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List of things I no understand


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In regards to defending against JDB's:

"Lack of Equitable Assignment" as an affirmative defense. This is what I think it means, but am not sure:

Since debt is initially bought out by huge debt buying companies who don't actually try and collect, but rather package it into similar portfolios, which are then bought by the JDB's, there is no "meeting of the minds" between the OC and the JDB, so they lack an equitable assignment.

I don't think JDB's can claim they are an assignee at all unless they are the ones who actually bought the debt from the OC (and can prove it) and if they aren't an assignee, they have no right to try and collect.

This is similar to "Lack of Standing" when they can't reconstruct the chain of custody back to the OC, but it specifically attacks the JDB's claims that they are "Standing in the Shoes of the OC."

But if they aren't an assignee, but they really did buy some debt, then what are they?

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"Lack of Arms Length Transaction"

Does this have to do with a JDB (or whoever) trying to unilaterally change the terms of the agreement? Like raising the interest rate form where it was when a credit card was charged off without a consumers consent, and could it also be used to challenge a Universal Default clause in a credit card agreement?

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"Pecuniary Liability"

I ran across this obscure term while researching an old AOC thread. TowerRat was talking about using it against JDB's somehow. Trying to google what it means didn't turn up much.

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"Payment and Tender"

Tower also mentioned to use this as an affirmative defense instead of "Accord and Satisfaction" if you want to point out that the OC was compensated on your behalf by the US Government when they gave the OC a tax write off, and that the OC accepted that as full payment.

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In regards to defending against JDB's:

"Lack of Equitable Assignment" as an affirmative defense.

An assignment alleging "valuable consideration" is effective.

"Lack of Arms Length Transaction"

This could apply to original parties to an agreement, but not to assignees

"Pecuniary Liability"

substitute "monetary" for the word "pecuniary"

"Payment and Tender"

This alleges that you have already paid, or more commonly have offered full payment and it has been refused. Refusal of offer of payment due precludes the other party from charging additional interest or fees on the amount for which payment was refused.

You also mentioned about tax write-off amounting to payment in full. If an account is truly "written off", and I mean charged against the company's surplus account for tax purposes, then proof of that fact discharges the debtor from any future liability for the debt. This goes way back to the beginning of the IRS but is still good today. But that has nothing to do with the term "payment of tender". Oh, and it's not the same as the term "charged-off" that you see alot either.

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"Lack of Arms Length Transaction" - I assume this term could refer to transactions between companies with shared ownership (i.e. LVNV Funding and Resurgent Capital) but I haven't seen this argument defined as a valid defense. Interesting...

I've seen it used as a defense that basically points out that the JDB has no real relationship with the OC, but I don't see how that's really a defense.

It was used along with "Novation of Contract" as the next affirmative defense, so I guess the defendant was trying to make some sort of a point about being charged too much in fees and interest, or maybe challenging the "Standing in the shoes of the OC."

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An assignment alleging "valuable consideration" is effective.

That's a little cryptic, nascar.

What I wanted to know was what "Equitable Assignment" meant, and how it could be used as an affirmative defense.

Besides, a JDB alleging valuable consideration would have to prove they were the ones who loaned the money to the consumer, which is silly. "Lack of Consideration" would be the affirmative defense there.

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ARM'S LENGTH TRANSACTION:

A transaction between two affiliated or related parties that is conducted as if they were unrelated, so there is no question of a conflict of interest.

A non arm's length transaction may cause one party to pay more than the market value.

j

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You also mentioned about tax write-off amounting to payment in full. If an account is truly "written off", and I mean charged against the company's surplus account for tax purposes, then proof of that fact discharges the debtor from any future liability for the debt. This goes way back to the beginning of the IRS but is still good today. But that has nothing to do with the term "payment of tender". Oh, and it's not the same as the term "charged-off" that you see alot either.

The implication of what you've written is that if an OC issues you a 1099c for the "forgiven debt" and your "found income", then the debt is effectively discharged. Can you point us to any exact IRS rulings stating that? And, are there any court cases that clearly state a JDB can't come after you for the balance?

(I've suggested for a long time that when an OC claims "charge off", us debtors should demand a 1099c at that point. I recognize that CO is not the same as "write off", but, nonetheless, the OC moves it around on their balance sheet...and, the IRS expects us to pay taxes on it whether or not the OC sends the 1099c. So...my argument is...at that point, the debt is over and done with. I'd like to know if there is some court that agrees.)

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I'd like to know if there is some court that agrees.)

While there doesn't seem to be an abundance of appellate cases citing this exact verbage, 33A AmJur 2d 1284 Write-off of Debt, 2007 addresses this by stating, "A creditor's write-off and charge against surplus of debt is evidence of discharge or cancellation of the debtor's obligation, but it isn't conclusive." It goes on to cite Hudson v. Commissioner of Internal Revenue, 99 F.2d 630 (C.A.6 1938) as reference. This case has been cited numerous times over the years and has yet to receive any negative treatment.

There's lots of secondary authority out there that supports this and my guess is that the basis for this is buried in the tax code somewhere. I'm going to find it.

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Basically, we are looking for ways to attack a JDB as having wasted their money when they bought a floppy disk with a list of names and numbers on a spreadsheet. That doesn't give them legal standing to sue. It can't stop them form asking you to pay, and will force you to sue them if the place a TL with the illegitimate amount they are trying to collect.

All the arguments that challenge the actual terms that JDB's use can be defeated by the fact that debts are freely transferrable. You might be able to attack the incorrect use of accounting terms against them if you ever have to defend yourself in court, but it isn't a slam dunk defense and hasn't ever stoped the debt buying industry from existing in the first place.

I have consulted the Matrix of Leadership (The AOC archives on IC) over the past two weeks and have come to the following conclusions:

The JDB industry probaly really is dysfunctional and illegitimate because when an OC writes a debt off (not charges it off, that's different) they recieve compensation for it by the Government, and the OC willingly accepts that as partial payment, the remaining payment they accept from the portfolio buyer of pennies on the dollar, which is all they really have the right to collect on, but only if they also get original documents of the account from the OC.

This doesn't extinguish the debt, but rather "satisfies" the debt, which is just as good. On paper, the value of the debt is reduced to zero by the write-off and sale of the debt converted into a tax writeoff. Tax laws give the OC that right. Because of this, the JDB can't be "standing in the shoes" of the original creditor, because if they really were, they could write off the debt if they don't collect. It's already been written off once, and can't be again, so they can't really be standing in the shoes of anyone.

The courts may or may not understand or care about any of the above accounting terminology, so it's best to stick to the legal principals of attacking the chain of custody, making the JDB reconstruct it back to the OC.

Sources:

http://www.infinitecredit.com/forums/aoc-archive/565-towerrat-assigment-debt-subsequent-sell-purchase.html

http://www.infinitecredit.com/forums/aoc-archive/487-towerrat-no-_open_-collections_-manny-i-owe-you-tall-col.html

http://www.infinitecredit.com/forums/aoc-archive/394-towerrat-jdbs-do-not-buy-debt.html

http://www.infinitecredit.com/forums/aoc-archive/345-towerrat-affirmative-defenses.html

http://www.infinitecredit.com/forums/aoc-archive/344-towerrat-accounts-status-part-i-part-ii.html

http://www.infinitecredit.com/forums/aoc-archive/287-towerrat-open-accounts.html

http://www.infinitecredit.com/forums/aoc-archive/285-towerrat-factoring-company.html

http://www.infinitecredit.com/forums/aoc-archive/255-towerrats-accounts-stated.html

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Should probaly take the time to read these, too. We have a good argument, but for the inexperienced pro-se litigator to be able to explain it to a judge in a way that makes sense, you have to understand the concepts behind it.

http://debtorboards.com/smf/index.php?topic=680.0

http://debtorboards.com/smf/index.php?topic=2365.0

http://debtorboards.com/smf/index.php?topic=4.0

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I almost forgot why I started this thread in the first place.

The most powerful affirmative defenses you can use against a JDB, in my opinion, are:

Lack of Standing

Which covers almost all of the conclusions we've been coming too.

and

Volenti non fit Injuria

(or assumption of risk)

If the JDB is dumb enough to buy something that is completely worthless, that's thier problem.

You should also include a few of the others that have been discussed, as well as the standard ones to make sure you have a broad defense.

Of course, if the debt is SOL, you probably don't need to bother with any of this.

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It was either Towerrat or Xanathos who came up with that one back in the days of AOC.

I've also seen it used by lawyers in JDB cases as "Assumption of Risk."

Rottweiller aka Broke Chick explained everything to me a little more:

"I am not sure about this point: While it can be argued there is nothing to write off at the JDB level, the analogy (I think it's Flying's) of the JDB having bought an empty pitcher (the "water" having been the original debt written off and accord and satisfaction reached at the OC's level) is apt here.

In other words, the JDB claims they are able to "stand in the shoes" of the OC because they bought the data file which indicates the debt existed at one time. This "empty pitcher" has market value and once belonged to the OC, like it or not...and that's what they could well write off, and often do.

A bigger question is whether this "double dipping"--tax writeoff and selling the database (which is the only thing that is usually transferred to the JDB)--really meets the spirit of the law; it may or may not meet the letter of the law. I suspect that the industry lobbyists have managed to get the IRS to look the other way; the way the industry is set up is tax fraud, IMHO. Or, should be.

Also keep in mind that a JDB sees this portfolio as database=valid debt still owing, irregardless of whether more solid documentation is proffered and accepted by the purchaser in closing the deal (some portfolios are now sold with docs...but that would still open up the question whether the documents are still valid and unadulterated).

The fact that there allegedly was a debt and an alleged record of an alleged debt with the OC is enough to make any apparent debt collectible at the JDB...even those debts--if they existed-- which were paid. In turn, the JDB sees themselves as having the right to dunn and/or sue anyone to collect if the alleged debt in that "portfolio" were within statute--and they often do.

We know how little "cleansing" of uncollectible--or bogus-- accounts actually takes place at a JDB (and how poorly OCs prepare their portfolios), in hopes that the debtor forgot about the account and/or whether it was paid and will give in on the "moral" arguments of the Salespeople from H*LL...or default if they are sued.

Unfortunately, nearly all of their targets will either ignore the ***** or pay them. The percentage may by rather small...but the bucks involved are huge.

In other words, it's worth their while to go after what they see as "easy money"...

"...Unfortunately, case law supports the view that judges know zippo about accounting theory and GAAP...and care not a whit. Also, state statutes often treat JDBs as creditors, not collectors.

Your last statement--attack the chain of custody--appears to be the best way to defeat these *****, even if other defenses are available ( such as the debt was paid (how many people keep every piece of paper and every cancelled check or bank statement?), or that the SOL has run).

What a messed up banking system we have.

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Read this...

In re Crosby, 261 B.R. 470 (Bkrcy.D.Kan., 2001)

Then, if you have Westlaw, read this ...

Debt Buyers' Assn. v. Snow, 2006 WL 598143 (D.D.C., 2006)

This is a REAL issue and the debt collection industry is freaking out about it. In Debt Buyers, they are trying to get an injunction against the Treasury and I.R.S. barring the requirement to issue the Form 1099-C. Their motion was denied.

You'll read in Crosby where the court (yes, I realize it's bankruptcy court) says that a Form 1099-C is effectively assigns the debt to the Federal government. This is getting whacky.

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I'll have to look those up.

That 1099c crap that JDB's send people is a scam anyway. They try to write off the amount they were tryng to collect if they are unable to, when it's really supposed to be only the amount the paid for the debt, but they don't ever want to reveal that.

Then, the consumer ends up with that huge amount on their taxes as income, when the OC already wrote it all off.

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E. Normis debtor wrote me about this and says:

Each subsequent assignee stands in the shoes of the respective assignor, and is a successor in interest to the right to collect it.

Equitable defenses wouldn't apply as a debt obligation arises out of contract, not equity.

The OC's income offset with their loss is between them and the IRS, and has nothing to do with satisfying either parties legal obligations created by the contract.

Ouch.

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E. Normis debtor wrote me about this and says:

The OC's income offset with their loss is between them and the IRS, and has nothing to do with satisfying either parties legal obligations created by the contract.

Ouch.

That contradicts a lot of stuff I've been reading about this subject. It's obviously a very complicated subject.

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The way I've understood the volenti non fit injuria defense is as a defense for claims arising out of equity, like quantum meruit. The assignee purchased the right to stand in for the creditor, but since the assignee voluntarily assumed the injury by purchasing an account in default, he is not entitled to being restored to a condition he never had.

But today I was reading some case law that mentioned exactly what E. Normis was saying, that no remedy based in equity is available when the injury arises out of express contract.

So why do JDB's sue under quantum meruit, unjust enrichment and other claims based in equity if they have no right to do so? Is defeating these claims really that simple?

And how exactly does volenti non fit injuria apply to a claim based on an express contract? I'd love to see a sample case in which a defendant used it and prevailed, but I haven't yet.

I have a lot to learn about equity.

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I freaking hate junk debt buyers.

E. Normis is very smart, just like Towerrat, yet they seem to have opposing viewpoints because they think so differently.

JDB's often don't have proof of a contract at all. All they usually have is names and numbers on a spreadsheet, so they rely on the consumer not responding to their demand letters, thus creating an account stated. It also helps that they just roll over and accept default judgements.

If a consumer bothers to defend themselves and disputes and denies everything, then the JDB has to reconstruct the chain of custody back to the OC to prove their case.

At best, they have a receipt from whomever they bought the debt from that proves the bought something, but it just isn't good enough in a court of law to use against an informed consumer.

Since they don't have a rock solid case, they try the "account stated" hoping a consumer won't challenge it as having disputed the JDB's claims in writing. If that fails, they try Quantum Meriut since they have some weak proof they bought some debt, and may even print the lines from the spreadsheet with the consumers info, claiming they "deserve" to be able to collect.

The problem for the JDB with that is the spreadsheet file isn't secure and can easily be altered as any spreadsheet data can, so they would still need at least an affidavit from someone at the OC that the amount they are claiming is consistent with the OC's records from all those years ago.

They can't get that because the OC's eventually purge their records and really have no interest in the debt once they sell it, anyway.

SO, if the JDB is dumb enough to buy debt portfolios with no supporting documentation, they have accepted that risk. Violenti non fit injuria.

Without a properly documented chain of custody, all they really have is hearsay. Lack of Standing.

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