A Schnauzer Warning: Beware of Bottom Feeders!

One of the "side benefits" of being cheated by lawyers and judges is that my wife and I have become intimately familiar with one of the sleaziest industries in the country.

These outfits are so sleazy that folks in the know call them "bottom feeders." This is a family blog, so I can't provide some of the other terms that have been used to describe these outfits.

Is this an obscure industry, one most regular folks are unlikely to come in contact with? Not hardly. If you have a credit card, you are quite likely to come in contact with these parasites. (Oh, that's another good name they are given!) And if you don't come in contact with them, someone you care about almost certainly will.

So call your friends and neighbors, and gather the women and chillun' (a little Southern terminology there), because the Schnauzer is about to teach a lesson from the School of Hard Knocks. It's a lesson that could keep you from being fleeced someday by these vultures. (Gosh, another good term!)

What purveyors of poop, what sultans of slime, are we talking about? They are called third-party debt buyers. And if you are like my wife and I were a little more than a year ago, you have no clue who they are. But if you don't know about third-party debt buyers, and the games they play, it could cost you dearly someday.

Until certain lawyers and judges started raiding our personal treasury several years ago, my wife and I were fortunate to enjoy excellent credit. In fact, credit-card companies hated me because I always paid my monthly balance, and did it on time, and they don't make money off folks who do that. My wife (surprise, surprise!) is a bit more "liberal" in her spending habits. But she had never had any problems with paying bills in a timely fashion.

In fighting a bogus lawsuit filed by corrupt Alabama lawyer William E. Swatek, and seeing Shelby County Circuit Judge J. Michael Joiner (Swatek's golfing buddy) repeatedly make unlawful rulings to keep the lawsuit alive, our financial picture grew more dim than usual.

It didn't help that my own attorneys were more interested in kissing up to a corrupt judge than they were in helping me. They charged me big-time while actually serving the interests of a judge with whom they wanted to stay in good graces. (Much more about my own attorneys and their corrupt actions coming soon.)

Our finances took enough of a hit that we started receiving phone calls and letters from companies we had never heard of. They had names like "NCO," "CACH LLC," and "Portfolio Recovery Associates LLC"--and they all had a similar message: "You owe us money, and you had better pay up, bub."

This was our welcome to the netherworld of third-party debt buyers.

Here's how the game works:

Let's say you have a credit card with American Express. Your finances take a downturn for whatever reason--or maybe you're just forgetful--and you miss the due dates on three payments. AMEX will shut down your card, declare it in default, and demand payment in full.

Under federal law, AMEX has 180 days to try to collect. During that time, with some card companies, your balance could balloon by 50 percent or more.

The task of trying to get you to pay probably will be farmed out to a debt-collection firm, some of which are reputable and some of which are . . . well, remember that term "bottom feeder?" We are getting to them.

If 180 days passes and no payments are made, federal law mandates that AMEX charge off the account to profit and loss (P&L), and this nugget of information is passed on to all three credit bureaus (Experian, Equifax, and Trans Union). Suddenly, your credit rating doesn't look so hot.

As for American Express, don't feel too bad for them. Federal law allows them to take a hefty bottom-line write off. That's why original creditors such as AMEX generally don't sue people for payment. It's bad for business, and there is no incentive for them to fool with litigation.

What about you? Your credit rating has taken a hit, but are you out of the woods otherwise? Oh, no. You are probably about to meet a third-party debt collector.

Companies like AMEX are allowed to take these charged-off accounts, known as "junk debt," and sell them in mass to third-party debt buyers. Those companies then will turn around and harass the beejeebers out of you, trying to get you to pay a debt that already is a distant memory to the original creditor.

NCO, CACH LLC, and Portfolio Recovery Associates are three of the best known, and most notorious, third-party debt buyers. Outfits like these generally pay 2 to 3 cents on the dollar for a junk-debt account. If they can get you to pay just a fraction of what they claim you "owe" them . . . well, you can see how the cash can pile up pretty quickly for them.

Let's say they claim you owe $10,000 on a junk debt they bought from American Express. Chances are, they paid about $200 for that debt. Now, if they can get you to pay just $1,000 on the alleged debt, they make a 500 percent profit. Of course, they are going to try to get you to pay the full $10,000. If they manage to pull that off, imagine what kind of profit they are making. Consumers who fall for this scheme cause junk debt buyers to dance around and sing Glory to God in the Highest.

But you don't want these dirtballs singing hymns on your dime. So here's a little hint: Odds are that these third-party debt buyers cannot prove that you owe them money. They might be able to prove that they own the debt. But in the massive transfer of bad debt from one party to another, rarely does the new owner get the kind of paperwork that would prove you owe the debt. In other words, chances are pretty good, that the debt buyers case could not stand up in court--at least if you were fortunate enough to get an honest judge.

How do junk-debt buyers make their money?

* By using intimidation tactics, many of them unlawful, to get consumers to pay as high a percentage of the "debt" as possible.

* By filing lawsuits and hoping the consumer does not show up in court, giving the debt buyer an easy default judgment.

How can you make debt buyers very unhappy?

* By not ignoring them.

* By learning how to fight them.

Texas-based Bud Hibbs is one of the nation's most prominent consumer advocates, and his Web site is a must read for anybody who is rasslin' with debt collectors.

What does Hibbs have to say about junk debt buyers? "These are the lowest end of the industry," he says. "Here is where you will find violation of law an art form. It's not just lawlessness; they descend to depths of depravity that give everyone the shivers."

Strong words. And my experience goes right along with what Hibbs is saying.

Debt collectors are governed by a federal law called the Fair Debt Collection Practices Act (FDCPA). But do collectors follow its provisions?

Well, let's hear Bud Hibbs on that subject: "Debt collectors who break the law make more money than those who do not. Fear is the universal tool used by debt collectors to separate consumers from their money. And if breaking the law means a bigger paycheck, greed overrides morality."

Greed overrides morality? Gosh, if I didn't like "Legal Schnauzer" so much, I might change the name of this blog to that. That sums up so much that my wife and I have experienced over the past eight years or so.

This piece from Bud Hibbs is one of the best overviews of the debt-collection business that I have seen. Another Hibbs piece on debt collectors and their wily ways is available here. A good overview of what debt collectors can and cannot do is available here.

I hope readers will check out Bud Hibbs' work and then follow along for my journey through the shark-infested waters of the debt-collection world.

My wife and I have come face to face with three third-party debt buyers--NCO, CACH LLC, and Portfolio Recovery Associates. Two of them, NCO and CACH, enlisted the services of Birmingham law firms-- Ingram & Associates and Halcomb & Wertheim--to help reel us in. All three companies, and their Birmingham surrogates, have violated the FDCPA.

Portfolio Recovery took an interesting route, using an outfit known as the National Arbitration Forum (NAF), which is a scam unto itself. NAF is based in Minnesota and has been the subject of some very interesting investigative reporting. In fact, the entire junk-debt buyer industry has received attention from inquisitive reporters, and we will be shining a light on that.

How do these bottom feeders operate? Portfolio Recovery enlisted a California law firm called Eskanos & Adler to come after us. And the California bunch has used some curious tactics. These have included:

* Having a courier company (DHL) leave documents in our shrubs, where I stumbled upon them after they had been rained on several times;

* Claiming I had been "served," even though I never signed for said documents--because they had been left in our shrubs!

* Claiming I had been sent documents that I never received;

* Butchering provisions of the FDCPA up one side and down the other. For example, we never received written notice of our right to have the debt verified. Even though we had never received verification of the debt, the California dreamers continued with their collection efforts.

* Failing to send me proof that I had ever signed a credit-card agreement with the underlying creditor (MBNA) or that I had ever agreed to a binding-arbitration agreement.

* Sending me copies of affidavits rather than originals that would prove the documents were actually sworn. Also sending an affidavit that is not even dated. It has a month and a day, but no year.

* Violating rules of the California State Bar, which states an attorney may not take advantage of wrongdoing by another lawyer. An attorney named Arthur Tessimond, with an outfit called Mann Bracken, is handling our case for Portfolio Recovery, and I sent him detailed information showing that my wife and I had essentially been the victims of theft by Alabama lawyers and judges. Evidently Mr. Tessimond doesn't give two hoots about California bar rules, or our status as crime victims, because he has kept right on with his collection efforts.

* Getting a Birmingham lawyer named William Ratliff appointed as "arbitrator" in our case. Ratliff is with the Birmingham firm of Wallace Jordan Ratliff & Brandt. Would he be a neutral observer in a dispute between a creditor and a consumer? Well, sure doesn't look like it. His firm advertises that it represents creditor rights. Don't see any mention of his interest in consumer rights. Ratliff's bio indicates that he has an interest in creditor rights, commercial litigation, etc. Again, don't see a thing about consumer rights. Wonder how many cases Ratliff has handled for the National Arbitration Forum. Wonder how many times he has ruled for a consumer. Wonder how much money he makes from these assignments with NAF. Wonder how much his firm makes from representing banks, credit-card companies, and other financial-services outfits. We will be seeking answers to those questions here at Legal Schnauzer.

Those are just a few of the tricks that junk debt collectors use; they have many more up their collective sleeves, and we will be laying it out in gory detail. I hope it will help you be prepared if they try to ensnare you one of these days.