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  1. #1
    Join Date
    Jun 2017
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    2

    Default Can an American Debt Collector Collect a Debt for a Foreign Company

    My question involves collection proceedings in the State of: All

    Timeshare Contract- Consumer vs Seller/Resort
    Country of Origin- Mexico
    Jurisdiction referenced in contract- Mexico
    Jurisdiction authority referenced in contract- Federal Consumer Protection Agency Conciliation proceeding and if the controversy persist the Federal District Court of Mexico

    Default clauses written in contract- In the event of default Seller may retain the amount the buyer may have paid on the date of default or demand 35% of the counter benefit provided hereunder whichever may be greater as a conventional penalty.

    Secondary clause- Maintenance Dues, In the event of default on punctual payment a 5% charge will be made as well as a moratorium interest at the rate of 2% per month plus collection expenses. Non payment of maintenance dues for 2 consecutive years shall imply cancellation of the membership.


    My questions:

    Can this resort hire an American Debt collector to pursue this account and ruin an Americans credit for a contract executed while in Mexico, that falls under the jurisdiction of Mexican laws and is clearly stated in the contract the jurisdiction as to where any controversy regarding contract is to be heard and resolved?

    If the contract already has default clauses clearly outlined, such as the default maintenance clause, that only implies cancellation and the default clause that provides for a conventional penalty, where does the resort get the authorization to abandon those written default remedies in favor of a third option, that is to pursue the collection in the USA using an American Debt Collector and threatening the detriment of the consumer's credit rating as leverage. This is a practice that is becoming all too common and leaves the consumer without the possibility or right to default in order to cancel his membership without suffering irreparable harm to his US credit rating.

    I understand that if the American Debt Collector purchases the debt they can try and collect, but what if they are only servicing the debt? In the case of servicing the debt, wont they too have to abide by the default clauses already embedded in the written contract?

    Last question- The contract has procedural processes outlined that say in the event of a controversy/dispute the parties agree to submit themselves to the authority of a conciliation proceeding at the Federal Consumer Protection Agency in Mexico and if the dispute continues to subsist after conciliation has be en exhausted then the parties agree to submit to the Federal District Court in Mexico. If the consumer has filed a controversy/dispute action/complaint with the Federal Consumer Protection Agency in Mexico seeking a conciliation proceeding with the Seller and the Seller has been notified, is the American Debt Collection Company required to respect that process and cease and desist collection efforts or can they continue to pursue the consumer and damage their credit rating? (this is if they are just servicing the debt and do not own it).

    The consumer does not want to pay any more annual dues, he would like the membership terminated. Unfortunately there is no outlined termination clause although there should be, just through default as it reads. But if the Resort is going to ruin his credit and not simply act of the matter using the default clauses already referenced then the client may pay to save his credit rating and start this vicious cycle all over. Since payment will revert the contract from default to current thus extinguishing any chance of termination.

  2. #2
    Join Date
    Mar 2013
    Posts
    18,340

    Default Re: Can an American Debt Collector Collect a Debt for a Foreign Company

    Obviously they CAN do it if they ARE doing it.

    And regardless of your interpretation of the contract, they can continue to do it until you sue them and get a judge to tell them to stop.

  3. #3
    Join Date
    Oct 2014
    Posts
    8,238

    Default Re: Can an American Debt Collector Collect a Debt for a Foreign Company

    Nothing in U.S. law prohibits a U.S. debt collection from collecting debts owed by U.S. debtors to foreign creditors. However, the debt collector must still follow federal and state laws regarding the collection of debts when the debtor is located in the U.S. Under the federal Fair Debt Collection Practices Act (FDCPA) you have the right to to tell the collection agency in writing to cease communication with you regarding this debt. Once you do that, the collector cannot contact you further about the debt other than to inform you of action it intends to take to collect the debt (e.g. file a lawsuit, etc). But that does not prevent the collection agency from reporting the debt to the credit bureaus. Under the Fair Credit Reporting Act (FCRA) the information the collector reports to the credit bureau must be accurate but there is no restriction on reporting debts owed to foreign creditors. Whether the collector must cease collection and/or reporting of this debt while you go through the conciliation process in Mexico is an issue of Mexican law and for that I suggest you consult a Mexican lawyer familiar with that nations law on debt collection and debt disputes.

    Your experience with time shares is not unusual. Lots of people get into time shares and then realize later on that there are problems with the time share or that they simply won’t use it like they thought they would. When they try to get out of the time share, they find out it’s very difficult to unload the time share unit on someone else. For these reasons I discourage clients from even considering time shares. There are a lot better ways to arrange your vacations that give you more flexibility and do not obligate you for ongoing fees year after year.

  4. #4
    Join Date
    Jun 2017
    Posts
    2

    Default Re: Can an American Debt Collector Collect a Debt for a Foreign Company

    Thank you for your response. I do understand that there is nothing in US law preventing them from collecting, but if they are collecting a debt, and the debt needs to be accurate, and if the debt or a material part of the contract is in dispute, don't they need to abide by the provisions of the contract? If the contract contains default procedures and jurisdiction as to where the parties must submit their grievances, how can a debt collector who should have a copy of the original contract, disregard the due process embedded within the terms and conditions of the contract and continue to collect. A Mexican lawyer can not sue a US collection company, so not much I can do there.

    My other question is these contracts have default clauses. Meaning if the consumer defaults, "This is what will happen" Much like a automobile contract saying, in the event of default we will repossess the car, you will lose all you have paid to this point and could also be responsible to pay any deficiency judgement. Albeit, not a good scenario for the consumer, but a clear scenario of what to expect. As a consumer we have the right to default, whether in our best interest or not and we have the right to expect the provider to act according to the terms and conditions of default as well.

    So how can sellers or providers, choose to side step default remedies in the contract in favor of other more successful remedies just because they are more successful but are not a material component of the contract? Its ridiculous that in a dispute the consumer has to fight it out in the jurisdiction of the contract origin and the Provider can attack the consumer here at home.

    Thanks to both responders to my questions.

  5. #5
    Join Date
    Oct 2014
    Posts
    8,238

    Default Re: Can an American Debt Collector Collect a Debt for a Foreign Company

    Quote Quoting neilsen
    View Post
    Thank you for your response. I do understand that there is nothing in US law preventing them from collecting, but if they are collecting a debt, and the debt needs to be accurate, and if the debt or a material part of the contract is in dispute, don't they need to abide by the provisions of the contract? If the contract contains default procedures and jurisdiction as to where the parties must submit their grievances, how can a debt collector who should have a copy of the original contract, disregard the due process embedded within the terms and conditions of the contract and continue to collect. A Mexican lawyer can not sue a US collection company, so not much I can do there.
    Even a U.S. creditor may engage a debt collector to collect a debt the creditor believes is due and report that debt to a credit bureau even though the debtor disputes the debt, even if the creditor and debtor are in the middle of court or arbitration proceedings to resolve that dispute. That happens every day, and it is not illegal. While there is a dispute about the debt, the FCRA allows the debtor to attach a (short) statement to his credit report disputing the debt so that others reading the report will know there is a dispute over the reported debt. Nothing in U.S. law says that a creditor must first have a judgement or arbitration decision before beginning collection action on a debt. However, without a judgment or arbitration award recorded as a judgment, the creditor’s remedies are limited to pestering the debtor about the debt, reporting it to the credit bureaus, and, if the debt was secured by property (e.g. a mortgage, vehicle title lien, etc), taking the secured property.

    The contract you have is governed by Mexican law and the time share company is presumably located in Mexico, so Mexico is where you have to resolve the underlying dispute over the time share. Mexican law is rooted in Spanish civil law, a significantly different legal construct than the common law from England which is the root of most U.S. law. I am unfamiliar with the details of Mexican contract law and cannot tell you how that will work out. But in any event, once there is a resolution of the dispute in Mexico, you could apply that resolution here, too. Thus, if the result is that you don’t owe anything the creditor and the collector will have to update the credit report to state that you don’t owe anything.

    While a Mexican lawyer cannot sue a U.S. debt collector in the U.S. without being licensed to practice law in the U.S. a lawyer licensed in your state could sue of the debt collector for you if any U.S. laws were violated by the debt collector.



    Quote Quoting neilsen
    View Post
    My other question is these contracts have default clauses. Meaning if the consumer defaults, "This is what will happen" Much like a automobile contract saying, in the event of default we will repossess the car, you will lose all you have paid to this point and could also be responsible to pay any deficiency judgement. Albeit, not a good scenario for the consumer, but a clear scenario of what to expect. As a consumer we have the right to default, whether in our best interest or not and we have the right to expect the provider to act according to the terms and conditions of default as well.
    A contract does not have to spell out all the various things the other party can do if you breach the contract. The other party may do whatever the law permits him/her/it to do, and parties to a contract are considered to know that. Consider for a moment that very, very few contracts say that if you default on the contract the other party may hire a debt collector to come after you and may report the debt to collection agency. Look at your credit card agreements and other contracts you have. They likely do not mention that at all. Yet that happens every day. Why? Because the law allows the creditor to do it. Most people know that is one of the things that can happen when they default so they are not surprised, but even if they didn’t know it that doesn’t stop the creditor from being able to do it.

    In order to repossess property as a remedy, the law does require that the parties enter into a security agreement that pledges the property for the debt. This is why you do see that written in contracts — the law requires that before the creditor may take that property. But nothing in U.S. law requires that a creditor have told you in the contract that you might face a debt collector or have the debt reported to a credit bureau before the creditor may do that. That’s the difference.


    Quote Quoting neilsen
    View Post
    So how can sellers or providers, choose to side step default remedies in the contract in favor of other more successful remedies just because they are more successful but are not a material component of the contract? Its ridiculous that in a dispute the consumer has to fight it out in the jurisdiction of the contract origin and the Provider can attack the consumer here at home.
    The creditor is free to choose among all the different options available to it to address the breach. If you default on a car loan, the creditor may start by getting a collection agency to come after you and reporting the debt to a collection agency first before repossessing the car if it wants. Nothing in the law requires it to first repo the car.

    As for having to resolve the dispute where the creditor is but the creditor can come after you where you are, that too is common. Even in the U.S. you see that all the time. If you are located in one state and the creditor is in another, you may face that same situation. A lot of contracts in the the U.S. will specify a particular forum for resolving disputes the parties, and it may be that the forum is located in the state where the creditor is, not where you are.

    In short, none of this is at all unusual or illegal. While you obviously do not like it, when you breach a contract this is the sort of thing you may face, whether the other party is another state or, as here, even in another country.

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