Am I being Bullied??? Long ....

[luckyinkentucky]

What is the name of your state (only U.S. law)? Kentucky

To begin with, in 2008 I started a sole proprietorship which I converted to an LLC in May of this year.

At the beginning of January '09 I started ordering parts and equipment from a local distributor, and the manager allowed me an open line of credit without running a credit check. He told me that I could pay as I go, and I thought everything would be fine.

At the end of April I had run up quite a bill between parts, supplies, and small equipment. It was right around $37000 to be exact.

One day the manager called and insisted payment in full before I could order anything else. I told him that I thought I was on a 'pay as I go' type account, and didn't think I needed to pay all of the moneys up front. He said that he would require payment in full within 30 days or he would refer my account to 'Corporate'. This is the same guy that told me to pay as I go, and I never signed a credit agreement nor did they run my credit report.

Now, after several months of talking to their corporate attorneys they have reffered the case to a collection firm by the name of Steadman & Steele. The corporate attorney told me that I would have to pay $12000 a month for 3 months or he would sue me. I couldn't possibly afford that, so I didn't agree to it knowing I had no way of paying it.

They have since fired the manager that told me to 'pay as I went', and I have no way of talking to him or getting him to testify for me.

Steadman & Steele are pressuring me to pay the full amount, and they told me today that if I didn't they were going to file Credit Fraud Charges against me, and I would be going to jail for a long time. He said they had every intention of sending me to jail unless I gave him a complete inventory list of my business before the end of the day on Thursday.

What should I do? I never signed a credit agreement, and they never took my credit information to begin with. I am on disability, and cannot afford to pay this debt all at once. Richard Steele suggested I borrow the money from someone or he would send me to jail.

What am I to do?

[cosine]

Be sure to get a recording of these illegal threats. Kentucky is a one-party recording-consent state.

[luckyinkentucky]

Originally Posted by cosine

Be sure to get a recording of these illegal threats. Kentucky is a one-party recording-consent state.

But, can he charge me with Credit Fraud or is it just a scare tactic?

[cosine]

He could. But filing criminal charges falsely is in fact criminal itself. And merely refusing to pay a debt is not fraud. Fraud would stuff such as lying and giving someone else's identity on a credit application. They would be sticking their neck WAY out if they tried to charge you with fraud.

Keep in mind that many abusive debt collectors do resort to illegal tactics like this to try to pressure people into paying. Lots of them get a thrill out of it even if they don't collect. But it is a tactic that is also very successful. In all likelihood they are just pulling the tactic on you.

[debtcollector`]

1. A collection agency cannot file criminal charges against anyone.
2. FDPCA doesn't apply -- this is a business debt.
3. If you ran up $37,000 in a few months, you were not paying as you went.

DC

[TinkerBelleLuvr]

Pay as you go means that when you get the bill, you pay the bill in its full amount.

[latigo]

It is a violation of the Federal Fair Debt Collection Practices Act (Section 807 (4)(5)for a debt collector to represent or to imply that the nonpayment of a debt will result in arrest or imprisonment. Or to threaten "to take any action that cannot legally be taken or that is not intended to be taken”.

Enforcement of the FDCPA falls within the province of the Federal Trade Commission. For information on filing a formal complaint call 1- FTC-HELP.

Other than that, I think your definition of "pay as you go" is a bit overly generous from the debtor's standpoint.

Also, you need to consult with your attorney and accountant that were engaged in setting up the LLC to make sure that you cannot be held personally liable for the debts incurred under the LLC name.

Like you didn''t make the common error of continuing business as normal with just a different face. It may shortly become very important to you personally!

[TimStudiesLaw]

The FDCPA doesn't apply to commercial debt.

Section 803(3): "The term “consumer” means any natural person obligated or allegedly obligated to pay any debt."

Section 803(5): "The term “debt” means any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment."

[cosine]

Originally Posted by TimStudiesLaw

The FDCPA doesn't apply to commercial debt.

Section 803(3): "The term “consumer” means any natural person obligated or allegedly obligated to pay any debt."

If they are threatening to sue the OP personally, then they ARE trying to collect the debt from him personally, and are expecting him to personally pay the debt. They are turning it into a personal debt at that point.

[TimStudiesLaw]

Originally Posted by cosine

If they are threatening to sue the OP personally, then they ARE trying to collect the debt from him personally, and are expecting him to personally pay the debt. They are turning it into a personal debt at that point.

A personal guarantee on a business debt does not make it a consumer debt. Don't try and argue that the product he bought was primarily for "personal, family, or household purposes" because he intended to generate income by selling it. If it looks like a duck...

[cosine]

Originally Posted by TimStudiesLaw

A personal guarantee on a business debt does not make it a consumer debt. Don't try and argue that the product he bought was primarily for "personal, family, or household purposes" because he intended to generate income by selling it. If it looks like a duck...

I will try to argue that. It is for personal purposes that he guaranteed the debt. So once they try to convert the debt to collect on the guarantee, it's personal. This is exactly the intent of the FDCPA, to protect persons from things like exposure of personal information by debt collectors that try to go beyond merely collecting a debt. Poorly written law? Very plausible since so much is. Will the courts always see it one way or the other? Certainly not.

[TimStudiesLaw]

Originally Posted by cosine

I will try to argue that. It is for personal purposes that he guaranteed the debt. So once they try to convert the debt to collect on the guarantee, it's personal. This is exactly the intent of the FDCPA, to protect persons from things like exposure of personal information by debt collectors that try to go beyond merely collecting a debt. Poorly written law? Very plausible since so much is. Will the courts always see it one way or the other? Certainly not.

I'm gonna tell you the courts disagree.

Gowing v. Royal Bank of Can., 1996 U.S. App. LEXIS 27777, 3-4 (9th Cir. 1996)

FDCPA was designed to protect consumers from illegal debt collection practices, the Act applies only to consumer debts and not to business-related loans or debts. Bloom v. I.C. Sys., Inc., 972 F.2d 1067, 1068 (9th Cir. 1992). In determining whether a debt qualifies under the Act, the transaction must be examined as a whole, "paying particular attention to 'the purpose for which the credit was extended in order to determine whether [the] transaction was primarily consumer or commercial in nature." Id. at 1068 (alteration in original) (quoting Tower v. Moss, 625 F.2d 1161, 1166 (5th Cir. 1980)). The record reveals that Gowing borrowed for the purpose of investing in a limited partnership. Although Gowing contends that he entered into the partnership for his "personal benefit," [*4] this does not transform the transaction in question into a consumer debt covered by the FDCPA. Generally, "the type of transaction which may give rise to a 'debt' as defined in the FDCPA, is the . . . type of transaction . . . involving the offer or extension of credit to a consumer. Specifically it is a transaction . . . 'primarily for household purposes.'" Zimmerman v. HBO Affiliate Group, 834 F.2d 1163, 1168 (3d Cir. 1987). Both because Royal Bank was not a "debt collector" and because the money owed it was not a "debt" under the FDCPA, Gowing has failed to raise a genuine issue of material fact with respect to whether the Bank violated the Act. n1

Holman v. West Valley Collection Servs., 60 F. Supp. 2d 935, 936-937 (D. Minn. 1999)

The plaintiff makes much of the fact that collection letters were sent to her home. Her concern is misplaced. Letters delivered to her home do not change Congress's explicit words. The plaintiff offers two cases to support her view of these letters: Dutton v. Wolhar, 809 F. Supp. 1130 (D. Del. 1992) and Creighton v. Emporia Credit Service, Inc., 981 F. Supp. 411 (E.D. Va. 1997). The cases are distinguishable. In each, the debt was personal, not commercial. Each debt fell squarely within the FDCPA's terms. Plaintiff also cites Moore v. Principal Credit Corporation, 1998 U.S. Dist. LEXIS 6917, 1998 WL 378387 (N.D. Miss. 1998). In Moore, it is unclear whether the obligation for computer programs was incurred for personal or business use. However, the Moore court concluded that even if the [*937] debt had been business related, collection calls to a home converted the debt, placing it within the FDCPA's reach. This Court is not persuaded by this reasoning. First, this bill is certainly for a business device, and second, if a communication to the debtor's home converted [**6] any commercial debt into an obligation under the FDCPA, it would be tantamount to an amendment of the clear intent of Congress.

[cosine]

I don't see how these cases match the OP's situation. There is no mention of what specific rights were violated in those. If the collector indicated that a debt was being collected against a business, to someone, then it's clearly a business debt, even if the collection action is aimed at the individual owning it. What these cases do not appear to involve is a debt collector claiming an INDIVIDUAL has the debt in a way as if it were a consumer debt. If the debt collector presents it as a consumer debt, then I argue they are effectively violating the law. I don't know that the cited cases involved that at all. So it appears the OP is on new ground unless you can find better case law (one specifically involving the collector doing what was done in the OP's case).

[TimStudiesLaw]

Originally Posted by cosine

What these cases do not appear to involve is a debt collector claiming an INDIVIDUAL has the debt in a way as if it were a consumer debt.

You are exactly correct. In these cases the collector was sued for FDCPA violations for collecting commercial debts from individuals. In both cases, the court found for the collector.

Find case law that supports your theory that when an collector sues an individual for a debt originated as commercial debt, the debt converts to an obligation covered by the FDCPA.

[cosine]

Originally Posted by TimStudiesLaw

You are exactly correct. In these cases the collector was sued for FDCPA violations for collecting commercial debts from individuals. In both cases, the court found for the collector.

As they should when that individual is obligated when the business fails to pay the debt, such as when they co-sign a loan to a business, or when certain practices pierce the veil.

Originally Posted by TimStudiesLaw

Find case law that supports your theory that when an collector sues an individual for a debt originated as commercial debt, the debt converts to an obligation covered by the FDCPA.

I'm leaving my theory as a "potential argument" the way I made it in the first place. I don't have access to do the kinds of case law searches you do. The nearest law school is over an hour long drive. What little can be done online is relatively worthless.

Case law arguments are logistic nightmares, anyway. First, you seem to be expecting that this issue (or maybe even every possible issue) has already been before the courts. Maybe this one never has. One can always stop their search when they find a case in their favor. Or against. But one case doesn't even settle the matter. Maybe there are dozens of cases that go either way, with or even without differences in the merits and particulars of those cases. I would hope a lawyer always does a completely exhaustive search of all possible cases, even if he has found some potentially matching cases. Even if he has cases in his (client's) favor, he would be prudent to also find all cases not in his favor to be fully prepared to include counter arguments why they cases may not apply in his instant case.

I cannot justify paying for the resources a lawyer can pay for, or that you can get free at a law school. I may find interesting cases one way or the other in various matters often enough. The exhaustive search I would expect a lawyer (or their legal assistants) to do is simply not practical for the rest of us. So don't expect it. Don't get your hopes up. And when relevant cases haven't even been heard by the courts before, you won't have good (as in matching the instant case well) case law to work with, and will have to use logical arguments (much as you would if there are conflicting cases).