Debt Collector Lies, Gets Hammmered By 9th Circuit

It's been a while since I visited this blog, but I'm determined to make amends and get back on the case.

This one is a little off topic, but since debt has been part of the farm equation since the first shylock squeezed the first dirt farmer out of his last shekel, it seemed appropriate-as well as being a sorely needed breath of fresh air in these times.

There's also a very important lesson here. Stay with me.

McCollough v. Johnson, Rodenburg & Lauinger, no. 09-35767 (9th Cir. Mar. 4, 2011)

McCollough, a school custodian now disabled, got behind in his credit cards like a lot of other folks. He owed Chase around $3,000 and didn't pay, making his last payment in 1999. Chase charged off the debt and sold the account to CACV of Colorado, a buyer of bad debts.

When McCollough didn't pay, he was sued in Yellowstone County, Montana by CACV in 2005. Representing himself, McCollough asserted the Montana 5 year statute of limitations on account collections and the case was dismissed by CACV.

One year later CACV retained the law firm to collect the debt and alleged that McCollough had made a payment in 2004, which would have tolled the statute of limitations-which starts to run when the last payment is made. The law firm sued McCollough.

McCollough filed a pro se answer asserting the statute of limitations and retained counsel. It had become apparent to the law firm at that point that the lawsuit had a statute of limitations problem. McCollough then sued the law firm under the Federal Fair Debt Collection Practices Act, and the jury awarded him $1,000 statutory damages, $60,000 in punitives and $250,000 for emotional distress.

The law firm, as you would expect, appealed.

The 9th circuit affirmed the trial court, among other things finding that the law firm's interrogatories propounded to McCollough contained requests for him to admit things that they knew were not true, having that information in their possession. Service of such requests on a pro se defendant without the obligatory notice that if not answered in 30 days the requests are deemed admitted was 'unfair, unconscionable, ...false, deceptive and misleading means to collect a debt.'

The teaching, however, is this. Keeping careful records and not making a further payment once you've stopped paying is the best defense to preserve your FDCPA rights and your rights under the applicable statutes of limitations.