U.S. regulators expanding probes of bank debt collection cases
The Office of the Comptroller of the Currency is currently investigating big banks who may have used flawed and error-filled documents in their collection actions against consumers, usually involving credit card debt
June 05, 2013
U.S. regulators expanding probes of bank debt collection casesArticle provided by Wages & Benham
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The Office of the Comptroller of the Currency is currently investigating big banks who may have used flawed and error-filled documents in their collection actions against consumers, usually involving credit card debt. The practices under investigation resemble the foreclosure scandal that occurred after the housing crisis of 2008, when big banks tried to foreclose on homes by rubber-stamping documents. The practice became known as "robo-signing." Federal regulators are expressing similar concerns that big banks are using robo-signed documents in collection cases and not verifying data.
Under the current system, debt buyers pay the lender less than is owed from the buyer and then attempt to collect on the full debt. In a subsequent lawsuit against the debtor, these debt buyers use legal documents called affidavits that swear they have reviewed all relevant data and documents and state that the debt is accurate. Instead, the debt buyers merely file affidavits without verification for all collection actions and then file a lawsuit hoping to receive a judgment in their favor.
Other problems continue to plague the industry. Consumer advocates have long felt that debt buyers have abused the court system to collect on creditor debt.
The U.S. Consumer Financial Protection Bureau began investigating debt collection abuses in a probe of American Express, which was ultimately resolved in a $112.5 million settlement for abusive collection actions. Among the alleged abuses, regulators claimed debt buyers falsely told consumers that if they partially paid off the debt the rest would be forgiven.
The OCC recently joined the CFPB to bring a $210 million action against Capital One. The regulators allege the credit card company misled millions into buying unneeded credit card services.
In May, the OCC expanded a probe against JP Morgan Chase similarly claiming that the banking giant used erroneous and robo-signed affidavits to file lawsuits against debtors.
Lawsuits and creditor harassment
The latest investigations into debt buyers are just an example of the myriad ways that some creditors try to collect on a debt. Third-party debt buyers make a living from getting a debtor to pay what is owed, one way or another. Collection actions could include harassing phone calls, letters and even posts on a debtor's Facebook page. Fortunately, there are laws protecting consumers from harassing behavior. Whether it is defending a collection case to prevent a judgment against the debtor or putting a stop to late-night phone calls, a bankruptcy attorney can help protect consumers. People facing large amounts of debt, creditor harassment or garnishment from a judgment against them should contact an experienced bankruptcy attorney to protect their rights.