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Debt buyers are suing thousands of Peninsula residents without ever having to prove their case

32,961 civil lawsuits were filed in Santa Clara and San Mateo Counties for the 2017/2018 fiscal year.[1] That is a lot of lawsuits.

According to public court records, of those civil lawsuits in Santa Clara and San Mateo Counties, just about ten percent (3,214 lawsuits) are brought by just four companies that most people have never heard of (until they are sued by them of course).

These companies are known as “debt buyers,” and they sue a shockingly high number of people in the Bay Area and across the county.

A debt buyer utilizes a simple, yet highly profitable business model. First, the company will purchase from banks, credit card companies, and lending institutions, large portfolios of allegedly delinquent accounts (mostly delinquent credit cards) for a very low price compared to the face value of the portfolio. In many instances the “portfolio” being purchased is nothing more than an Excel spreadsheet with the alleged debtor’s name and account number, and other bare-bones information. Then, the company will use that purchased information to sue large swaths of people (using a small handful of lawyers) for the face value of the debt, plus interest and other costs.

As an example, in 2018 the nation’s leading debt buyer, Encore Capital Group, spent about $1.13 billion ($638 million in the U.S.) to acquire 3.4 million portfolios with face values totaling $8.5 billion, for an average purchase price of 13.3% of face value.[2] The company then went on to spend $205.2 million on collection efforts that earned the company $1.16 billion.[3]

In the Bay Area, the most litigious debt buying companies are Midland Funding, LLC, a subsidiary of Encore Capital group (with 1,315 lawsuits filed in the 2017/2018 fiscal year in San Mateo and Santa Clara counties), Cavalry SVP (with 837 lawsuits filed), LVNV Funding (with 490 lawsuits filed), and Portfolio Recovery Associates (with 451 lawsuits filed). New debt buying plaintiffs also appear to be cropping up each day. For example, a debt buyer company named Achievable Solutions, Inc. does not appear to have filed any collection lawsuits until the Spring of 2019. But in the month of January 2020 alone, the company (though one attorney) has filed just over a lawsuit a day in San Mateo and Santa Clara counties.

To be clear, any company to whom money is rightfully owed is entitled to sue in order to collect on that debt. But if debt buyers are going to avail themselves of the privileges of taxpayer-funded institutions like the court system, they should have to prove their claim. Unfortunately, that is overwhelmingly not the case. Debt buyer lawsuits almost always go unchallenged. Most studies have found that only in 1% to 2% of cases does a collection attorney face a consumer represented by an attorney.[4] When the consumer does not show up in court to defend his or her case, the court will enter a “default judgment” in favor of the debt buyer. What that means is the court decides the case in the plaintiff/debt buyer’s favor before any substantive issues are presented to the court because the defendant failed to appear. Once armed with that judgment order, the debt buyer can garnish wages and levy bank accounts, pushing families that already struggle to pay their bills and support their families further into poverty.

What defendants in debt-buyer cases may not know (how would they?) is that debt buyers often sue with little or no admissible evidence to prove that they in fact own the specific debt at issue, or that the consumer owes the amounts demanded, or that the claim is timely, or that they have even sued the right person. Errors are very common because debt buyers utilize an automated, mass-production business model that is based on unreliable data. Because debt-buyer cases almost always go unchallenged, debt buyers often win these cases even when there are defenses.

Consumers generally have much better outcomes when they retain a lawyer. In fact, many debt buyers will simply drop the case once they realize that the defendant has legal representation. In some situations, the defendant may be able to not just win the collection suit, but also turn the table on the debt buyer and sue them for violating fair debt collection laws. Being sued can cause a lot of stress, both physical and emotional, especially for individuals who have never been sued and are unfamiliar with the court system. Hiring a lawyer means that the lawyer handles all correspondence with the debt collector on the client’s behalf and reduces the anxiety associated with those discussions. Even if a default judgment has been entered, an attorney can seek to set aside the judgment or take action to protect assets that are exempt from garnishment under the applicable laws. Unless defendants begin to obtain legal representation in debt-buyer cases, debt buyer companies will continue to engage in litigation abuse because it is highly profitable for them to do so.

[1] 2019 Court Statistics Report, Statewide Caseload Trends, Judicial Council of California, available at, at p. 112.

[2] Encore Capital Group Form 10-K (2018), available at, at pp. 27, 31.

[3] Id. at pp. 27, 39.

[4] See, e.g., Paul Kiel, So Sue Them: What We’ve Learned About The Debt Collection Lawsuit Machine, (May 5, 2016).

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