The 5 Scenarios in which Collectors have Standing to Bring Collection Lawsuits

We operate heavily in the debt-buyer litigation market. Standing (ability to show connection to an injury) is always a core defense since the debt buyers' Achilles heels are the admissibility of records alleging the assignments of individual accounts.

We cite below the five core ways that creditors and debt buyers have standing to bring a collection lawsuit. This list is taken directly from a superb collection-action treatise[1]:

  1. The collector is the originating creditor and has never assigned the account, even to a securitization trust.
  2. The collector is a bank or other entity that is usually an originating creditor, but in this case is not the originating creditor, and instead has merged with or purchased the originating creditor or its portfolio of loans.
  3. The collector is the originating creditor but has sold the receivables to a securitization trust and is either servicing the account or purchased the receivables back pursuant to a recourse agreement.
  4. The collector is a debt-collection agency that has been assigned the debt solely for collection purposes, and the debt-collection agency is not the real owner of the debt. This is described as legal title—but not equitable title—being transferred to the collector.
  5. The collector is a debt buyer who either purchased the debt from the originating creditor or from another debt buyer. In this case, both legal and equitable titles have been transferred.

The first three scenarios are considered actions brought by the creditors—although challenges to evidence of transfer between banks and trusts should be raised. These five scenarios will be examined more closely in future blog posts. Attention should also be given to any collection agency 1) that is not licensed by the Department of Consumer Affairs (or similar regulating body) or 2) that is not registered to do business in your state as an out-of-state corporate entity.

Contact us if you need help defending a collection lawsuit or a garnishment/bank freeze.



[1] Jonathan Sheldon, Carolyn L. Carter, Chi Chi Wu, Collection Actions, Collector as Real Party in Interest, 4.3.1 at 68 [3rd ed 2014].

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