Application of the hearsay evidence rule in debt collection

‘Hearsay’, as we know, is exactly what it means; what we hear another person say or what someone from another third party hears. These terms are used primarily in legal language in court hearings of evidence and testimony provided by witnesses other than the actual deponent, statements that are cross-examined by attorneys and prosecutors. In such situations, ‘hearsay evidence’ is used to denote an out-of-court statement made by a person or persons that is brought into court proceedings to prove the factual truth of a matter at issue.

The hearsay evidence rule dictates that not all hearsay evidence is admissible as evidence in a court case or legal proceeding, unless a specific exception applies. This is simply because hearsay applies to facts or statements made by people who are actually present in court or under oath to verify the truth of the statements.

In matters of debt recovery or collection, as we know, there are several cases in which recovery proceedings are handled or resolved through legal proceedings in a court of law. However, this is an area where the rule of hearsay evidence applies in that collection agencies sometimes use the resources at their disposal to recover amounts owed.

Sometimes it happens that collection agencies or “debt buyers” are not in possession of the documents that prove that the debtor owes money to the creditor, such as the original loan or contract document. In such cases, agencies take advantage of a debtor’s ignorance of collection laws to get default judgments passed so they can legally access the debtor’s personal information, such as bank accounts, pay stubs, and other personal details. If they manage to do so, the debtor’s assets may be frozen and inaccessible unless the amounts owed are repaid.

However, in cases where such legal mandates are not possible, creditors and collection agencies try to use statements from friends and associates to make statements under oath. The hearsay evidence rule means that no witness may give oral or written statements outside of court to provide evidence in a recovery matter.

We may well wonder why then collection agencies and creditors resort to such activities. The truth is, collection agencies deal with thousands of delinquent accounts and have virtually no real idea of ​​the money owed unless the creditor provides them with the details. In the absence of original documents or statements, it is up to the collection agency to prove that the debtor owes the money to the creditor.

Every claim pursued by the debt collection agency is an essential factor in the debt buyer’s damages; for every dollar recovered your commissions are paid in cents. To further their claims, they often submit old credit card statements or loan documents to indicate how much money the debtor owes.

The Hearsay Evidence Rules apply here. Billing statements are not admissible in court because they are considered material provided by an out-of-court witness to prove the truth in a controversial matter. Therefore, monthly credit card or loan statements are inadmissible evidence, as they are nothing more than hearsay.

Of course, it is ethical to pay on time; However, if financial constraints occur, it is best to re-examine and agree to pay off a reduced debt on terms that make payment easier. However, many collection agencies have been known to twist their arms and use intimidation practices to recover debts, which is strictly illegal and not in accordance with the Fair Debt Collection Practices Act.