Robo-Signing Is Back: Credit Card Bank Lawsuits Rely on Flawed Docs

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Credit card lawsuits
Robo-signing is back -- but with a new set of players and victims.

The first robo-signing iteration hit during the mortgage crisis, as banks and their contractors fraudulently mass-produced forged, unverified, or otherwise false legal documents relating to foreclosures. In autumn 2010, major lenders like JPMorgan Chase (JPM) and Bank of America (BAC) had to suspend their foreclosure operations altogether after widespread robo-signing was revealed. Eventually, a $26 billion settlement was reached between the big banks and aggrieved borrowers.

Now, credit card companies like American Express (AXP), Citigroup (C) and Discover Financial (DFS) are going to court to collect money they say is owed to them, and The New York Times reports that their legal processes are just as faulty as the earlier attempts to turn people out of their homes. Problems include "erroneous documents, incomplete records and generic testimony from witnesses," according to the paper.

One civil court judge in Brooklyn, who presides over as many as 100 credit card debt collection cases a day, told the Times, "I would say that roughly 90 percent of the credit card lawsuits are flawed and can't prove the person owes the debt."

He's not alone: The Times cites "dozens of state judges, regulators and lawyers" as indicating "that such flaws are increasingly common in credit card suits," which are inundating the system: "In all, borrowers are behind on $18.7 billion of credit card debt, or roughly 3 percent of the total, according to Equifax and Moody's Analytics."

In some cases, lenders are going after customers whose bills have already been paid, or bulking up balances by tacking on bogus fees and interest charges. In other instances, the companies have the right to collect the money, but still seem unable to follow proper procedures.

"This is robo-signing redux," said attorney Peter Holland, head of the Consumer Protection Clinic at the University of Maryland Francis King Carey School of Law.

Adam Levin, co-founder of Credit.com, told ABCNews.com that he was unsurprised to hear of this latest malfeasance. "[The credit card companies] are in a frenzy right now to make up for money they're losing after the government restricted the insane fees these institutions were charging," he said. Consumers should contact an attorney or their state consumer affairs agency if they are told they owe money and suspect something amiss about the debt, Levin said.

Unfortunately, borrowers usually don't show up in court to contest these suits, which means that an estimated 95% of cases are resolved by default judgement in favor of the credit card companies -- with any errors or irregularities in documentation going unnoticed. "I do suspect flaws," said one superior court judge in Ventura, Calif. "But there is little I can do."

The lesson: Be sure to show up for your day in court; you never know how weak your lender's case against you might be.

New York-based consumer attorney Brian Bromberg told Marketplace he used to avoid taking on clients who were being sued by credit card companies, but no longer. "What were finding more and more is, once you start taking depositions of the people who are signing off on the original documents, they know nothing." Bromberg says the courts are catching on, demanding stronger evidence even though the enormous volume of cases leaves little time to examine documents.

If you've been served with a spurious lawsuit, or faced any fraudulent effort at debt collection, tell us about it in the comments below.




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ladytax2

We ran into money problems four years ago. We couldn't make payments on three credit cards. Now we are being sued by a lawyer for one company. I was willing to start some payment plan four years ago small one but the credit card company wouldn't do it. The other one has a law firm calling me at work about six times a day regularly. I answer one call and inform them that I was willing to make a small payment with no future interest accruing. They said that they would have to talk to their client. They are constantly calling and now I just don't answer their phone. I thought that these firms could not call a person at their place of work.

September 13 2012 at 3:11 PM Report abuse rate up rate down Reply
jesstokes73

I had received a write-off notice for my last outstanding debt in jan. 2009, later that year, while out out of the house, a sort of subpeona was delived to my house after asking the babysitter if she knew anyone by my name, only it was my maiden name, anyway, they threatened to sue me for the balance of now nearly 6,000 when my original debt was 2,500, I know this because that was the limit on that card, and I had purchased a flwed "realty program" to learn how to make money in the realty world but it didn't work, when I called to have my money refunded no one knew anything and it was basically a scam, now it's been 7 years since then, I received a write-off notification for tax purposes, and now they're threatening to take me to court, I'm rather uneducated in all this but I knew it had been resolved so I set out looking for help, all I could find was a non-profit org that helps you work out a smaller amount...so I show up to court on the day it says to on the paperwork and there are no courts in session on that day, someone there helps me and takes a look at the paper I had, goes to check on it and notices that the request for the qourt date was submitted after they sent me the paper, bring me the later filed copy from the collector and reschedules the court date, I go back, they're not there,...oh! Meanwhile my wages are being garnished in the amount of $350/paycheck, that's $700/month on a single salary with 3 kids and a rent I never intended on paying on my own after my husband and I split up..., so I get granted a garnishment reduction to $50/month...better, but that will take forever to pay off the remaining thousands they were granted, even after I feel the debt was already removed from my record. Is there anything I can do to have the judgement wiped out? And like another user posted, from moving and decreasing clutter, I haven't kept records before all of this started.

August 16 2012 at 3:02 PM Report abuse rate up rate down Reply
apriljewel

Simple solution --- Wipe out all the credit card debt & start over with laws PROTECTING the small consumer!!! Alot of us are unable to pay because of loss of employment or illness. I do work but my husband has not been able to find employment (either over qualified or not trained for factory work, wth); I am not offered health insurance from my work; I have several illness's that have to be treated (I can't afford it); I have a hospital after me for 1 1/2 hours in the ER & thousands of $$$'s...
Ridiculous -- this is certainly going to keep happening unless we stand up & force them to stop these acts of 'strangling the 99%' !

August 16 2012 at 10:46 AM Report abuse rate up rate down Reply
Diane

If you owe to credit cards, pay it. However, I have received dunning letters from 2 different credit cards that I never had!! All I had to do was send them a letter requesting verification of the debt, with the social security number used to apply for the card, and I never heard from them again, I should clarify that the communication wasn't from the bank----it was from a 3rd party collection agency. Many times they cannot verify the debt, particularly if they are going after the wrong person. Don't just ignore those letters & expect that they'll go away----they won't, & the collection agencies will pursue legal action against you, even if you're not the right person. When it gets to that point, it's a lot harder & more time and money intensive to fight it. Nip it in the bud, and you'll be fine.

August 16 2012 at 7:14 AM Report abuse +1 rate up rate down Reply
lanoue96

Yup. lts interesting that someone is finally shedding light on this problem. I've been trying to fight it for the last two years. l've already paid off my credit cards but collections are still garnishing my wages. l've talked to lawyers and the courts about this situation but all l've been told so far is that l owe so l have to pay. l've even reported them to the Consumer Protection Agency (l think thats what its called) with no response. So good luck to those that have the same problem as me.

August 15 2012 at 11:55 PM Report abuse rate up rate down Reply
Dereck

People should know this involving "Unsecured" Debts like Credit, Loan, or Finance "Account Balances"
concerning the "21st Century Act: Final Amendments to Regulation CC"
Rules and Regulations for the Federal Reserve (Banking) System

Found @: http://www.federalreserve.gov/boarddocs/press/bcreg/2004/20040726/attachment.pdf

Only "Non-bank Consumers" can suffer loss and File for Re-credit, Re-claims, and Expedited Re-claims under these Rules and any Corporation, Organization, or Representative utilizing Bank Contracts and/or Agreements seeking Claims will be considered to be that Bank under the Rules also, as stated on page 85.
The "Expanded Definition" also includes Credit Cards and Home Equity Lines of Credit, as stated on page 86.

This means that Creditors such as: Banks, Debt Collection Companies, and their Law Firms have no "Legal Right" to claim debts due in a Court of Law.

Accusations should be made of "Racketeering" of your Personal Credit Report based upon:
(1) A "False Claim of Debts due" and
(2) The "diminishing of your Detrimental Financial Ability to support yourself".

"Extortion" accusations can also be claimed for the second reason.

Accusations of: "Telephone Harassment" and "Federal Mail Fraud" should also be brought if your are
receiving Calls and Mail from Creditors and/or their Law Firms.

The biggest and best accusation is "Threatening of the U.S.
Financial Infrastructure" based upon "Continued Loss of Revenue and Financing due to Violation of the 21st Century Act", which is a "Capital Crime"!

All this is due to the fact that Banks do not own the Accounts or the Money Non-bank Consumers utilize in the Credit, Loan, and Finance Process, it is owned Privately Worldwide by the World Fortune, with "Court Ruled Legal Precedent".

Once stated in Court, the Judge, bound by the 21st Century Act, which was signed into "Federal Law" on January 1, 2006 should "Award the Judgment to the Defendant" and "Dismiss with Prejudice".

The Judge should also "Enter the Judgment in Favor of the Plaintiff", but don't be alarmed this is only because the Plaintiff or Attorney for Plaintiff filled-out and filed the "Affidavit to Secure Judgment" which is the "Application for Trial". I have used this Precedent 4 times.

The Banks disregard for these Rules and Regulations are a "Major Part" of the problems our World is suffering from Economically and this is a great way to force them to comply because the White House and it's Cabinet have not even tried to force "Compliance", but they will Cut your Financial Aid Programs and Spend your Social Security Funds to pay the Nations Debts!

August 15 2012 at 10:49 PM Report abuse rate up rate down Reply
jannjanf

Simple solution if any of our lawmakers really cared: 1) When a bank or business writes off a debt for tax purchases, the debt is cancelled! They shouldn't be allowed to write off the debt for a deduction, and then sell the debt to a boilermaker collection agency that adds late fees and interest to debts that aren't even known until months later. 2) Ban the ridiculous size of "late charges" and limit them to a reasonable amount. All loan-makers claim the high interest rates are to cover bad debt, but yet they charge huge late charges. Hospitals are especially guilty of this as they jack up the bills of people who often aren't working because of illness or injury.

August 15 2012 at 10:46 PM Report abuse rate up rate down Reply
SgtJoeFriday

I guess the bailout money wasn't enough for these banks.

August 15 2012 at 9:26 PM Report abuse +1 rate up rate down Reply
Barb

I had debt collectors suing me by my maiden name? Since I don't own anything, I called the free legal aid. They said show up or don't. I looked them up on the web and I read complaints about these lawyers/debt collectors.I always check all billing for accuracy. This is in NJ so I don't know about other states. Who is real? In NJ, no one can touch your main income if it is SSI or Social Security. It doesn't help anyone's health to go through these ordeals. I still get calls, automated, real people. Nice to be able to shut phone off and use an answering machine. BTW, I haven't used my maiden name in about 30 years.

August 15 2012 at 8:16 PM Report abuse +1 rate up rate down Reply
Daryl

Huntsville Hospital, Huntsville, Al. selling alleged "Bad Debts to collection agency. They bully you and swamp you with phone calls asking for money with no proof of debt.

August 15 2012 at 8:06 PM Report abuse +1 rate up rate down Reply