity have relevance when the assignor does not have to notify me of the assignment? Lastly, how can I evaluate whether there is unjust enrichment when I do not have the ability to view the agreement between the assignor and assignee?

    (1) Defendant is informed and believes, and thereon alleges, Plaintiff's Complaint violates the statute of Frauds as the purported contract or agreement falls within a class of contracts or agreements required to be in writing. The purported contract or agreement alleged in the Complaint is not in writing and signed by the Defendant or by some other person authorized by the Defendant and who was to answer for the alleged debt, default or miscarriage of another person.

    (2) Defendant is informed and believes, and thereon alleges, that the Complaint includes references to alleged agreements made outside of the alleged written contract, violating the Parole Evidence Rule.

    (3) Defendant is informed and believes, and thereon alleges, Lack of Privity as Defendant has never entered into any contractual or debtor/creditor arrangements with the Plaintiff.

    (4) The Defendant alleges that the granting of the Plaintiff's demand in the Complaint would result in Unjust Enrichment, as the Plaintiff would receive more money than the Plaintiff is entitled to receive.

  2. #2
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    Default Re: Affirmative Defense Questions

    Absent a contractual agreement not to assign (which I've never seen in a consumer credit agreement), they do not need your consent to assign the contract to another. Nothing in the statute of frauds appear to make any necessity for the assignment to be in writing. Your best way is to assert the debt validation requirements to make sure this is a valid debt collection.

    You seem to love to throw out legal terms at random. Who do you assert is being unjustly enriched other than you for not paying your debt?

    What terms are they asserting that are contrary to your original contract with the lender are in violation of the parole evidence rule?

    A valid assignment creates privity.

    What demand are you talking about in #4.

  3. #3
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    Default Re: Affirmative Defense Questions

    I do not know the substance of the agreement between the assignor (original creditor) and the assignee (Junk Debt Buyer – JDB
    who cares what their agreement was. You are bound only by your contract (and relative laws) so that is all you need to address your defenses to.

    You can attack their claim of ownership and require proof of ownership of the debt because your contract was with the OC. As such, the person suing must be able to prove their right to sue. If they prove that, they have privity (as ron stated). Ownership of debt can be bought and sold unless there is something within your original contract limiting such actions.

    and if the plaintiff is seeking more than they are due and were awarded such, technically it would be an unjust enrichment but that is not the proper argument. If the debt claimed is improper, you address that by stating such.

  4. #4
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    Default Re: Affirmative Defense Questions

    jk and flyingron,

    I respectfully thank you both for your response, it is much appreciated as I am not a lawyer but had a business law class in college. I found the affirmative defenses in my posting regarding the assignment but they didn't look correct.

    As for the unjust enrichment I found a document that is a Memo from the Plaintiff to U.S. Federal Trade Commission. Unfortunately, I cannot attach the posted document though I have copied the contents below.

    In short, JDB is possibly buying my debt at a cost of 3% of the face value of the debt and charging me in my lawsuit 131% of the face value of the debt which includes legal fees, interest & court costs. Considering that the legal fees, interest and court cost are necessary expenses to stay in business, when you take this out of the equation, the plaintiff is still making 3,333% in gross profit. This is what I am claiming as unjust enrichment. Am I seeing this correctly?

    Here is a link to the original posting:
    http://www.debt-consolidation-credit...%28a%29%281%29
    ------------------------------------------------------------------------------------
    Encore Capital Group
    ... and its subsidiary, Midland Credit Management, Inc.

    8875 Aero Drive, Suite 200
    San Diego, CA 92123
    Tel: (800) 825-8131 Fax: (800) 309-6998

    Via electronic delivery
    July 31, 2009

    Federal Trade Commission
    Office of the Secretary
    Room H-135 (Annex A)
    600 Pennsylvania Avenue, N. W.
    Washington, DC 20580
    Re: Debt Collection Roundtable -Comment, Project No. P094806

    Dear Federal Trade Commission:

    Thank you for the opportunity to provide written comments in advance of the roundtable discussion regarding "Protecting Consumers in Debt Collection Litigation and Arbitration", scheduled for Chicago on August 5-6, 2009.
    Our companies,
    Encore Capital Group, Inc. (NASDAQ: ECPG),
    Midland Credit Management, Inc. ("MCM"),
    and three debt-buying entities,
    Midland Funding LLC,
    Midland Funding NCC-2 Corporation and
    MRC Receivables Corporation ...

    We employ more than 1200 employees across five locations,

    We have been in the collection business for 55 years and started purchasing portfolios for our own account approximately 18 years ago.
    From our inception through June 30, 2009, we have invested approximately $1.3 billion to acquire 27 million consumer accounts
    with a face value of approxilnately $43 billion.

    The receivable portfolios we purchase consist primarily of unsecured, charged-off domestic consumer credit card, auto loan deficiency and telecom receivables purchased from national financial institutions, major retail credit corporations, telecom companies and resellers of such portfolios.

    After we purchase a portfolio, we continuously refine our analysis of the accounts to determine the best strategy for collection, including the use of a nationwide network of collection attorneys to pursue legal action where appropriate. We believe the use of the legal system is a necessary element of maintaining accountability in our financial system when repayment cannot be secured through the mail or by phone.

    Default Judgments and Service of Process
    The processes by which any judgments, including default judgments, are entered across various jurisdictions differ greatly based upon such considerations as the amount of the debt, the documentation provided with the complaint, and the sufficiency of evidence regarding the proper service of process upon the defendant. Default judgments represent a significant percentage of the judgments obtained by our companies and others in this industry, as well as in all other cases filed in coulis that must review and resolve increasingly large numbers of lawsuits. In our view, the rate of default judgments does not depend on the type of action but rather on the processes in place for a particular court or judge to make a decision in a case where the defendant has failed to file an appearance or responsive pleading, and has similarly failed to physically appear before the court. We would prefer that consumers appear so that we may discuss the account, their financial situation, and payment options, but they do not go to court, and that is the reason for the large numbers of default judgments.
    While the number of cases filed to collect delinquent debts is substantial, we do not see the default judgment rate to be a reflection of certain types of debt or debt ownership, but as an indication that most defendants fail to respond to proper legal notice of a pending court action involving their interests. A reasonable default judgment process that examines both the service of process and the information and materials supporting the complaint is able to quickly resolve uncontested lnatters and remove them from a crowded court docket while limiting the time that local counsel must devote to such cases. In most jurisdictions, a defendant is notified of such a default judgment and provided another opportunity to appear before the court and raise available defenses to the claim. We believe that defendants are given sufficient opportunities, both before and during the litigation process, to raise defenses, ask questions, and reach a resolution to their delinquent account, and the default judgment process is important for companies such as ours to continue to collect debts in an efficient and costeffective manner.

    Statute of Limitations
    A statute of limitations, which provides a deadline for the commencement of litigation, is defined is various ways across many states, with distinctions based on the nature of a contract, availability of supporting documentation, location of activity, and other factors that are reviewed and applied by courts at different jurisdictional levels. Our company uses litigation as only one of several methods to collect debts and, for those accounts that are past the statute of limitations, we do collect on such accounts through methods such as telephone calls and letters because there is no prohibition on such actions. We do not, however, knowingly pursue litigation against those consumers whose statute has expired. As you know, the FTC issued a Consumer Alert in October 2004 that specifically concluded that collection of debt for which a statute of limitations has run is not deceptive, misleading, or prohibited by law. With only a few exceptions, the expiration of the statute of limitations does not extinguish the debt or our right to continue collections, and we do collect such debts in the same general course of business that we collect all other debts.

    Through court decisions, the statute of limitations for credit card accounts has been reduced in several states, and a number of state legislatures have also proposed a reduction in the time period for litigation. It is our view that shorter statutes will not have the intended effect and will lead to a significant increase in the number of lawsuits filed. Companies will be compelled to file lawsuits earlier in the collection process to protect their interests, and will no longer have the time and flexibility to work with consumers having financial difficulties. While shorter statutes may initially appear to be favorable for consumers, the result will likely not be beneficial to them because agencies will no longer be able to wait for individuals to financially recover. Additionally, the litigation costs and court activity will only add to the burden faced by such consumers.
    Finally, consumers are currently provided with detailed information about their debt and numerous notices regarding their rights, and it is our view that informing consumers about the legal status of their account is problematic. Consumers receive a validation letter each time that an account is transferred to a new servicer, and consumers have also already likely received many letters and notices from the original creditor and prior owners and servicers, so we believe that sufficient disclosures have been made to consumers and that requiring an additional notice will result in legal questions and other issues that collection agencies should not be required to address. Letters to consumers should be concise, informative and provide details regarding the subject account and payment options, but should not be complicated with legal advice related to the statute of limitations, tax consequences, or other similar issues, which will complicate letters and make them less effective and more difficult for consumers to read and understand.

    Evidence of Indebtedness
    As noted previously, our company purchases account portfolios from national financial institutions, major retail credit corporations, and telecom companies, as well as resellers of such portfolios, and each purchase is the subject of a comprehensive written agreement that addresses all aspects of the transaction between our company and the selling entity. Our agreements not only require representations and warranties from a seller that all consumer and account information is accurate and current, but also often provide for post-purchase support from sellers regarding additional information or documents that may be needed to address consumer or court inquiries. The electronic data obtained from sellers includes a consumer's name, address, Social Security Number, telephone number and other details that are used to confirm identity, as well as specific account information regarding the charge-off and current balance, last payment date and amount, and other account activity. All of this is provided to our law firms at the time we place an account for litigation. We intend and expect that all relevant and required information is referenced in the complaint or provided to the court and the consumer in the form of an affidavit or other exhibit.
    One major concern for our company and the industry has been the elevated evidentiary standards being proposed by state legislatures and independently developed by local courts. The standards appear to be applicable only to debt collection cases and often include documentation and information requirements that are burdensome and unrealistic in a time when such physical materials are often unavailable or non-existent. Many accounts are opened, accessed, managed and transferred without any hardcopy documents, so an evidentiary standard that sets minimum filing or judgment requirements that demand the production of an original application, complete set of account statements, copies of payments and other written materials is, in our opinion, an unreasonable expectation. The burden of proof should not be higher for debt collection matters, and we meet our burden of proof using electronic information and certain documents provided to us by the sellers and warranted by contract to be true and correct.

    Lance S. Martin
    Vice President, Compliance and Regulatory Affairs

  5. #5
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    Default Re: Affirmative Defense Questions

    They are not making 3333% of gross profit. If that kind of profit could be had, the original creditor would pursue it. The truth is they have to exert legal fees to go to court to get a judgment, which is further prolonged when people who can google a few legal terms unnecessarily prolong things with non-sequitor arguments. Then when they get the judgment they have to go to the effort of actually collecting on it, if there is something to collect. You have to take this across all of their accounts not just the ones they win on.

    Further, even if they were making 3333% profit, they're not unjustly enriched. They bought the debt from a willing seller, and made good on it.
    They are entitled to that profit. Even fat profits aren't "UNJUST ENRICHMENT."

  6. #6
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    Default Re: Affirmative Defense Questions

    flyingron,

    In addressing the unjust enrichment, in the event there is judgement on behalf of the assignee the assignor should be entitled to cost plus litigation costs plus profit margin up to the original obligation. Isn't unjust enrichment defined as requiring the debtor to pay an amount beyond the original obligation? In other words the unjust enrichment is the 31% return above my original obligation?

  7. #7
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    Default Re: Affirmative Defense Questions

    Nope. Your obligation persists until you satisfy it. The interest and obliged fees will continue to go up. The fees are most likely spelled out in your contract with the lender. Any legal fees further awarded are also not unjust (even if they weren't in the contract) if they represent what they actually spend on this case.

  8. #8
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    Default Re: Affirmative Defense Questions

    Quote Quoting ForexSurfr
    View Post
    flyingron,

    In addressing the unjust enrichment, in the event there is judgement on behalf of the assignee the assignor should be entitled to cost plus litigation costs plus profit margin up to the original obligation. Isn't unjust enrichment defined as requiring the debtor to pay an amount beyond the original obligation? In other words the unjust enrichment is the 31% return above my original obligation?
    profiting on the purchase of a commodity is not unjust enrichment. You will not be paying anything more than you owe. They purchased the debt. You owe the debt. If they purchased it at a discount is irrelevant to what you owe. There is nothing unfair about you paying what you owe.

    I sure wish I could use that argument when buying a car, buying stock, or any other item. Hell, commodity market sales would have to be halted. The fact is; they purchased your contract and have a right to collect full value of that contract.

    Quote Quoting ForexSurfr
    View Post
    . Isn't unjust enrichment defined as requiring the debtor to pay an amount beyond the original obligation? In other words the unjust enrichment is the 31% return above my original obligation?
    are they asking for more than your actual obligation? They have no right to demand more than you are obligated to so when you discover they are, you can contest their action. So far, you haven't shown where they seek more than your actual obligation.

  9. #9
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    Default Re: Affirmative Defense Questions

    jk and flyingron,

    I now understand. The fees, interest and court costs stand alone in a claim of unjust enrichment. In other words, you cannot include them in a determination. Thank you again for your responses.

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