Debt Collectors and Creditors Beware: FCRA and FDCPA Lawsuits Skyrocket

08.14.09
By John Ulzheimer

In an article I wrote on December 16th 2008, I predicted a sharp increase in consumer credit related lawsuits in 2009. Boy, did I nail that one. According to Jack Gordon, CEO of WebRecon LLC, a service that tracks FCRA and FDCPA filings, “we’re on pace to eclipse 8,500 such lawsuits in 2009. That’s a record for any one year.”

The issue at hand seems to be two-fold. First, more consumers view litigation as an investment in their own credit future. These are the folks who are fed up with the typical credit dispute protocol, which might work fine for 98 percent of disputes, but isn’t 100 percent effective. The percentage who can’t seem to have legitimate errors removed from their credit reports using the bureau’s required methods are starting to find it necessary to escalate their efforts into the courts in order to regain their good credit names.

The second bunch seems to be coming from the shake down artists. These are consumers who have damaged themselves through poor credit management and have hooked up with lawyers, on a contingency basis, to see if they can clean up by suing debt buyers, collection agencies, lenders, and credit bureaus despite having no damages caused by the aforementioned parties. In many cases, it’s less expensive to throw a little money at the plaintiff rather than taking the case all the way to court, where even a jury verdict in the defendant’s favor is hugely expensive.

It’s been my experience that roughly 6 percent of FCRA and FDCPA cases make it to court. Two of the 31 cases in which I’ve been an expert witness have seen the inside of a courtroom. The overwhelming majority of cases are either settled prior to going to court, dismissed, or disposed of via summary judgment.  

It probably doesn’t surprise you, but these lawsuits are not all filed by unique consumers and unique lawyers. According to Gordon, “Approximately 38 percent of all FDCPA cases are filed by repeat litigants.” It seems that there are many lawyers and many consumers who are habitual filers, meaning that they have sued multiple times under the FDCPA and FCRA.   

While it’s completely plausible that a consumer can simply attract bad creditors or illegal treatment from a collector, it doesn’t take a rocket scientist to figure out that many lawyers and consumers have determined that it pays quite well to be a serial litigant. A simple Google search on “collection attorneys” yields over 2 million results. The bottom line: Suing collection agencies seems to be good business.

As a former collection agency owner, Gordon saw a strong need for a service that helped collection agencies avoid serial litigants. This has led to the 2008 development of the ”FDCPA Litigant Alert.” This service culls the federal and state court records, pulls out all FDCPA and FCRA filings, and twice a month compiles a list of cases. This list can be purchased by collection agencies and used to avoid the overly litigious consumers. “A lawsuit does not have to be legitimate to be very, very expensive”, says Gordon. I think many collection agency owners would agree.

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Consumer credit related lawsuits have increased significantly in 2009.