Advertisement

Beware of law firms' letters saying you're being sued for outstanding debt

Beware of law firms' letters saying you're being sued for outstanding debt
Many law firms scour legal dockets for debt-related lawsuits and send out letters to people who may (or may not) be involved in hopes of ginning up some business. (Getty Images)

The mail is from a San Diego law firm, and right there in the envelope’s address window it says, ominously, “You may have been sued.”

The letter within states that “county records indicate you (or someone with your name) have been sued recently.”

Advertisement

It says that if you haven’t received legal papers, it may be because the plaintiff, probably a debt collector, didn’t bother sending a notice in hopes you’ll default in the case, making it possible for the collector to garnish your wages or place a lien on your property.

The law firm, Hyde & Swigart, wants to help. It says it will review your case for free. If you want the firm to negotiate on your behalf, it will cost at least $300. If you want to go to court, it will cost $850 or 10% of the debt, whichever is greater.

OK, there are a number of things going on here.

Most prominently, this is an example of a practice used by numerous law firms — checking legal dockets for debt-related lawsuits and sending letters to people who may (or may not) be involved in hopes of ginning up some business.

It’s also a reminder that consumers have rights when it comes to debt collection, and it’s important to know them before you agree to pay a law firm for assistance.

Finally, it should serve as a wake-up call to many people, especially seniors, to watch out for cases of mistaken identity.

The Hyde & Swigart letter was shared with me by Hollywood resident Mark Preston, 70, who serves as caretaker for a 92-year-old World War II veteran named Robert Nielsen.

Preston said Nielsen didn’t know what to make of the letter when it arrived the other day but was understandably concerned about the possibility he was being sued by debt collectors.

By law, you have to be officially served for litigation to proceed.

“We’ve received no notice of a lawsuit,” Preston told me. “Ten years ago, a debt collector contacted Bob because of $35 related to a book from Reader’s Digest, but then they stopped bothering him.”

Preston asked if I thought this new letter was a scam.

It’s not. But it’s not the most savory legal practice.

Not to put too fine a point on it, we’re talking about a form of ambulance chasing, although Hyde & Swigart at least is polite about it.

“If we have contacted you in error, or if you are currently represented by counsel in this matter, please accept our apologies and ignore this letter,” they say.

Advertisement

But by this time, the damage is done. The letter recipient may be freaking out about the possibility of a lawsuit and probably will have to do some legwork to make sure they’re in the clear.

And that’s my main beef. There’s nothing wrong with trying to generate business leads based on public records. But would it kill the companies that do it to perform just a little due diligence before bugging people?

A quick check on my part determined that a Robert Nielsen is indeed being sued by the debt collector JHPDE Finance over a few thousand bucks in outstanding Citi credit card bills.

But the lawsuit says this Robert Nielsen lives in Encino. The Nielsen who received the Hyde & Swigart letter has lived in Hollywood for almost 30 years.

Moreover, Preston told me his Nielsen has never been a Citi customer and doesn’t use credit cards.

All that took me about five minutes to ascertain.

Crosby Connolly, a lawyer with Hyde & Swigart, said letters such as the ones his firm sends out could be seen as fishing for clients, but they actually perform a helpful service.

“I think a lot of consumers are happy when they get a letter that tips them off about a lawsuit they didn’t know about,” he said.

Connolly also said his firm’s letter prominently says “advertisement” at the top, in accordance with California Bar Assn. marketing rules, and has been “vetted by ethics attorneys.”

But just because something is legally legit doesn’t make it OK. I pointed out to Connolly the ease with which I determined that the Robert Nielsen his firm said “may have been sued” isn’t in fact the Robert Nielsen being sued.

Connolly said it’s been his experience that people — particularly those with outstanding debt — change addresses frequently so you can’t go by what’s in a lawsuit.

And obviously it would be too costly from a lead-generation standpoint to call everyone in the Southland named Robert Nielsen to see if they’re the one named in the suit. Much easier and cheaper to send out letters and see what happens.

Or, and I’m just spitballing here, maybe law firms shouldn’t rely on dubious letters such as these to chase down clients.

The California Bar Assn. prohibits any solicitation that is “false, deceptive or which tends to confuse, deceive or mislead the public.” I’m not saying that’s what Hyde & Swigart, or other law firms, are doing.

But when I’m getting contacted by a letter recipient asking if it’s a scam, I’d say it’s possible the “confuse, deceive or mislead” test isn’t being passed.

Before anyone signs on with a debt-collection lawyer, make sure you know the legal landscape.

For example, each state has a statute of limitations for most consumer debt. In California, that limit is four years.

What this means is that if you're sued by a collector after four years, you can have the case thrown out of court. Your credit file will still show the debt as unpaid until seven years have passed, which can affect your interest rates.

Also, you’re protected by the federal Fair Debt Collection Practices Act, which restricts when and how debt collectors can contact you.

They can’t call early in the morning or late at night. They can’t bother you at work if you tell them to stop.

If you demand written proof of any money you allegedly owe, they have to send you documentation.

Above all, a debt collector can't threaten or harass you.

I told Preston that Nielsen can rest easy: That letter isn’t a scam but nobody’s suing him.

As for that other Robert Nielsen in Encino — heads up, dude.

Have you considered Hyde & Swigart? They’re looking for clients.

Advertisement
Advertisement