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Collecting on previously uncollectible debt


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Previously posted in the wrong place:

Got a lawyer CA in my state of WA who sent his first letter of collection for a debt that the last CA of the same debt could not verify or validate. They used the wrong account # and were otherwise deceptive. I took care of that CA with deft letter writing.

In each communication was a text box "NOTICE TO AGENT IS NOTICE TO PRINCIPAL -- NOTICE TO PRINCIPAL IS NOTICE TO AGENT. Applicable to all successors and assigns". Therefore, when the first CA defaulted the the validation process, all subsequent CA default as well. (Right?)

Now, does the new CA have any way of collecting on this previously uncollectible debt.

These assumptions apply: This is a commerical line of credit, used for personal purchases, therefore, making it a consumer line of credit. Therefore, FDPCA applies, right? And SOL for such open ended accounts is 3 years.

I am inclined to do a C&D rather than a DV because it still stands as not valid, unverified, and therefore, uncollectible.

Advise?

You guys posts are great and I look forward to hearing from you.

Thanks --

Joncy

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These assumptions apply: This is a commerical line of credit, used for personal purchases, therefore, making it a consumer line of credit. Therefore, FDPCA applies, right? And SOL for such open ended accounts is 3 years.

Probably incorrect. I think there actually some court cases that found that the "least sophisticated consumer" test doesn't apply to us business folk. If they can in any way assume it was a "business" account, you're stuck...

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Here's what I'm using for my position:

In Slenk v. Transworld Systems, Inc., 236 F.3d 1072; 2001 U.S. App. 9th

Cir., the Court, in matter involving whether or not a loan was a consumer

loan, stated:

"We have found it necessary when classifying a loan to " 'examine the

transaction [**7] as a whole,' paying particular attention to 'the purpose

for which the credit was extended in order to determine whether [the]

transaction was primarily consumer or commercial in nature.' " Bloom, 972

F.2d at 1068 (quoting Tower v. Moss, 625 F.2d 1161, 1166 (5th Cir. 1980)).

In making this determination, we have elevated substance over form, holding that "neither the lender's motives nor the fashion in which the loan is memorialized are dispositive of this inquiry." Id. We must therefore "look to the substance of the transaction and the borrower's purpose in obtaining the loan, rather than the form alone." Riviere, et al. v. Banner Chevrolet, Inc., 184 F.3d 457, 462 (5th Cir. 1999)."

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Is there truth to this statement:

If they sue you personally, as a consumer the FDCPA applies... if they

sue the business for which the debt applies then FDCPA does not apply.

Still -- even without that (above post). A line of credit (and a VISA business card attached to it) are open-ended lines of credit, yes?

And if they are, they are subject to the WA SOL of 3 years for open-ended accounts (not written contract), yes? Regardless of business or consumer?

And if so, then 5-29-05 was the 3-year mark, yes?

I just want to make sure I have everything lined up. But it starts with the original question... Can CA#2 collect on an unverified alledged debt from CA#1?

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I really don't know, but I'd bet this isn't going to work in your favor.

The court case you cited could easily have been FOR the plaintiff and in effect, saying that even though it was a "commercial line of credit" from a CC, the fact that the defendant used it for personal purposes made it the defendant's (not the business) debt.

Even the IRS, in stating the rules regarding when a 1099c must be issued for a written off debt, says that even if the debt was IIB, if the creditor has "reason to beleive...the debt was used for personal purposes...", the creditor should issue a 1099c.

So...as to whether the FDCPA and SOL applies...because it was personal...I still don't think so.

And, like hannah was implying, personally guaranteed commercial loans are NOT subject to the FDCPA...as I said, the "least sophisticated consumer" test fails.

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SOL is only for consumer not for commerical?

Don't know. SOL is state by state and you'd have to read through the entire law to know for sure. And then you'd have to decide what category your particular debt fell under. I'm guessing, but I'd bet that a Commercial Line of Credit might be one of those neverending story kind of things...

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Joncy, the keyword here is "commercial". It might have been fraud for you to use a business line of credit for personal use since this was a business loan. I believe you need to consult an attorney in your area. Business loans are not covered by the FDCPA and since you personally guaranteed the loan, it is entirely legal for the creditors to contact you at your home and to sue you personally since you guaranteed the loan. Reporting the debt to your own personal credit report is also legal for them to do as long as they are reporting accurately.

That said, your state law may consider OC's to be bound by state collection laws. You need to read your state's consumer laws to be clear.

Also, there was recent caselaw on a guy being sued for personally guaranteeing a commercial law where the judge ruled that the FDCPA did apply to collection efforts. I can't remember if it was a federal case or not, I will look for it.

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