You owe the money and there is nothing you can do, right? To the contrary, in many collection actions the consumer will have significant counterclaims. Filing fees and arbitration requirements may be avoided and federal claims stay in state court. The debt collector may be less willing to dismiss its claims and may prosecute the collection case more aggressively in order to vigorously contest the counterclaim. Courts that hear collection cases may not have judges willing to put in the extra time that counterclaims require.
A good example of a collection case that raises numerous potential counterclaims is when the collector is seeking to recover a deficiency after a car repossession and repossession sale. The consumer may have counterclaims under Uniform Commercial Code Article 9 and other state laws relating to the repossession and repossession sale or to the original sale to the consumer and performance of the vehicle.
In many collection cases, consumers can also raise counterclaims based upon the Fair Debt Collection Practices Act and related debt harassment theories. It may even be possible to raise counterclaims related to the collector’s litigation misconduct. Legal representation can thus result not only in dismissal of the collector’s case but also in the consumer’s recovery of significant damages and attorney fees. In recent Missouri case in Jackson County, the consumer raised counterclaims against a major debt buyer, Portfolio Recovery, and was awarded $250,000 compensatory damages, $82 million in punitive damages, and over $300,000 in attorney fees and expenses. You can read a copy of the judgement here: Portfolio Recovery Assocs., L.L.C. v. Mejia (Mo. Cir. Ct. Nov. 4, 2015).
“The Court finds the harm to Plaintiff was the result of intentional malice and not mere accident. This Defendant owns debt in all 50 states – 750,000 accounts in Missouri, 37,500 of which are in litigation. It shows no remorse. It’s business model is irresponsible and preys against the financially vulnerable. This Defendant does not respect the Court’s rules. And, especially reprehensible is Defendant’s use and abuse of our court system to harm the Plaintiff. Under the facts presented in this case, the Court cannot find that the jury’s punitive damage award – equating to half of Defendant’s net profits for one year – is grossly excessive.”
— THE HONORABLE JOEL P. FAHNESTOCK