Sunday, June 2, 2013

Federal Regulators Widen Probe Into Alleged Robosigning Practices Surrounding Delinquent Credit Card Debt Collections

The Washington Post reports:

  • Federal regulators are widening a probe into whether the nation’s biggest banks used flawed documents and incomplete records to collect on delinquent credit card debts, according to four people familiar with the investigation.

    The scope of the inquiry is unclear, but those familiar with it say the Office of the Comptroller of the Currency is expanding an ongoing probe that began in 2011 with allegations that JPMorgan Chase was using error-filled documents in lawsuits against debtors.

    The regulatory agency is examining the process several banks use to verify consumers’ outstanding debt before taking legal action, say people who were not authorized to speak about an ongoing investigation. An OCC spokesman declined to comment.

    The concerns about credit card debt collection echo the wave of shoddy foreclosures that hit after the housing market collapsed. In those cases, as homeowners defaulted on their loans in droves, mortgage servicers were accused of falsifying records and ‘‘robo-signing’’ hundreds of documents without actually reviewing them.
  • Peter Holland, who runs the Consumer Protection Clinic at the University of Maryland Francis King Carey School of Law, said the problems in debt collection extend from the banks to the companies who purchase delinquent accounts for cents on the dollar.
  • Debt buyers often purchase just a spreadsheet with names of delinquent borrowers from banks after accounts become more than 180 days past due, Holland said. Judges, he noted, grew alarmed by the number of cases involving debt buyers that lacked proof of outstanding debt or contained generic testimony.

    Chief Judge Ben C. Clyburn of the District Court of Maryland, for instance, said he dismissed 3,168 debt collection cases in October because the debt buyer, in part, misstated the amounts owed. The state court of appeals adopted new rules in 2011 that required debt buyers to provide more evidence when seeking judgments against consumers based on sworn statements.

    ‘‘Most of the abuses that we’ve seen have been in the affidavits of the debt buyers,’’ said W. Thomas Lawrie, assistant attorney general in the Maryland Department of Labor, Licensing & Regulation. ‘‘There are debt buyers signing affidavits without having the consumer’s account files. There’s evidence that some are signing upwards of 400 affidavits a day.’’
For the story, see US taking harder look at debt collection practices (Banks’ verification process faces scrutiny).

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