April 6, 2012
Credit Card Collections Under Scrutiny
American Banker just published a three part series about how Bank of America sold defaulted credit card debt to a company called CACH LLC, some of which were old accounts acquired from MBNA. Bank of America apparently purchased some these accounts in 2006 and the records of the credit card accounts were "faulty."
The report is scandalous by itself, but the reason I am so interested in the story is because I saw first hand what CACH was doing when a friend of mine was sued by CACH a few years ago. You can view his credit card affidavit here. (Sometimes Issuu has issues (ha ha) with their displays showing properly, so if you can't see it you can always click through to the page on Issu.)
What many people may not realize is that robo-signing in foreclosures is just an extension of institutionalized, mechanized debt collection designed to extract as much money out of people for as little effort as possible. From an investigative standpoint, when I reviewed my friend's pleadings and the evidence, there wasn't much there, assuming you know what to look for. (Note: the investigation process is the same whether it's a credit card lawsuit or a foreclosure. What evidence is there and what can be done with it?)
The lawyer for the debt collectors didn't actually name any witnesses from the original creditor, instead naming his office manager as a witness who would testify. The assignment of the credit card account was also robo-signed, and no one with any personal knowledge was involved.
Given that the amount my friend was sued over was less than $20k, it didn't make a lot of sense that the local firm was so aggressive that it made me wonder how the firm was incentivized to be so aggressive. Are the law firms sharing in the judgments or settlements they negotiated? If so, they can't split fees with non-lawyers.
Adam Levitin talks here about how many of these operations are essentially collectors who rent law licenses. There are some pretty good comments at the bottom of this post — the most scathing is from a debt collection attorney. It's definitely worth a read.
My friend was able to negotiate a decent settlement as a result of putting up a good defense on his own. His reasoning was that he did owe the money, and shockingly, he didn't care that the person suing him wasn't the right party either — he just wanted the lawsuit resolved.
But that's the part about all of this the bothers me the most about foreclosures and debt collections: nobody seems to give a damn that the person who is collecting is not the party entitled to collect or foreclose.
I also wonder why everyone is so keen on reading about the credit card collections industry but not foreclosures. In my view, when you get down to it, they are the same thing — collection of a debt.
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