Consumer Law

Countersuits are acceptable losses for debt collectors

By Sam Glover

Speaking of screwing consumers, California consumer lawyer Jonathan Stein has an instructive story on what happens when corporations and debt collectors try to bully consumers into paying debts?even debts they do not owe.

His client sold a car that was later involved in an auto accident. Because the buyer did not register the title or obtain insurance, Allstate decided to go after Stein’s client for the damage. Neither Allstate nor its debt collector accepted her transfer of title documents, and ended up suing her for $3,500. She hired Stein, who helped her win a motion for sanctions for $1,200 and, later, settled a lawsuit for malicious prosecution for $5,000.

Should this be an instructive lesson for the debt collection industry? Maybe. I think cases like this fall well within the range of acceptable losses for collection agencies. So what if they lost $6,200 to Stein’s client. Just one debt collector?Unifund?is suing 5,500 people a year in California.

Stein’s win is a drop in the bucket. The money debt collectors can earn by bullying consumers more than makes up for the loss.

Full post as published by Caveat Emptor on May 20, 2008 (boomark / email).