AcknowledgmentThanks to poor record keeping, incompetence, enormous legal fees and

institutionalized banking fraud, we have a great opportunity to force corrupt banking practices out of our economic system. This book is dedicated to those of us who are doing it. I hope we can restore an honest banking system in this century.

You will not find this information in law school and your attorney may not be willing to follow the material in this book. This is the most powerful information you will find published on the subject of defending yourself against creditors and debt collectors. I have personally worked thousands of collection disputes and because of my simple letter writing techniques, only the smallest number of them have resulted in a lawsuit. As of this printing, none of our subscribers have ever lost a lawsuit or dispute with a collector.

CONTENTSACKNOWLEDGMENT 3INTRODUCTION 6PURGING DEBTS 10 Creditors 11 Debt Collectors 16 Defending against a debt collector’s lawsuit 32 Mortgages 53

Defending against a foreclosure or credit card lawsuit 70 Guaranteed Student Loans 81

Happy Endings 82EFFECTIVE LETTER WRITING 85

The Analogy 86Restoring Your Credit History 87

FEDERAL RESERVE REGULATIONS 93DISCLOSURE FROM THE FEDERAL RESERVE BOARD 122CREDIT FILE SEGREGATION 127APPENDIX A 131 Fair Debt Collection Practices Act 131APPENDIX B 143 Fair Credit Reporting Act 143APPENDIX C 184 Requesting Records 184APPENDIX D 207 Social Security Scheme 207

INTRODUCTION

The focus of this book is to demonstrate the most effective methods we’ve found in the course of purging debts using the Fair Debt Collection Practice Act. It will also explain the process of restoring your credit history using the Fair Credit Reporting Act and file segregation techniques, along with the most effective methods of protecting your property from judgment liens and administrative attachments. The information in this book has enabled our subscribers to stop debt collectors from collecting millions of dollars since 1995 and it can save you thousands of dollars in time and legal fees.

Every effort is made to add clarity to the points discussed. Once the legal concepts are understood, the process of purging debts and restoring credit should be easily understood. This is information that we were not taught in school but should have been. The government expects us to abide by the law, but it doesn’t incorporate law study into government-sponsored curriculums.

This publication is not intended to give or supplement legal advice. I am not an attorney. This information is from my own personal experience and the successes I have enjoyed through my own research and process of trial and error. If you believe you need legal advice or have a question about your rights, you should consult with a licensed professional.

My Story

In 1994, I was a good candidate for bankruptcy. I just didn’t like the idea of allowing some government bureaucrat to scrutinize every aspect of my life. I was also ashamed to engage in conversations related to my financial problems with my family or friends. I felt like a failure and helpless because I couldn’t pay my credit card bills. I decided to take a proactive approach to getting myself out of this situation. At the next opportunity to respond to a collection notice, I decided that delay would be a good move. I requested a validation of the collection using a letter I had written based on the Fair Debt Collection Practices Act.

Five days later, I got a letter from the collection attorney apologizing for the

and that I could contact the original creditor with any questions. I telephoned the creditor to find out what happened and was told I didn’t owe anything (it was a $1,500 debt). I was told that they were merely complying with the Fair Debt Collection Practices and Fair Credit Reporting Acts. The very next day I visited my local law library to read up on these two laws. I discovered that because I requested a validation, and because the collector never provided me any services or products, that I had no obligation to pay the collector anything. I guess they would rather pursue a collection against someone else who didn’t appear know how to defend himself.

I wasn’t satisfied because it just didn’t seem right. “What if everyone did this?” I thought. So I went a little further with the help of the law librarian and she showed me where to find case law about contracts. I discovered that the assignment of a

debt without the consent of the debtor is null and void. I also learned that most debt collectors report these accounts as a loss to the government and claim deductions on their tax returns, and some even make an insurance claim for their purported losses. In some cases, the new collector purchases these debts from the original creditor at a discount. I quickly began to realize that the collector actually make more money when they don’t collect’

Needless to say, I left that library with my confidence restored and some hope to see light at the end of the tunnel. In the proceeding months, I received four more collection notices from different collectors, similar to the first. I responded to each with a similar request for validation. They each discontinued contacting me except one. The last one needed a cease further communication notice from me before they decided I wasn’t worth it.

In the months that followed, a CPA taught me that banks in the Federal Reserve System (or any banking system for that matter) are prohibited from loaning anything under generally accepted accounting principles (GAAP) and Federal Reserve regulations. In order to accept a credit application or promissory note, they must convert the customer’s note into a check and give it back to him. Only they can do this because the banks have monopolized the market on negotiable instruments. They cannot loan out the money of other depositors because of the “matching” principle under GAAP and they cannot loan out their own assets because of Federal Reserve regulations. I found that if you compare the accounting ledgers for a regular demand deposit (checking) account with those involved when a customer opens line of credit or when a bank takes possession of a promissory note, that they are identical. The customer or account holder is the creditor of the bank in each case.

This means that the bank that issued your mortgage can be forced to cancel (forgive) it for failing to disclose this fact in the note or mortgage agreement. It’s considered a failure to disclose a material aspect of the arrangement and it’s a violation of the Truth and Lending Law. In any case, I didn’t have a mortgage, just a list of unsecured credit card accounts totaling about $20,000. After several months, I managed to get out from under every single debt. The downside to this was that my credit history was toast.

After talking with a mortgage broker friend of mine, I learned a few secrets known only within the banking and mortgage system. It was possible and legal for me ‘to create a new credit history, with no tax number, and walk away free and clear from my old andderogatory credit history. I did just that and six months later, credit card companies were soliciting me for my business. There are other ways to correcting and restoring your credit history, but I was working diligently so I didn’t wait around for the system.

I sought the help of an offshore asset protection firm. I purchased an offshore trust. complete with private bank account and credit/debit ATM card. It was outside of the credit reporting system and the best part was that it was anonymous and convenient. While it didn’t help restore my credit history, it gave me a reprieve from the abusive credit system of this country, and the taste of a greater degree of freedom outside our borders. I use this account for anything I want; moving money, ATM cash advances, car rentals, groceries, you name it. The best part is that no purchase appears in my name, even though my name is on the face of the card in case I need to use it at a bank teller window.

During the same period of time, while I was recovering from this evil debt system, I learned a really queer sounding concept. I say queer because at first, I was shocked, then skeptical and then angry. My skepticism lead to more research and more discoveries and more truth. You will get any attorney to agree to the following four facts:

1. Signing a federal or state income tax return requires the signer to waive certain rights.

2. The government cannot compel anyone to waive his rights.

3. The government cannot compel anyone to give testimony under penalty of perjury by signing a federal or state income tax return. My due diligence got these three facts admitted by the IRS in a recent Texas tax court proceeding.

4. No law requires anyone to apply for, use or disclose a social security number as a condition of working, banking or anything. My due diligence on this resulted in a letter from my congressman agreeing with this and another IRS admission in tax court.

5. The average citizen pays his federal income tax at the point of sale, when he buys gasoline or other fuel, pays his phone bill, buys alcohol, pays his utilities, buys cigarettes, etc. The income tax is an excise tax and it is not imposed upon money for labor.

I learned that by re-organizing my business and personal income, I could reduce my personal income and liabilities down to a point where I received less than $18,000 per year and had less than this in living expenses. I did this mostly by first understanding how the levy statute of the federal income tax code operates. Once I learned that, I was able to arrange my business practices to legally reduce my taxable income. Now I dOn’t file any tax returns, and do not pay any tax on my labor. I no longer receive any W-2 or 1099 in my name. I do continue to pay federal, state, county and city sales taxes where I am liable for such things as fuel, alcohol, licensing, etc.

I managed to negotiate renting a house for $1 ,000 a month with no credit check and no social security number. I now enjoy every benefit from the banking system, including insurance benefits and a good credit history but never use a social security number for

anything. That wasn’t enough, after all, I have a college education and I couldn’t let that go to waste. I started writing detailed books about these little known secrets about the credit and tax system. In fact, I began traveling around the country giving lectures on this subject and working with people to help them accomplish the same things I had, increased income, more time with their families, less debt, more privacy, less government regulation, etc.

In the last six years, I have personally worked with literally thousands of people around the country to help them duplicate my results without all the trial and error work that it took me. The positive changes in my life and in those with whom I’ve worked have been innumerable. I could not have imagined these things were possible before I began my research and changed my lifestyle and perspective about the economy, government and banking system. Now I think differently about the great possibflities a little information can bring anyone if they just ask for it.

I traded the publishing rights for my books for a position as General Manager with Due Process and together we have pushed back the level of abuse and deceit relied upon by collectors, credit bureaus and the government in the course of unjustly taking away our rights, privacy and property. You can do the same and you don’t need to re-invent the wheel. We’ve already completed the trial and error phase of the information and have made it available t9 everyone.

This is the short story of how I successfully forced debt collectors to forgive my credit card debt. I want to give you a free copy of one of the correspondence I used. I call it the “Million Dollar Letter” because since 1994, Uve used it to help thousands of people to legally stop millions of dollars from being collected by their creditors. Would you like to learn the “martial arts” of stopping debt collectors? This is the most effective technique ever used in stopping debt collectors! Most attorneys don’t even know how this works, but it’s so simple, you don’t need an attorney to succeed in protecting yourself and restoring your peace of mind.

If your credit card bills or other unsecured debts have been assigned to debt collectors, or if you have no incentive to pay your credit cards, student loans or other unsecured debts, this information will set you free. It will protect you from lawsuits and abusive collections when you simply cannot pay or when the collector engages in abusive communications with you.

Purging Debts

This information is very powerful and with it, you will be able to legally rid yourself of any unsecured debt without a bankruptcy or settlement and with very few exceptions (less than one percent), without being sued. We do not encourage anyone to learn this process and then purposely incur huge debts only to get out of paying at a later time. This material is focused on resolving abusive collections, where there is no incentive to pay. We dont make judgments about whether or not you were responsible in managing your money or credit, that is your concern only: however, you should only need to apply this information one time in your life, to get a second chance without all the problems normally associated with not paying debts.

When there is no incentive to pay, and when you are unwilling or not eligible for bankruptcy or debt consolidation and can tolerate a diminished credit rating for about one year, this letter writing process will effectively relieve you from the burden of paying your unsecured credit card debts. It will not work for secured accounts (where there is collateral securing the account).

Before explaining how this works, I want to review the use of some important terms and basic principles by which the banking system operates today. Banks, under the regulation of the Federal Reserve Board, do not loan nor risk any assets. Banking policy and basic accounting principles prohibit banks from lending any of their own assets or the deposits of other depositors. It is the customer who creates currency and funds the line of credit to himself. The customer is the depositor (creditor). The banks conceal this fact by carrying out what appears to be a loan approval process for each customer. There is no loan from the bank. The banks have monopolized the market on negotiable instruments and are the only institutions that facilitate the creation of currency. You cannot sell your promissory note to the grocery store for groceries, but you can sell it to the bank in exchange for what the bank calls a “line of credit” or a “check.”

When, what we’ve been told to be, a “creditor” extends a “loan” or “credit” to someone, an obligation of debt is created with a “debtor,” and the terms of that obligation are governed by a written contract. The contract is usually an application for credit and then the lender’s (bank’s) policy that constitute the terms of that credit agreement The “consideration” that makes the agreement binding is when either party receives or become eligible for a benefit, or incurs a detriment (loss) such as relying on the other

party to perform under the agreement. The credit agreement becomes legal and binding when the borrower acquires the rights to use the money or property of the creditor. The medium of exchange does not matter. Contractual obligations can be created using Federal Reserve Notes (today’s dollar bill), precious metals or any other object having value, intrinsic or not.

If the debtor defaults on the payments to the creditor, or otherwise fails to comply with the credit agreement, he will have breached that agreement and after

following a few procedural matters, the creditor will have a right to sue for damages resulting from that breach. The creditor may retain an attorney to do this, and it changes nothing about his standing. or right to sue. However, if the creditor assigns, sells or transfer the rights to sue or collect to a third party, without the consent of the debtor, it will amount to a relinquishment of that right to sue or recover from damages.

The third party assignee usually has no agreement with the debtor, but in order to recover the loss that it chose to incur, it would need the debtor’s consent. This is usually obtained by deceit, by tricking the debtor into accepting a new obligation with the collector. This is easily accomplished by sending the debtor a bill. When the debtor pays it, believing he’s required, a new obligation is then created. Many collectors claim they have the right to do this because of the assignment clause in the contract, but this clause never names the new assignee so it is still not valid without a debtor’s consent.

There are many affirmative defenses when this happens to a debtor, and I have never known as subscriber to lose a case when stopping a debt collector involved in this type of practice. Due Process has helped stop the collection of over $1 ,000.000 in unsecured debt by using the information in this book. Subscribers sometimes receive letters from collectors after the first correspondence, apologizing and stating that they will be ceasing any further communication and collection action.

The essential concept to keep in mind is that no one can put himself in harm’s way and then maintain an action to recover his losses resulting therefrom. When someone is the cause of his own losses, such as a debt collector, he has assumed a risk that he could have otherwise avoided and the law does not provide a remedy for this. That’s why the assignee must obtain the consent of the “debtor” through consideration by obtaining that first payment. If the debtor were informed of these things before the assignee’s solicitation, the entire system of debt collection would not function. Several collection managers admitted this to me in discussion.

Creditors

The object in defending yourself against a creditor that has not assigned the account to a debt collector is to manipulate the creditor into a new agreement or force the account into collections (to be assigned to a debt collector). This is where you gain the greatest advantage of stopping the collection without going to court. We send the creditor a notice of final payment with the expectation that the creditor will not dispute the payment or its terms in writing, thereby accepting it as payment in full. Do not write ‘‘payment in full’’ in the check or money order because it is prohibited under some state statutes and is not really necessary. If you want proof of your mailing, ask your postal service for a proof of delivery receipt. Don’t send it by any other means than first class mail because you don’t want to draw any more attention to it than you must.

In most cases the creditor accepts the notice without question simply because its automated payment processing center is not equipped to dispute the notice Whether or not the creditor acknowledges the notice, it pursues the collection and the account is eventually charged off (assigned to collections and claimed as a loss). This technique merely gives the account holder a chance at gaining a defense such as “payment” or accord and satisfaction in the event the creditor sues him. When this happens, and the creditor has failed to respond or object to the notice of final payment, no claim against the account holder can be maintained.

In practice, the creditor will call you to ask about late payments. Do not discuss the merits of the account or mention the notice of final payment. Just make a record of the caller’s name, company, time and date of call, caller’s fax and phone numbers and mailing address. Request that the caller limit communication with you only to writing, whether by mail or fax. Disconnect the call after you obtain this information and send a written correspondence to the caller or company making the same request. Keep a copy for your records. It is also important to keep copies of all communication and phone logs in one paper file for each account. If the calls continue, try this again or make a complaint with your state’s attorney general’s office alleging threatening or harassing phone calls. Include a copy of the phone log. In most jurisdictions, it is a class 1 misdemeanor to make unwanted phone calls after receiving a request to discontinue such communication.

If you have the time, there is another approach you can use to eliminate the unwanted calls. When the creditor (or a collector) calls, take the time and engage in conversation for as long as you possibly can. Don’t let the caller off of the phone until he disconnects you. Act as if you are sincere, but continue talking about every subject you can imagine, such as inflation, politics, latest news, even your personal (fictitious) health problems. Tell the caller about your hemorrhoids and constipation or how you noticed you had blood in your stool for the last week. Ask for medical and/or legal advice from the caller, but act sincere as long as you can. Ask the caller for personal information or if you can call him at home after hours to talk about something you might have in common. After a while, you should stop getting calls.

In most cases, the creditor assigns the account to collections. Once the account is assigned, the third party collection efforts are regulated under the Fair Debt Collection Practices Act. This is where we have won over 99% of the collections without a lawsuit.

In situations where the creditor is wise to this technique and returns the payment with or without a written dispute, we follow the same steps one more time. It usually does not get returned unless you’re dealing with a department store. If the payment and its terms are again refused, we discontinue all contact and wait until the account is charged off to collections. The advantage in attempting to get this final payment accepted with its terms is that it reduces the creditor’s standing to

maintain a suit against you down to nothing. It gives the account holder an affirmative defense (payment or accord and satisfaction) that the account was paid in full. They say you owe and you say you don’t because it was paid in full. If the creditor fails to dispute the payment and its terms, you will have what is called a “novation.”

Novation

In some jurisdictions, novation is a species of accord and satisfaction. When a debtor pays a collection agency, there is a novation of the original agreement. This means that the debtor agrees that even though his legal duty to pay the original creditor has been extinguished, he agrees to pay the new collector anyway.

Novation is a type of substituted contract that has the effect of adding a party, either as obligor or obligee, who was not a party to the original duty. It is the substitution of a new contract, debt, or obligation for an existing one, between the same or different parties. It is the substitution by mutual agreement of one debtor for another or of one creditor for another, whereby the old debt is extinguished. A novation substitutes a new party and discharges one of the original parties to a contract by agreement of all the parties.

There are certain basic elements for a novation: 1. That there be a previous valid obligation, 2. An agreement of all the parties to a new contract, 3. The extinguishment of the old obligation, and 4. The validity of the new one.

The process of novation occurs quite commonly, the term is just not used in normal conversation. You may recognize it if you understand what happens in the mediation of a lawsuit, the reorganization of a business, a bankruptcy or in the re-negotiation of a contract. A novation occurs when the parties to one agreement or set of obligations change the terms of the agreement to maintain an equitable situation and maintain or alter the mutual benefits to each of them.

You can even reach a novation with the Internal Revenue Service when you submit an Offer in Compromise in good faith. If the requisite conditions are met, you can effectively reduce your tax liability. The same is true in a small claims lawsuit. The judge usually defers the controversy to a mediator so that the parties can reach an equitable agreement without the court’s intervention.

Civil law recognizes these three types of novation: 1. Where the debtor and creditor remain the same, but a new debt takes the place of the old one, 2. Where the debt remains the same, but a new debtor is substituted and 3. Where the debt and debtor remain the same, but a new creditor is substituted.

Collection agencies usually try to obtain the third situation and this is where an account holder can effectively use the Fair Debt Collection Practices Act to easily

purge an unsecured debt. The defense would be under failure of consideration, release, or statute of frauds.

Failure of Consideration

“The sole consideration for the execution and delivery of the promissory note described in paragraph ___ of the complaint was plaintiffs promise to lend defendant $1 ,000; plaintiff failed to lend the sum to defendant.”

Release

“Before commencement of this action, (or on [date] or after plaintiff’s claim in this action accrued), plaintiff released defendant from it, a copy of the release being attached.”

The notice of final payment and its terms allows you to successfully defeat any collection attempts, even a lawsuit, once the creditor accepts the payment. The

affirmative defense is “accord and satisfaction” and it can work even after you have been sued, but before the conclusion of the proceeding.

I have included an example of the ‘Notice of Final Payment” on the next page. Once you send this, you may begin receiving phone calls from the creditor or its in-house collection department. The first section under Debt Collectors will explain more about this process. This notice and evidence of your final payment can be used to remove or amend derogatory items appearing on your credit file.

Debt Collectors

This section will explain the legal principles that support my successful letter writing practices. They can be used when a creditor assigns, sells or transfers a debt to a third party collector without the consent of the debtor. The trick in corresponding with collectors is to enforce the Fair Debt Collection Practices Act by first requesting a validation of the purported debt.

I have found that even though a debtor might have owed the original creditor, the debt collector is unable to validate the account simply because of the way they operate. This renders their claim invalid, not only because you cannot be compelled to pay a third party assignee without your prior consent, but because they simply cannot prove you owe even the creditor. Most of these companies do not maintain the records needed to validate such claims because many people do not question them this way. I believe this might change as more people learn how the system works.

Examples of proof of the debt would include some evidence that you derived a benefit from the alleged debt. It might also include a payment history but remember that a contract does not require a signature to be binding, but the claimant merely needs to establish that the debtor derived some benefit from the collector.

After several years of discussing this book with subscribers, I decided to include this section to help others prepare for what to expect when they follow this process. You can expect a variation of many circumstances once an account goes into collections (is charged off). It is important to distinguish between the original creditor and the assignee (debt collector). Always request a validation from the assignee debt collector as soon as you receive the first collection notice in the mail or in writing. If the collector calls before sending the first notice, obtain the information about the caller’s identity and collector for whom he or she is calling. Explain that you will not discuss the collection over the phone but they may correspond with you in writing. It is important to maintain an open line of written communication in the beginning of a collection with the assignee. End the call after you have explained this and do not discuss any aspects of the collection.

1. The collector may send you all the information it has from the account you had with the creditor. This does not establish any contractual obligation with the collector but only supports the fact that you do not owe the collector. This type of response is known as a “non-response” or a “failure or refusal to validate” and does not satisfy the legal requirements of the Fair Debt Collection Practices Act.

2. The collector may reassign the account back to the creditor. In this case, the creditor can no longer enforce the collection because it has previously “repudiated” the account. It has no more standing than any other third party collector at this point.

3. The collection may be assigned to another debt collector. Follow the same process as if it were a new collection (because it is).

4. If or when you begin receiving phone calls, make a record of the caller’s name, company, phone number, address, date and time of call. Send a written communication to the caller requesting that future communication be limited to writingonly. If they refuse to honor that request, then send a written complaint to the attorney general’s office for your state, alleging that the caller is making unwanted, harassing and/or threatening phone calls to you. Include a copy of you phone log. Send a copy of the complaint to the caller or his company. That should end the problem very quickly.

The important aspects about defending yourself against creditors (i.e. foreclosures, guaranteed loans and other secured accounts include simple contract law, the Generally Accepted Accounts Principles, rules of court and the basis that the

banks do not loan anything. The important aspects about defending yourself against debt collectors include the Fair Debt Collection Practices Act, simple contract law and the basis that a debt collector (assignee) cannot establish any contractual nexus to enforce a claim.

A contract is an agreement between two or more people or entities in which obligations are created by what is known as “consideration”. In law, the term consideration means the exchange of a benefit or detriment. The essential factors in determining whether or not a valid contract exists are first, there must be an offer, there must then be an acceptance and there must then be an agreement to perform under the terms and conditions of the contract. And while these are the basic elements of a contract, it is of no value unless it can be enforced in a court of law. To establish the validity of a contract, consideration must first be given.

Remember that no process actually prohibits a collector or creditor from suing you. Even the United States President can be sued while in office. Anyone can file a lawsuit; however, if you follow the principles in this book, the collector or creditor will not be able to enforce its claim and get a judgment against you provided the circumstances are similar to what is described here. My entire letter writing process is based upon little known but basic principles of contract law. If people had a basic understanding of them the credit and collection industry would probably not exist today.

Elements of a contract or agreement

If I agree to purchase a service from someone, that agreement is not valid until I pay something for it or enter into a written “promise to pay.” It is “consideration” that creates an obligation and it can be in the form of just giving something in exchange for the performance or benefits of the contract. If I handed you a book that you wanted and you agreed to do something for me because of that book, then we have a valid contract. This type of verbal contract is sometimes difficult to enforce because when tested in court, the parties may not be able to resolve genuine disputes as to the true agreement. The court might then make a judgment based on what would appear to be equitable. Consideration for a valid agreement involves an exchange of a benefit or detriment between two or more people or entities.

A valid contract exists when there has been an offer, acceptance, agreement, and when consideration has been made. And these contracts are easier to enforce when they are written; however, there are at least two more important factors involved in making a valid contract. Each party to the contract must be competent, or have the standing to contract and the terms of the contract must be equitable for everyone entering into it. A contract is a matter of equity.

In other words, a contract with someone who is insane or not of sound mind (noncompos mentts) is not valid or enforceable in any court because it cannot be

equitable. A contract with a child is not valid except to the extent that it may be enforced upon the party who is not the child. A contract with a corporation is not valid unless it is directly with its board of directors or an authorized agent or officer as defined in the corporation’s articles and by-laws. A contract with any government is not valid unless it is authorized by one holding an office as prescribed by law and the office holder must have the proper delegation of authority as required by statute. When a contract is not equitable it can be said to be unconscionable, and therefore, unenforceable.

If I agree to pay for a service and enter into a contract to that effect, then it may be enforceable. However, if the written terms of the contract create only obligations for me, but not for the service provider, it can be said to be unconscionable. It could not then be enforceable in any court for two reasons, the first because it was not fair or equitable, and the second because such an action to enforce it would be barred by the statute of frauds (no contract in writing).

On its face, such a contract could be found to be unconscionable when the service provider attempts to sue for breach of contract. Or, if I brought suit for the service provider’s failure to perform, there’s a good chance that because the contract was more or less one sided, I wouldn’t be able to show the court that the service provider had any particular obligation as agreed to under the written contract. Contracts cannot be extended beyond the language of the written agreement. And agreements made in a written contract must be performed within a certain period of time. Even statutes and company charters have expiration dates. Let’s discuss the basics of how to defend yourself against any collection in the event it ends up in court.

Affirmative Defenses

An affirmative defense usually refers to the practice of moving a court to dismiss a lawsuit before an answer is filed without getting to the merits of the case. There are several defenses that include: lack of subject matter jurisdiction, failure to state of cause of action, service of process not perfected, failure to join necessary party and the list continues. These types of defenses do not admit the allegations in the complaint but can be asserted as a sufficient defense. I’m not including any examples of this type of motion because it is quite simple and you should probably spend some time at the law library to find it yourself. I have included examples of other types of motions. A motion to dismiss in response to a complaint will toll the time limit within which the answer must be filed. If the motion is denied, the court will impose a new limit in which to file an answer.

Black’s Law Dictionary defines an affirmative defense as it relates to a pleading. It’s a matter asserted by the defendant that, assuming the complaint to be true, constitutes a defense to it. It’s a response to a plaintiff’s claim that attacks the plaintiffs legal right to bring an action, as opposed to attacking the truth of the claim. Under the Federal Rules of Civil Procedure, and also under most state rules,

all affirmative defenses must be raised in the responsive pleading (answer); such defenses include accord and satisfaction, assumption of risk, contributory negligence, duress, statute of limitations,

es~oppeI, etc. Concerning debts, this book discusses accord and satisfaction, novation, statute of frauds, failure of consideration and laches.

You can raise a legal defense, such as those listed in the local rules of civil procedure, without first filing an answer. The ones discussed in the next sections must be asserted in the actual answer if your motion to dismiss is denied.

An affirmative defense is an argument raised in court while answering a complaint. It does not go to either denying or admitting the allegations, but sets forth a basis as to why the merits of the complaint are not relevant. You can use the principle of any affirmative defense without ever having to go to court, and that’s how we get debt collectors to stop collecting before they sue.

It works like this, instead of sounding like a lawyer in your written response to a collector a simple “request to validate” will suffice. It doesn’t say you’re a smart guy or know anything about the legal principles behind your real defense, but that you’re simply aware of FDCPA procedures. When the collector responds with anything but some written agreement, evidence of your consent or evidence of consideration (e.g. payment), they have failed to validate. If they pursue collection efforts by continuing to call you or contact you by mail, you have several options.

If you want to stop the contact, a simple letter of complaint to the attorney general’s office of the responsible state (your state) alleging telephone harassment, threats or just unwanted calls will be sufficient to stop the unwanted communication. It is a class 1 misdemeanor in most jurisdictions to make unwanted calls or send threatening communications. In some cases, when you are sure that the collector will not sue, you can mail them a notice to cease further communications. The object of this material is to win against the collection without going to court. If you send a cease further communication notice prematurely, it has been shown to have a tendency to prompt the collector to sue. Even though you can win, you chances of being successful are diminished when you’re in court.

Reasons why debt collectors cannot enforce the collection

1. Although the assignment is permitted by normal business practices, the assignee (debt collector) is not named in the agreement so the debt is not owed to the collector. Because the creditor assigns the account to a third party, he waives his rights to collect, afterwards. There was no “meeting of the minds,” a necessary element of a valid contract. This is known as “repudiation.”

02. The debt collector cannot provide the same services as the creditor did, so the contractual arrangement changes. It would be analogous to assigning a credit card debt to a loan shark and instead of getting sued, the loan shark hunts you down and shoots off your kneecaps. It’s not an equitable agreement and there was no “meeting of the minds,” a necessary element of any valid contract. This is known as “breach of contract” or the affirmative defense of “statute of frauds” (no contract in writing).

The Statute of Frauds

The statute of frauds has its origin from the English common law as early as 1677. It reou,red r.~~rt~in rI~~c~ Af rAntr~-t~ ~ ~ ~-. -~-J ~

the statute of frauds is concerned with agreements exceeding five hundred dollars in value, contracts which guaranty the debt of another, the sale of land, or those agreements that cannot, by their terms, be performed within a year. It has been adopted by many state legislatures in America and has nothing to do with ‘fraud” per Se. It was formerly known as the statute of frauds and perjuries because, by securing an agreement in writing, the courts can better decide on the facts of the dispute and avoids perjured testimony by the parties.

Suppose you made an agreement with another person to purchase his property for a value of one thousand dollars. If you both agreed that a down payment of one-fourth of that was acceptable, then you might also agree to pay the balance over the next several months. That’s a fair deal, but if you decided not to fulfill your end of the bargain by making those payments, and the seller never entered into a written agreement with you defining those particular terms, it would be very difficult to enforce through our court system.

You might argue that the seller agreed to accept payment on the balance over the next eighteen months, while the seller would argue that you agreed to pay him the balance within a week. An agreement in writing should prevent this type of dispute. The statute of frauds prevents costly disputes, as in this example. The parties would have simply referred to the written agreement, each knowing completely what the obligations were.

The statute of frauds can be used very effectively as an affirmative defense if a debt collector sues you. Here is an example of the language you could use in an affirmative defense.

“The purported contract or agreement falls within a class of contracts or agreements required to be in writing. The purported contract or agreement alleged in the complaint was not in writing and signed by defendant or by some other person authorized by defendant and who was to answer for the debt, default, or miscarriage of another person.

Another reason is that the debtor of a creditor cannot be responsible to third party collectors because our legal system does not provide a remedy for a individual (e.g. collector) who knowingly and voluntarily incurs a liability (takes the assignment of a debt) and then seeks to recover the purported balance from the debtor (former debtor). It would be analogous to arriving on the scene of a house fire, buying the house from the owner and then suing him for damages resulting from the tire.

There are certain principles of law that protect debtors from the collection efforts of third party debt collectors. One of those involves the concept that one cannot put oneself in harm’s way and maintain a suit for damages resulting therefrom. It’s such an old principle of law that it’s found in Latin as “Scienti et volenti non fit injuria” in which the literal translation is “An injury ~s not done to one who knows and wills it.”

This is what debt collectors must do when they assume the liability for collecting a debt from you on behalf of an assignor.

Furthermore, because there was no exchange of any benefit or detriment between the collector and former debtor, there is no enforceable agreement. A benefit or detriment would include a payment history to the collector, receiving products or services from the

collector or some reliance by either party on the other to perform. Because these elements are not present, there is a “failure of consideration” and no valid contract or agreement.

In some cases, the creditor (assignor) makes an insurance claim for an assignment or claims it as a tax deduction. This is known as “accord and satisfaction” because the creditor accepted payment from a third party for the purported debt, or a portion of the purported debt. This renders the debt satisfied and legally uncollectible by the creditor or any subsequent assignees.

Accord and Satisfaction

These two elements of contract usually work together. The concept of accord is generally concerned with agreement between a creditor and a debtor over the same issue. The concept of satisfaction is concerned with the discharge of an obligation to pay a debt. These two principles are normally used together.

Accord and satisfaction is defined in Black’s Law Dictionary as a method of discharging a claim whereby the parties agree to give and accept something in settlement of the claim and perform the agreement, the “accord” being the agreement and the satisfaction” its execution or performance, and it is a new contract substituted for an old obligation or cause of action which is settled, and must have all of the elements of a valid contract.

An example of how this legal principle would be applied is when a creditor or collector makes an insurance claim for the purported losses. When the claim is paid, the creditor or collector waives its standing to sue for recovery of any losses for what they might wish to claim as the balance because they’ve already excepted a benefit in satisfaction of the original debt. If you owe me $100 and your neighbor offers to pay me $90 for my consent to waive my rights to collect the balance from you, then accord and satisfaction is made when I accept the settlement. I no longer have any contractual rights that can be enforced. The agreement is then maintained between you and your neighbor as to the new terms. Here are two examples of affirmative defenses:

Accord and satisfaction

“Before commencement of this action (or on [date]) defendant delivered to plaintiff and plaintiff accepted from defendant (specify consideration) in full satisfaction of plaintiff’s claim.”

Payment

“Before commencement of this action defendant discharged plaintiff’s claim and each item of it by payment.”

Laches

This is another example of an affirmative defense. Better known as the doctrine of laches or the statute of limitations for civil actions, it’s a defense to bar claims in which the claimant waits too long to assert h~s rights. Today, it’s governed by statute and imposes a time limit on most civil actions. It could be anywhere from two years to seven years in duration depending upon the subject matter of the dispute.

Laches (statute of limitations)

“Each cause of action, claim, and item of damages did not accrue within the time prescribed by law for them before this action was brought.”

The best way to stop a debt collector in court is to be the defendant in its suit against you. I have included some examples of how our subscribers have succeeded in winning against lawsuits brought by collectors. As of this writing, none of our subscribers have lost or had to pay any debt collector, but that does not mean you don’t risk the chance of losing. It is important to understand the process in order to have a good chance of winning.

You’ll want to answer the complaint within the time limit imposed by the court, usually twenty days. Note that discovery is different in unsecured claims as compared to mortgages or claims brought by original creditors (unsecured or not) and that not all affirmative defenses apply in every case. I’m beginning with the first response to the debt collector. You only need to add your contact information along with the collector’s, and be sure to include a copy of the collector’s notice with your request for validation. The disclosure statement is for the collector, and don’t expect them to return it every time.

Most collectors who receive this request will never pursue the collection. None of them are able to validate the collection and some try by sending information about the creditor. The longest I’ve seen a collector wait to follow up with a debtor after such a request is six months and it’s always with another collection notice, just like the one they sent the first time. This indicates that the collector does not intend to pursue the collection. In some cases, the collector continues with telephone call demands.

I don’t recommend sending a cease further communications notice unless it is quite obvious that the collector will not sue. This notice has been known to prompt a lawsuit. Instead, we have had great success sending in written complaints to the attorney general’s office in the state in which the collector is conducting business. It is a class one misdemeanor in most jurisdictions to make unwanted phone calls. It is important that before making this type of complaint, you keep an accurate phone log of the caller’s name, time and date of call, company involved, and company’s contact information. This should be included with your written complaint alleging unwanted, harassing or threatening phone calls. Most attorney generals offices can be contacted via the Internet and they even have consumer complaint forms that can be downloaded for your convenience.

I’ve included a sample of the cease further communication notice in case you might have occasion to use it

[Sender][Address][City state ZIP][Collector][Address][City State ZIP][Phone number][Date] Certified Ma~I No.:Re

Greetings:Thank you for receiving this notice. You have failed to answer my request

to validate your claim of debt against me. Pursuant to the Fair Debt Collection Practices Act, I request that you cease further communications with me. Please complete and return the attached notice as required by law. If I do not receive your response within thirty (30) days, I will assume that your collection efforts are being terminated and that you have waived all claims against me.

Best regards,

[Sender]

COLLECTOR’S NOTICE

From[Collector][Address][City state zip]To:[Sender][Address][City state zip]This notice is given by the collector so as to comply with Fair Debt Collection Practices Act.

If a consumer notifies a debt collector in writing that the consumer refuses to pay a debt or that the consumer wishes the debt collector to cease further communication with the consumer, the debt collector shall not communicate further with the consumer with respect to such debt, except(1) to advise the consumer that the debt collector’s further collection efforts are being..terminated;

(2) to notify the consumer that the debt collector or creditor may invoke specified remedies which are ordinarily invoked by such debt collector or creditor; or (3) where applicable, to notify the consumer that the debt collector or creditor intends to invoke a specified remedy.

Please select one of the following by placing an “X” over the appropriate line.

As the debt collector in this matter, this final notice is to inform you that our collection efforts are being terminated.

As the debt collector in this matter, we may invoke a specified remedy, which is ordinarily invoked by us, to collect this alleged debt.

As the debt collector in this matter, we intend to invoke a specified remedy to collect this alleged debt.Signature of manager or agent date

This notice is not valid unless completed and signed by an employee or authorized representative of the collector, and timely returned to the consumer. The collector understands that its failure to comply with this federal law may result in civil penalties imposed by the Federal Trade Commission or the United States District Court.

We’ve had very good results with this second correspondence and sometimes the collector will even sign and return it. They always select the box stating that they will take no further action. A word of caution however is to be sure there is almost no likelihood that the collector will be forced to sue you.

The collectors sometimes respond to the request for validation with some documents that attempt to validate the claim made against you. This usually consists of a page of data that the collector generated when they were assigned the collection account and cannot work to validate a claim that you owe them. This is not a validation of anything and should be treated as a non-response. Remember that the collector put itself in harm’s way by purchasing or accepting the assignment of the purported debt, and the collector, without your consent, cannot hold this against you.

If the collector persists in ignoring your request for validation and subsequent notice to cease further communication, a complaint to the Federal Trade Commission is then appropriate. The FTC does not represent individuals but they do make a record of the number of complaints about each collector and after several of them, they will conduct an investigation.

We’ve noticed that sometimes, just listing the address for the FTC on this second notice is enough to get positive results. The FTC has been very helpful to us over the years. Here is a listing of each of its mailing addresses:

FTC10877 Wilshire Blvd., Suite 700Los Angeles, California 90024FTC901 Market Street, #570San Francisco, CA 94130FTC

1405 Curtis Street, #2900Denver, CO 80202FEDERAL TRADE COMMISSION HEADQUARTERSSixth and Pennsylvania Avenue, NWWashington, DC 20580(202) 326-2222FTC55 East Monroe Street, #1 437Chicago, IL 60603FTC10 Causeway Street, #1184Boston, MA 02222FTC150 William Street, #1 300New York, NY 10038FTC668 Euclid Avenue, #520-ACleveland, OH 44114FTC100 North Central ExpresswayDallas, TX 75201FTC915 Second AvenueSeattle, WA 98174

Your letter of complaint must first identify the specific provision of the Act alleged to have been violated. You won’t need to site the exact statute, but you must identify the particular facts in support of your complaint and then allege that the collector deliberately violated the Act. Your letter should include the dates on which such alleged violations have occurred along with a brief description of the circumstances. Follow the guidelines set forth in the discussion about effective letter writing to achieve the best results. I have included samples on the next pages and they should be amended to match your particular circumstances.

[Sender][Address][City state zip]FTC [or attorney general’s office] [address][City state zip][Date)Re collector’s refusal to validate debt I cease communication

Greetings:Thank you for reviewing this complaint against [debt collector]. This organization claims to be collecting a debt on behalf of someone alleged to be my creditor. I have no records relating to such claims and requested that this collector validate its claims as required by the Fair Debt Collection Act.

After thirty days had lapsed, I received no answer to my request. I subsequently sent them a notice to cease further communication with me but they continue to call me at work and send me unsolicited mail.

My responses have been timely and I’ve attached copies for your review along with a telephone log of the unwanted phone calls. Please assist me in stopping this collector. I do not owe this debt collector any money.

Please confirm this complaint.

Best regards,

[Sender]

SSN: 000-00-0000DOB: 12/12/12

Guaranteed Student Loans

This type of arrangement is very much like the mortgage except that it is guaranteed by the United States (Department of Education, DOE). This means that the purported debt is not dischargeable in bankruptcy and is not adversely affected by any statute of limitations (laches). These types of debts should be treated just like an IRS collection under the authority to levy, 26 USCS 6331. Under this statute, the IRS has the authority to levy upon the property or rights to property of a taxpayer. A student loan can be assigned to the IRS for collection as a non-tax liability. The defenses used for unsecured debts assigned to debt collectors will not work against a student loan or tax collection. If given the opportunity, the collection should be defended just as if it were a mortgage or secured debt or collection brought by an original creditor. You will need to get to the merits of whether or not the United States (or guarantor) risked any of its assets in the purported loan.

Unfortunately, you may not be able to maintain a lawsuit against the government directly because of sovereign immunity, but you might be able to sue or successfully defend against any of its assignees.

We generally use a variation or combination of approaches in defending against student loan collections. The basic premise is that if you don’t have it, they can’t get it. Then there are practical ways to “not have it” and that is what I’ll discuss here.

In response to a student loan collection, you should first request a forbearance application and see if you qualify for delay payment. In the meantime, you can take steps to limit your liability or the chance of having some of your property taken. On bank accounts, you can add one or two signers (two in California) and amend the signature card so that at least two or three signatures are required for every single transaction. Be sure to send this notice to the bank in writing and test it to be sure they follow the agreement. This will avoid any bank levies from the student loan collector. You can order a signature stamp from almost any office supply store to be used for writing checks conveniently. This will avoid having to pass a check around to all the signers before using it.

If you are sued, make the same defenses as you would for a mortgage. If you are receiving income from employment, we call it “W-2 income”, you will be open to a garnishment if you lose against the lawsuit or if the collection is assigned to the IRS to collect as a non-tax liability.

You may also try to make payment arrangements with the collector. This will delay any levies and give you a little more control over you income and assets. A second option in negotiating for a payoff is to get a “loan” from a bank and pay off the student loan. Try to avoid secured loans such as home equity lines of credit; however, just about any other debt is easier to resolve than a student loan collection. The only other one that might be a little more difficult to resolve is a federal income tax liability on Form 941, for not paying the IRS from employee withholdings.

(h) Disclosure of foreign-bank Confidential Report of Operations.

(1) Availability of foreign-bank Confidential Report of Operations to bank supervisory agencies. Notwithstanding any other provision of this regulation, any Confidential Report of Operations(Form FR 2068) of a foreign banking organization may, upon written request to and approval by the director of the Division of Banking Supervision and Regulation (or his delegee), and with the concurrence of the general counsel (or his delegee), be made available for inspection to another bank supervisory authority having general supervision of any United States branch, agency, subsidiary bank or commercial lending company of the foreign banking organization, only for use where necessary in the performance of official duties. These reports shall be made available for inspection by authorized persons only on Federal Reserve premises under the same procedures as apply to personnel of the Federal Reserve System. All reports made available under this paragraph shall remain the property of the Board: and no person, agency, or authority who obtains access to any such report, or any officer, director, or employee thereof, shall publish, publicize, or otherwise disclose any information contained in the report to any person.

(2) Restrictions on disclosure by Federal Reserve System employees. It is the Board’s policy that the confidentiality of a foreign banking organization’s Confidential Report of Operations (Form FR 2068) should be maintained at all times. Except as provided by paragraph (h)(1) of this section, information submitted to the Board as part of any Confidential Report of Operations is not available for public inspection by any person other than an officer, employee, or agent of the Board or of a Federal Reserve Bank properly entitled to such information in the performance of such person’s official duties. Any employee that violates this section by releasing such a report to any unauthorized person may be subject to disciplinary action under 12 CFR 264.735-5 (Rules of Employee Responsibilities and Conduct).

SECTION 261 .21—Confidential Information Made Available to Law Enforcement Agencies and Other Non—Financial Institution Supervisory Agencies

(a) Disclosure upon request. Upon written request, the Board may make available to appropriate law enforcement agencies and to other non—financial institution supervisory agencies for use where necessary in the performance of official duties, reports of examination and inspection, confidential supervisory information, and other confidential documents and information of the Board concerning banks, bank holding companies and their subsidiaries, U.S. branches and agencies of foreign banks, and other examined institutions.

(b) Eligibility. Federal, state, and local law enforcement agencies and other nonfinancial institution supervisory agencies may file written requests with the Board for access to confidential documents and information under this section of

the regulation. Properly accredited foreign law enforcement agencies and other foreign-government agencies may also file written requests with the Board.

(c) Contents of request. To obtain access to confidential documents or information under this section of the regulation, the head of the law enforcement agency or non — financial institution supervisory agency (or their designees) shall address a letter request to the Board’s general counsel, specifying—

(1) the particular information, kinds of information, and where possible, the particular documents to which access is sought;

(2) the reasons why such information cannot be obtained from the examined institution in question rather than from the Board;

(3) a statement of the law enforcement purpose or other purpose for which the information shall be used;

(4) whether the requested disclosure is permitted or restricted in any way by applicable law or regulation;

(5) a commitment that the information requested shall not be disclosed to any person outside the agency without the written permission of the Board or its general counsel; and

(6) if the document or information requested includes customer-account information subject to the Right to Financial Privacy Act, as amended (12 USC 3401 et seq.), a statement that such customer-account information need not be provided, or a statement as to why the act does not apply to the request, or a certification that the requesting agency has complied with the requirements of the act.

(d) Action on request.

(1) The general counsel shall review each request and may approve the request upon determining that— (i) the request complies with this section; (ii) the information is needed in connection with a formal investigation or other official duties of the requesting agency; (iii) satisfactory assurances of confidentiality have been given; and (iv) no law prohibits the requested disclosure.

(2) The general counsel may impose any conditions or limitations on disclosure that the general counsel determines to be necessary to effect the purposes of this regulation or to ensure compliance with applicable laws or regulations.

(e) Federal and state grand jury, criminal trial, and government administrative subpoenas. The Board’s general counsel shall review and may approve the disclosure of confidential information pursuant to federal and state grand jury, criminal trial, and government administrative subpoenas. The general counsel may impose such conditions or limitations on disclosure under this section that the general counsel determines are necessary to effect the purposes of this regulation, to ensure compliance with applicable laws or regulations, or to protect the confidentiality of the Board’s information.

(f) Requests for testimony or interviews. Government agencies seeking to obtain testimony or interviews from current and former Federal Reserve System staff concerning any confidential information of the Board shall use the procedures set out in.

(g) Other disclosure prohibited. All reports and information made available under this section remain the property of the Board, and except as otherwise provided in this regulation, no person, agency, or authority to whom the information is made available, or any officer, director, or employee thereof, may disclose any such information except in published statistical material that does not disclose, either directly or when used in conjunction with publicly available information, the affairs of any individual or corporation.

SECTION 261.22—Other Disclosure of Confidential Supervisory Information

(a) Board policy. It is the Board’s policy regarding confidential supervisory information that such information is confidential and privileged. Accordingly, the Board will not normally disclose this information to the public. The Board, when considering a request for disclosure of confidential supervisory information under this section, will not authorize disclosure unless the person requesting disclosure is able to show a substantial need for such information that outweighs the need to maintain confidentiality.

(b) Requests for disclosure.

(1)Requests from litigants for information or testimony. Any person (except agencies identified in sections 261.11 and 261.12 of this regulation)

seeking access to confidential supervisory information or seeking to obtain the testimony of present or former Board or Reserve Bank employees on matters involving confidential supervisory information of the Board, whether by deposition or otherwise, for use in litigation before a court, board, commission, or agency, shall file a written request with the general counsel of the Board. The request shall describe— (I) the particular information, kinds of information, and where possible, the particular documents to which access is sought; (ii) the judicial

or administrative action for which the confidential supervisory information is sought; (iii) the relationship of the confidential supervisory information to the issues or matters raised by the judicial or administrative action; (iv) the requesting person’s need for the information; (v) the reason why the requesting person cannot obtain the information sought from any other source; and (vi) a commitment to obtain a protective order acceptable to the Board from the judicial or administrative tribunal hearing the action preserving the confidentiality of any information that is provided.

(2)All other requests. Any other person (except agencies identified in sections

261.11 and 261.12 of this regulation) seeking access to confidential supervisory information for any other purpose shall file a written request with the general counsel of the Board. A request under this paragraph (b)(2) shall describe the purpose for which such disclosure is sought.

(c) Action on request.

(1)Determination of approval. The general counsel of the Board may approve a request made under this section provided that he or she determines that— (i) the person making the request has shown a substantial need for confidential supervisory information that outweighs the need to maintain confidentiality; and (ii) disclosure is

consistent with the supervisory and regulatory responsibilities and policies of the Board

(2) Conditions or limitations. The general counsel of the Board may, in approving a request, impose such conditions or limitations on use of any information disclosed as is deemed necessary to protect the confidentiality of the Board’s information.

(d) Exhaustion of administrative remedies for discovery purposes in civil, criminal, or administrative action. Action on a request under this section by the general counsel of the Board shall exhaust administrative remedies for discovery purposes in any civil, criminal, or administrative proceeding. A request made pursuant to section 261.9 of this regulation does not exhaust administrative remedies for discovery purposes. Therefore, it is not necessary to file a request pursuant to section 261 .9 to exhaust administrative remedies under this section.

(e) Other disclosure prohibited. All confidential supervisory information made available under this section shall remain the property of the Board. Any person in possession of such information shall not use or disclose such information for any purpose other than that authorized by the general counsel of the Board without his or her prior written approval.

SECTION 261.23—Subpoenas, Orders Compelling Production, and Other Process

(a) Advice by person served. Any person (including any officers, employee, or agent of the Board or any Federal Reserve Bank) who has documents or information of the Board that may not be disclosed and who is served with a subpoena. order, or other judicial or administrative process requiring his or her personal attendance as a witness or requiring the production of documents or information in any proceeding, shall—

(1) promptly inform the Board’s general counsel of the service and all relevant facts, including the documents and information requested, and any facts of assistance to the Board in determining whether the material requested should be made available; and

(2) at the appropriate time inform the court or tribunal that issued the process and the attorney for the party at whose instance the process was issued of the substance of these rules.

(b) Appearance by person served. Unless the Board has authorized disclosure of the information requested, any person who has Board information that may not be disclosed, and who is required to respond to a subpoena or other legal process, shall attend at the time and place required and decline to disclose or to give any testimony with respect to the information, basing such refusal upon the provisions of this regulation. If the court or other body orders the disclosure of the information or the giving of testimony, the person having the information shall continue to decline to disclose the information and shall promptly report the facts to the Board for such action as the Board may deem appropriate.

Appendix D

Social Security Scheme

The social security number consists of nine digits. The first three denote the area (or state) where the application was filed. Within each area, the group number (middle two digits) range from 01 to 99 but are not assigned in consecutive order. Within each group, the numbers are assigned in serial (sequentially) from 0001 through 9999, like this:

000 00 0000area group serial

For administrative purposes, group numbers issued first in a state or territory consist of

the odd numbers. After all numbers in group 98 of a particular area have been issued,the even groups 02 through 08 are used, followed by odd groups 11 through 99. Thechart below shows how group numbers are assigned:

I ODD I EVEN I EVEN I ODD

I01,03,05,07,09 10to98 02,04,06,08 11to99

Here is the mathematical derivation of how I arrived at the total available numbers:Looking at the chart on the next page, you can see that each state has a limited number of “areas” for which applicants can be assigned numbers. These must be “areas” relating to the federal government, but in any case, three digits would normally result in a combination of ten to the third power, or n x n x n n3. Remember that each ‘n” means “10” because in a range of 0 through 9, you can count ten numbers, 0, 1, 2, 3. 4. 5, 6, 7, 8, and 9. The exponent 3 represents how many digits (n). You can see that this yields a possible of 1,000 combinations for each area. You can see that New Hampshire has three areas, 001, 002 and 003 in which it can assign numbers, so this leaves a total possible remaining combination of social security numbers which may be assigned in NewHampshireat: 3x(nxn)x(nxnxnxn)=3x(lOxlO)x(lOxlOx lOx 10) = 3 x 106 = 3 x 1,000,000 =

3,000,000. You can see by the chart on the next page that for each area, there are one million available numbers.

Notice also that the 622 numbered areas are all consecutive, which should mean that there are actually 622 million possible social security numbers available (notice there are none allocated for 596-599); however, Mississippi shares 76 million of its 102 million with 21 other states and three other territories (see box under Mississippi), and Missouri shares 14 million of its 15 million with Mississippi. This allows a deficient state to share from a surplus state, thereby increasing the availability of the social security number across the entire nation and federal territories, but diminishing availability for the particular state having the surplus.

Temporary numbers are assigned for areas 900 through 999 by a service center. The fourth and fifth digits are the code of the particular service center assigning the number. The last four digits are numbers assigned consecutively beginning with 0001. The printed format is TXXXXXXXXX* (T indicates a temporary social security number, and the asterisk (*) indicates the number is invalid). This demonstrates that there can be 1 00 million temporary numbers in existence at any one time among the total number of

State or territory Area Comb. State or territory Area Comb.

New HampshireMaineVermontMassachusettsRhode IslandConnecticutNew YorkNew JerseyPennsylvaniaMarylandDelawareVirginiaWest VirginiaNorth CarolinaSouth CarolinaGeorgiaFloridaOhioIndianaIllinoisMichiganWisconsinKentuckyTennesseeAlabamaMississippiArkansasLouisianaOklahomaTexasMinnesota

Look at the columns below and you’ll find that in some states, there aren’t enough numbers available for the current population (negative numbers). I suspect that these numbers are being re-allocated from other states.

State or territory available SSNs 1997 population unusedAlabamaAlaskaAll Pacific TerritoriesAmerican SomoasArizonaArkansas

CaliforniaColoradoConnecticutDelawareFlor;daGeorgiaGuamHawaiiIdahoIllinoisIndianaIowaKansasKentuckyLouisianaMaineMarylandMassachusettsMichiganMinnesotaMississippiMissouriMontanaNebraskaNevadaNew HampshireNew JerseyNew MexicoNew YorkNorth CarolinaNorth DakotaOhioOklahomaOregonPennsylvaniaPuerto RicoRhode Island

State or territory available SSNs 1997 population unusedSouth Carolina 5.000.000 3,760,000 1,240,000South Dakota 2,000,000 738,000 1,262,000Tennessee 8,000,000 5,368,000 2,632,000Texas 19,000,000 19,439,000 439,000Utah 2,000,000 2,059,000 -59,000

Vermont 2,000,000 589,000 1,411,000Virgin Islands 1,000,000 0 1.000,000Virginia 9,000,000 6,734,000 2,266,000Washington 9,000,000 5,610,000 3,390,000Washington D.C 3,000,000 529,000 2,471,000West Virginia 5,000,000 1,816,000 3,184,000Wisconsin 13,000,000 5,170,000 7,830,000Wyoming 1,000,000 480,000 520,000

It was Grace D. Owen from Concord, New Hampshire, who was issued the lowest possible numbered social security card. The number was 001-01-0001. And the first official Social Security record is that of John D. Sweeney Jr. of New Rochelle, New York, and that number was 055-09-0001. In 1938, a sales representative at E. H. Ferree Company of Lockport, New York made the mistake of publishing the number of one of the company’s secretaries on an insert for its new wallets (078-05-1120). Although it was a mock card, half the size of the social security card itself, and was marked “specimen”, it has become the most abused number in the history of the social security scheme. More than 40,000 people have used this number at one time or another, some as recently as 1977. The Social Security Administration has now reserved this number along with the following range of numbers to be officially identified as bogus social security numbers: 987-65-4320 through 987-65-4329.

The scheme’s first monthly beneficiary was Ida May Fuller of Ludlow, Vermont. She received $22.54 per month from 1940 until the cost of living increase was issued. She died in 1975 at age 100, and had received more than $20,000 in benefits. Since the beginning of the scheme, over four trillion dollars has been paid out in benefits.

Considering all the nine digit tax numbers issued for businesses and individuals, and all the nine digit numbers issued for passport holders, we can surmise that there aren’t enough unique numbers for the entire population and that possibly, a portion of the issued numbers are being used by more than one individual.