"You're a Deadbeat"
Several years ago while sitting at my desk one morning, I got a beep on the phone from our paralegal. "There's a woman over here, and she's very upset," the paralegal said. "She wants to see you." "OK," I replied. "I'll be right over," and I walked next door to the reception area.

The woman was an old friend and former client. She sat in the reception area crying uncontrollably. I walked her into the conference room where she spilled out her story. It turned out that an awful man "with a Yankee accent" had called her last week about an old credit card debt. She remembered the credit card but recalled paying it off. She had lost her job in the great recession and told him that she could not pay. At this point, things went from bad to worse. He screamed curses at her and threatened to have her thrown in jail. "You owe the debt, ma'am. You're a deadbeat. I have no sympathy for you. I'll set you up on a payment plan, but the first payment has to be wired here to my bank by 5 PM this afternoon. Otherwise, I'll have to "refer the case to 'Legal' for prosecution." She did not wire the money to his company.

He'd called back this morning at 7 AM while she was still in bed to "confirm her address" so that "legal papers can be served on you." Not knowing what to do, she hung up. The phone rang again immediately. She got dressed, jumped in her car, and drove to my office. She seemed to believe that she could hide out at my office from the police like a Communist defector taking refuge in an American embassy.

That's My Debt
It was easy to see something was wrong in the picture she painted to me. In the first place, legitimate bill collectors don't threaten prosecution against debtors. Second, even if they wanted to, creditors can't prosecute debtors. Only a law-enforcement officer or a prosecutor (e.g., a US Attorney, solicitor, city attorney) can prosecute a debtor, and even they can't convict you for breaching a credit-card contract.

However, consumers who fail to pay a credit card debt can sure as heck be sued and a judgment levied against the equity in their house or have other assets sold. So, although she thought she'd paid off the VISA charges, I was worried that she'd actually ignored a letter or failed to respond to a prior lawsuit by the creditor. As it turned out, she was caught up in the shadowy world of bad paper.

Selling the Paper
I called my client's persecutor (the collection man) who refused to give me any information until I told him that I would not advise my client to pay unless I got proof of the debt. He agreed to fax "proof" to me. Meanwhile, I Googled his phone number and traced it to a trailer park in Buffalo, New York. Oh no! Bad paper from Buffalo! It all began to fall into place.

Buffalo is known as the sewer pit of collections. This is how my client's problems arose. Ten years earlier, a big lender such as Bank of America had signed my client up for a VISA card. She had gotten into financial trouble and couldn't make her payments for a while. She owed $345.17 when the bank wrote off her VISA bill as a loss. The bank then put her $345.17 debt, together with 100,000 other similar debts, for sale in a package. The debt was known as "paper." In this case, the "paper" was essentially an Excel spreadsheet list of the names of the bank's 100,000 VISA debtors, their last known addresses, dates of birth, social security numbers, and the date the debts went unpaid. The buyer of the paper might've been given a certification by the bank that the debts were legitimate. Or it might have been sold "as is" without any warranties at all, sorta like a quitclaim deed. The buyer of the paper is authorized to collect on the VISA debts, if it can.

Bad Paper
The first purchaser of the paper was a large company. My client had paid the debt off shortly after the collections agency called and put it out of her mind.

Unfortunately, the paper was resold several times, and each new owner contacted my client again for the same VISA debt. When she came to me, her VISA debt was owned and being being worked by an ex-convict (who had bought the paper on a flash drive in a bar) and his five-person staff. Two of his staff were former convicts too. (Regulation and oversight of these ex-cons were non-existent.) When told that my client had paid the debt already, the ex-con lied to her, claiming that she'd paid the debt but still owed interest and "fees." In addition to the fact that she had already paid the debt, the ex-con collector knew (but did not tell her) that the statute of limitations had run on his bogus claim against her. In fact, the statute had run on 95% of all claims on the Excel list against the VISA debtors.

Everyone Has the Right to a Little Dignity
All cases aren't this cut and dried. But at the very least, it's worth your while to see a consumer lawyer to know your rights and escape harassment. The collection agency may not be able to retrieve the documents needed to prove its case against the debtor. Letters from a lawyer to the bill collectors usually can stop the constant harassment brought on by multiple bill collectors calling day and night. Everyone has a duty to pay legitimate bills. On the other hand, everyone has the right to a little dignity too.