Being Sued for a Debt? Just Follow These 3 Steps:

STEP 1: Enter your information below.
STEP 2: Talk with one of our attorneys to review your options.
STEP 3: Commit to a plan of attack.

If a debt collector like LVNV Funding sues you for money, you may be able to win the case. You just need to be willing to stand up for yourself and remember some simple advice.

In a story heard on This American Life, reporter Jake Halpern interviews a Georgia couple who got sued by LVNV Funding for an old credit card debt. They’d never heard of LVNV, so they decided to go to court and try to make some sense of the lawsuit. LVNV told them the debt had originated from American Express; though the couple didn’t deny the fact that they’d fallen behind on that account, they had no idea how LVNV Funding fit into the picture.

Standing before the judge, they demanded that the lawyer for LVNV show evidence of their ownership of the debt. In response, LVNV’s attorneys (who had previously not been particularly helpful to them) dropped the case.

The couple needed to use two magic words to make LVNV leave them alone.

prove it

Who Is LVNV Funding?

According to the company’s website, LVNV Funding LLC, (“LVNV”) buys past due debts from banks and finance companies. LVNV then hires Resurgent Capital Services LP (Resurgent) to manage that debt. Resurgent may try to collect the debt from people, but most often the company will hire collection agencies to handle the day-to-day collection activities.

LVNV is a wholly owned subsidiary of Sherman Originator LLC. Sherman Originator LLC, in turn, is owned by Sherman Financial Group LLC.

Resurgent is owned by Alegis Group LLC and Sherman Financial Group, LLC. Alegis Group LLC is also a subsidiary of Sherman Financial Group, LLC.

According to court papers filed in a Maryland case in 2011, Sherman Financial Group LLC is a company that buys and services portfolios of consumer debt in default that it acquires at a large discount, and in originating and servicing credit card receivables. The company buys, services, resells and secures consumer debt that includes credit card receivables, telecommunications receivables, student loans, mortgage deficiencies, and all types of bankruptcy debt. SFG consists of numerous asset holding and operating entities throughout the U.S. and Mexico City, Mexico. As of December 31, 2006, SFG reported total assets of $1.204 billion and net income of $347 million.

Sherman Financial Group, LLC is owned by Sherman Capital, LLC.

If you’re interested, here is a corporate disclosure statement in a class action filed against Sherman.

This setup is intentionally confusing, with the organizations intertwined in such a way as to keep people from understanding who funds the purchase of such large amounts of consumer debt.

Why Can’t LVNV Prove the Case?

When you make the collection company prove the case, that means you want the other side to provide you with the following:

  • you signed the application
  • the entity suing you purchased the right to collect on the debt
  • the balance claimed as being due is calculated properly
  • the loan has not been rendered unenforceable due to the expiration of the statute of limitations

For companies such as LVNV Funding, meeting this minimal standard should be easy – after all, the company buys old debt for a living. But the company’s business model relies on buying debts for as little as possible, thereby enabling it to maximize profits on collection. To get rock bottom pricing on the accounts it purchases, LVNV gets the bare minimum amount of information needed and in the most cost-effective format.

That format takes the shape of a simple computer file containing the name and address of the cardholder, the original account number, the balance due and the last date of use. LVNV has the option of buying additional documentation and information, but it comes at a steep price.

Spending the extra money may make business sense on a single debt, but not when the company is buying thousands of accounts at once.

Being Sued for a Debt? Just Follow These 3 Steps:

STEP 1: Enter your information below.
STEP 2: Talk with one of our attorneys to review your options.
STEP 3: Commit to a plan of attack.

LVNV Doesn’t Care If It Loses

Remember that Sherman Capital LLC made $347 million in 2006, the last year for which I’ve been able to locate documents. LVNV, which is just one of many companies owned by Sherman Capital, files thousands of lawsuits each year. Even if the company paid $0.50 for every $1.00 of debt, it would need to win only half of those cases in order to break even.

The reality of the debt buyer’s business model, however, is far more profitable. In fact, the US Federal Trade Commission estimates that companies such as LVNV win nearly ninety percent of debt collection cases because people don’t respond to the lawsuit. This failure to respond, called default, lets LVNV and other debt buyers get a court judgment without providing any proof of the debt.

That judgment allows LVNV to freeze bank accounts, take part of a consumer’s paycheck through wage garnishment and, in some states, put a lien on real estate and automobiles. LVNV’s lawyers can also collect legal fees, court costs and interest on the judgment, which makes this a profitable business model.

When someone fights the lawsuit, LVNV can spend the time and money to fight back or use those resources to pursue default judgments. In many cases, it makes more economic sense for the company to drop the case because it can make more money chasing people who don’t take action to protect themselves.

Defend the Lawsuit on Your Own, Or Hire a Lawyer?

You may not need to hire a lawyer to represent you in court against a debt buyer, but it’s a good idea to speak with one before making a decision.

When the debt is small relative to the cost of representation, bringing an attorney with you may be overkill. After all, it doesn’t make financial sense to spend $2,500 for a lawyer to defend against a $3,500 lawsuit. If you’re struggling with a number of past due debts then it may make sense to consider other options such as bankruptcy as a way to resolve all your financial problems at once. These factors will help you decide on your best course of action, and the best way to achieve your long-term financial goals.

Don’t Lose Your Rights Due to Inaction

You get only a short time to take action once you receive the lawsuit papers. Miss your window of opportunity and the debt collector will get an automatic judgment against you for the full amount of the debt.

Talk with a lawyer, decide on your best course of action, and move forward from there. You get only one chance, so be sure to make the most of it.