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Marcia Gienapp

Valparaiso University law professor Marcia Gienapp is taking action against debt-buyers using deceptive practices in targeting Porter County residents.

VALPARAISO | The Consumer Financial Protection Bureau recently took action against the nation's two largest debt buyers and collectors for using deceptive tactics to collect bad debts.

The Law Clinic at Valparaiso University has been fighting the same battle locally, representing more than 100 defendants in Porter County  and resulting in dismissals of more than $250,000 worth of debt in the last four years.

The CFPB found that Encore Capital Group and Portfolio Recovery Associates bought debts that were potentially inaccurate, lacking documentation or unenforceable. They were each ordered to pay millions of dollars in consumer refunds and penalties.

Those same debt buyers file an average of 60 cases per month in Porter County, said Marcia Gienapp, VU professor of law.

The majority of it is credit card debt, and Gienapp realized there was a problem locally and began sending solicitation letters out after combing through public records. Some people already knew of VU's free law clinic and sought help. Gienapp sent letters to other defendants telling them the debt buyers "can be beaten."

The letters told the defendants they need to respond to the lawsuit, that the law clinic was there to help and they would do it for free.

"For about the last four years we've tried to get as many debtors in our office as we could," Gienapp said. "We have been extremely successful. My biggest frustration is about 90 percent of the people who are sued by debt buyers don't respond at all."

Gienapp said the debt buyers, and there are more than just the two listed by the CFPB, have a business model that relies on default judgments.

"They buy the debts for pennies on the dollar, buy massive amounts of them, and then they sue and get default judgments in 90 percent of them," she said. "They then immediately move into doing wage garnishments or freezing bank accounts."

Gienapp said when the VU law clinic appears to make them prove their case, "it throws a monkey wrench into their practice."

"We're saying, 'Prove your case,' and they can't," Gienapp said. "They don't have paper."

Gienapp said it's similar to what happened several years ago with bad mortgages, where they are sold and re-sold. Now it's credit card debt being sold and re-sold.

A lot of them are $800 lawsuits in which the debt buyers paid 85 cents to buy the debt and $160 on the filing fee.

"If they file 20 they're going to get default judgments probably on 18 of those," Gienapp said. "There's big money being made. The problem now is people don't respond to these lawsuits and I wish more of them would because they can be defended."

Gienapp said the cases are good learning experiences for her law students. 

"It teaches them the same sort of skills no matter what work they do," she said. "And private attorneys aren't doing it now because by definition these are people who probably owe money and can't afford an attorney."

Gienapp said if anyone in Porter County has been sued by a debt buyer to call the law clinic at (219) 465-7903.


Lake County reporter

Rob covers urban affairs and other matters in Crown Point, St. John, Winfield and beyond. Previously he covered Valparaiso, Hammond, Gary and East Chicago. He's also written for various magazines and pens a culture blog for The Times.