Debt collection tips from WSJ

Six years after her divorce and default on her credit-card debt, Ms. Scott of Phoenix heard from an Asset lawyer that she was about to be sued. Unable to pay for her own lawyer, she says she went to a free legal-services agency where a lawyer told her there was no point in showing up in small-claims court. That was bad advice, which Ms. Scott says she followed.
Asset won a default judgment of $7,731 in February 2002, a sum that included interest costs and $2,035 for Asset's legal expenses and court fees. Two months later, Asset offered to settle for $3,290. Ms. Scott says she didn't have it. By August, Asset had withdrawn the offer, and the total bill had risen to $9,537. Then, last month, Ms. Scott offered to pay the company another $3,000 that a relative agreed to lend her. Asset accepted the settlement. "I had to get it behind me," Ms. Scott says.

Some former debtors and lawyers who have skirmished with Asset say Ms. Scott may not have had to pay the company anything if she had gone to court and contested its claims.

Asset acknowledges that, when buying a pool of debt, it typically gets a bare-bones list of debtors' names, their social security numbers, the amounts creditors were owed and the date of last activity. To acquire more information would require creditors to dig deep into their files, which would cost Asset dearly. In many instances, where debts have already changed hands, industry executives say it is very difficult to obtain definitive documentation.

As a result, if a debtor can plausibly argue in court that the amount Asset is seeking may be incorrect, a judge may dismiss the case for lack of evidence, some consumer attorneys say. "They usually don't have the documentation," says Glen Chulsky, an attorney in Dover, N.J.,
who now represents individuals but previously did work for debt-collection firms.

Jason David Fregeau, a lawyer in Longmeadow, Mass., says he has faced off against Asset seven times in recent years, and each time the company has settled because it lacked documentation. "I have yet to see them prove their case," he says.

Asked about these assertions, the company says it has acted appropriately. Asset confirms that it is often hard to prove old debts and that consumers are challenging its documentation more often.
Asset executives say the vast majority of debtors know they owe money, and those complaining about court proceedings are merely trying to escape from paying. "If a person has a plausible or legitimate reason why they cannot pay, or if the debt is fraudulent, then we will work with them to resolve the issue," the company said in its written statement. "However, from our experience, we find that most people accept their responsibility and pay their past obligations."

Idalberto de la Torre appeared in a Miami small-claims court in November 2003 to contest Asset's suit against him. The company demanded $1,800 in old Providian Financial Corp. credit-card debt, plus another $900 in legal fees. Mr. de la Torre, an administrator for Delmonte Fresh Produce Inc., hired an attorney and was able to produce copies of credit reports that he says showed that Asset's records were wrong. Asset agreed to drop its suit.


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