In the credit repair industry we are used to hearing about the plethora of inaccurate information contained in consumer credit reports. Now, it seems that credit card companies are also mistreating customers by producing flawed or inaccurate documentation and using it to sue consumers for balances that may be false.
These dubious debt-collection practices are strikingly similar to the recent misconduct in the mortgage foreclosure system, a practice known as “robo-signing” in which banks produced comparable documents for different homeowners and did not review them.
Noach Dear, a Brooklyn, NY, civil court judge, estimates that “roughly 90 percent of the credit card lawsuits are flawed and can’t prove the person owes the debt.” He should know, as he sees up to 100 cases come before his bench every single day. He says that employee witnesses for the credit card companies are known to provide “robo-testimony” – a generic testimony defending the company’s record-keeping practices. In one case, the same witness gave similar evidence in other cases. Not surprisingly, the credit card companies defend their practices.
In some instances, lenders are trying to collect money from consumers who have already paid their bills. Often they are attempting to increase the size of the debt by adding on bogus fees and improper interest rates. The specifics of the lawsuits run the gamut. Some consumers dispute that they owe money at all. More commonly, borrowers agree that they are behind on their payments but contest the size of their debts.
The problem, according to judges, is that credit card companies do not always follow the proper legal procedures, even when they have the right to collect the money. Worse, they usually get away with their unfair practices, as clients rarely show up in court to defend themselves. As a result, an estimated 95 percent of lawsuits result in default judgments in favor of lenders, even though the lenders often do not provide proof of the outstanding debt – such as the original contract. If the consumer were to appear in court, such a misstep on the part of the credit card company could get their case thrown out. However, once the credit card company has a judgment, they can legally garnish a consumer’s wages and even freeze their bank accounts to collect the debt.
The FTC is now working with courts across the country to improve the process by which banks and credit card companies pursue consumers who are behind on their credit card payments, mortgages, and other bills. Let’s hope change comes fast
Educating the Consumer,
Douglas Muir, CEO