Massive School of Debt Collection Defense

[Massive]

For the second time Citibank has sued a debtor on a credit card debt and the result was a dismissal. Trial was scheduled for today and they filed a voluntary dismissal on Friday. On the initial suit the "law firm" failed to show at pretrial conference and the judge dismissed without prejudice. This time "Citibank" law firm dismissed on Friday without prejudice. Judge told debtor if they try to file suit again he would note that they had already filed twice on the same debt. Judge should have dismissed with prejudice. Securitization defense really gets Law Firms attention.

[BoscoMama]

WTG!!!!!

[Pumaz]

Congrats

[Chapel Hill]

If that consumer had filed a cross complaint Citibank could not have gotten off without writing a check for at least $4,500. After writing that first check Citibank would have also found prey with less ability.

[Massive]

So true indeed.

[willingtocope]

So, if I understand this correctly...you're basically arguing that the OC no longer owns the debt because they sold it to a group of "packaged debt investors (like the mortgage buyers)" and therfore have no right to sue.

Okay...maybe...but your OP doesn't exactly say that. The first rent-a-lawyer didn't show up, and the second dismissed of their own accord. I don't see the connection.

[Massive]

So, if I understand this correctly...you're basically arguing that the OC no longer owns the debt because they sold it to a group of "packaged debt investors (like the mortgage buyers)" and therfore have no right to sue.

Okay...maybe...but your OP doesn't exactly say that. The first rent-a-lawyer didn't show up, and the second dismissed of their own accord. I don't see the connection.

Same debtor, same law firm and according to the rules it will have to be changed to dismissed with prejudice. Adjudicated on the merits due to a second dismissal. Securitization is just one of the elements of defense in regards to the Massive School of Debt Collection Defense. Thing is, you can't string along somebody and dismiss right before trial and think you will be entitled to a third opportunity. Abuse of the legal process for one thing. Any other attempt will be met with a countersuit seeking trebled damages.

[Recovering Attorney]

Not a countersuit so much as asking the court for sanctions

[willingtocope]

Same debtor, same law firm and according to the rules it will have to be changed to dismissed with prejudice. Adjudicated on the merits due to a second dismissal.

Understood.

But, does your "Securitization" agrument imply they no longer own the debt....and therefore have no grounds for a suit. (Seems like an incredibuly dumb thing for all their high priced internal legal department to allow to happen).

[Guest usctrojanalum]

This was not adjudicated on the merits. You should have really pushed for that in this case.

[cinnamngrl]

I would love to hear more about Securitization

[TBirdLady42]

But, does your "Securitization" agrument imply they no longer own the debt....and therefore have no grounds for a suit. (Seems like an incredibuly dumb thing for all their high priced internal legal department to allow to happen).

Has any incredibly dumb thing for attorneys to do ever stopped them or the banksters, especially when it comes to greed and profit???

[Massive]

Understood.

But, does your "Securitization" agrument imply they no longer own the debt....and therefore have no grounds for a suit. (Seems like an incredibuly dumb thing for all their high priced internal legal department to allow to happen).

My interpretation is they receive an enrichment when they SELL the receivables to the trusts which then solicit investors on the open market. It's been a successful affirmative defense in each case.

[Recovering Attorney]

you have to allege this on information and belief, do you not? What is your proof?

[Massive]

Noneother than Citibank itself in its prospectus.

[willingtocope]

Noneother than Citibank itself in its prospectus.

Can you cite us some caselaw on the results of this defense?

[FL4answer58]

you have to allege this on information and belief, do you not? What is your proof?

So in affect Massive is pleading; a statement based on information and belief [that] lacks personal knowledge as to the statement but has a belief that the information is correct. In effect, the person is saying, "I am only stating [swearing only to facts] what I have been told, and I believe it to be true."

Would this be the same in a fact-pleading jurisdiction? Would a decision be consistent with long standing law requiring the pleading of facts with particularity?

What would be the required proof - an affidavit from Massive on 'information and belief' or must it be from an 'expert' to testify as such?

It seems that it would be difficult and that the Court will hold that the statements were not pled with sufficient particularity to permit judicial review or the formulation of an answer and potential affirmative defenses -without an affidavit at some point from someone who has first hand knowledge.

Edited October 9, 2010 by FL4answer58

[Massive]

you have to allege this on information and belief, do you not? What is your proof?

Show me the Plaintiff's proof that they own the debt. Junk debt buyers nor original creditors have been able to prove they own the debt. I think it's bogus to be sued by somebody (twice) and they voluntarily dismiss the Friday before a Monday Bench trial, that's abuse of the legal process if you ask me. There are thousands of default judgments across the country where junk debt buyers AND original creditors CAN'T prove they own the debt, yet have judgments because they weren't challenged. There should be a big jail full of "Esquires" if we really had accountability in the justice system.

[FL4answer58]

Massive are you in notice pleading or fact pleading state -

Edited October 9, 2010 by FL4answer58

[creditidol]

Since reading your post this week i have been doing some legal thinking...

Questions to ask in the Discovery should lean towards this, it seems the defendant will have to do some coaching of the judge so he is not lost. But asking a question such as:

What kind of trust is the alleged debt part of? (there are two)

How many investors were receiving equity payments apart of this trust?

Has the trustee or will the trustee be apart of this lawsuit?

Have all investors signed off on this lawsuit?

You can really back these jokers into a corner, now put in some IRS issues and it will be a slam dunk;

Has this debt been used to offset? If so by who?

Has the IRS recorded this debt as a loss to the creditor? If so who is creditor?

It is against the law to take a loss and then get the funds and not report them on taxes which they all do!!

Securitization is the packaging of a chosen group of loans with a suitable level of credit improvement, and the redeployment of these packages to investors. Investors purchase the repackaged assets in the form of securities or loans, which are secured on the original pool and its connected income stream. Securitization thus changes illiquid assets into liquid ones.

A huge bulk of credit card securitization has been accomplished using two dissimilar vehicles - the individual trust and the master trust. The individual formation is a solitary pool of receivables sold to a trust and used for a single security. When the issuer plans to give out another security, it must assign a new group of card accounts and put up for sale the receivables in those accounts to a different trust.

The master trust constitution lets the issuer generate numerous securities from the same pool of receivables. The master trust acts as a pool of receivables to which receivables are added from time to time to give out more securities. The master trust allows the issuer-improved flexibility.

One of the exceptional characteristics of credit card securitization is the small cycle of the receivable (4-5 months). The standard amortization arrangement used in automobile loans, home loans and the like does not apply in case of credit cards. If the collections from the borrowers were to be passed straight to the investors, the investors would get paid in around 5-8 months.

This is neither advantageous nor cost-effective. Thus, an exclusive structure is worked out to give a longer life to the security compared to the normal settlement time of a credit card receivable. The technique involves dividing the receivables into finance costs and principal. While the finance fees are employed for paying the coupon on the security, the main settlement is dealt with in any of the two ways:

A. Revolving method: Under this process, the major repayment every month is given to the issuer for purchasing new receivables.

B. Controlled repayment: Under this construction, the main repayment is divided into controlled pre-fixed amortization and is utilized to retire the security over a set period, say a year. The surplus of main collection in any month is reinvested in purchasing new receivables with which the shortfall, in any month, is covered.

Another important characteristic of credit card securitization is the lack of asset support. Credit card receivables proffer no security in the possibility of cardholder non-payment. As a consequence, recoveries are restricted.

The main "players" in the cycle of securitization are:

Originator - This is the entity that either creates Receivables in the normal route of its business, or buys and collects portfolios of Receivables. Its counsel works intimately with counsel to the Underwriter/Placement Agent and the Rating Agencies in arranging the deal and organizing documents.

Issuer - It is the exclusive purpose entity, generally an owner trust, formed pursuant to a Trust Agreement between the Originator and the Trustee. It gives out the Securities and prevents taxation at the entity level.

Trustees - It is generally a bank or other entity sanctioned to act in such ability. The Trustee, selected pursuant to a Trust Agreement, holds the Receivables, gets payments on the Receivables and makes payments to the Security holders.

Investors - They are the final buyers of the Securities - usually banks, insurance companies, retirement funds and other "competent investors." In a number of cases, the Securities are bought in a straight line from the Issuer, but more frequently the Securities are issued to the Originator or Intermediate SPE as compensation for the Receivables and then sold to the Investors, or in the case of a guarantee, to the Underwriters.

[Chapel Hill]

Not a countersuit so much as asking the court for sanctions

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To hell with sanctions. That isn't real money. Cross complaint. Gin up as much discovery as is reasonable. File motions after motion as opportunity presents itself. Every motion requires a response and or an appearance. Time spent fighting a motion are billable hours that could have gone to a case where there is an actual possibility of cashflow. Two motion losses and enough discovery motivates the other side to give up the ghost. A cross action means that can't cut and run without writing a friggin check.

Filing a cross action stops the abuse of the legal system. I see so many defaults when as Massive says these bastards can't prove their case at trial. California has 58 counties. I don't do rural but in the metro areas I've never seen a collection case go to trial that was properly defended and the creditor won. The most likely creditor to win is Chase and I just don't think they have the resources in place to win these cases at trial.

Who spends $26,000 to collect $18,500? Chase didnt get to be JP Morgan Chase Bank doing that kind of state of cali budget math.

[willingtocope]

Okay, so without actual case law to reference, I'm going to put this down to another "...don't pay income tax because the IRS is not spelled out in the constitution..." kind of argument. Use it at your peril...

[nobk4me]

Okay, so without actual case law to reference, I'm going to put this down to another "...don't pay income tax because the IRS is not spelled out in the constitution..." kind of argument. Use it at your peril...

It's too new of an issue for there to be much case law. Plus, think of the numbers game here: most defendants in debt collection cases are no-shows and the plaintiff gets a default judgment. Very few people fight back against creditors, and very few of those who do defend are aware of the securitization issue and are going to plead it properly. Plus, securitization is a complex issue, hard for most folks to understand the nuances of it.

So it's not a surprise if there is little or no case law yet. I think the mortgage cases, where securitization is also a huge factor (produce the note strategy), will be the first area for case law to appear.

[willingtocope]

Okay...so what you got for pending cases? Any suits where this has been used as a defense and the court is considering the argument?

[Chapel Hill]

Okay...so what you got for pending cases? Any suits where this has been used as a defense and the court is considering the argument?

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That you need case law is fine for you. I take Massive at his word and besides his representations are consistent with the facts as I've seen them play out in the great state of California. Specifically these collect cases do not have admissible evidence presented. When challenged competently these lawyers fold. The only time they prevail is when the jurist hearing the case commits reverseable error and the defendant lacks the willingness or ability to hold that jurist to task.

As Massive would say, it's simple. These collection cases in California never have as their basis admissible evidence. No evidence means the case can only be decided in favor of the cross-plaintiff provided of course that individual had the balls and insight to ask the trial court for leave to file a cross-complaint.