The Flawed Credit Card Debt Collection Process

Credit card companies are increasingly turning to the legal system in their rush to collect money that is owed to them. But, there now exists a very big problem in this litigious-happy practice — nearly all these lawsuits are flawed, at least, said a civil judge who presides over such cases in New York.

“I would say that roughly 90 percent of the credit card lawsuits are flawed and can’t prove the person owes the debt,” said Noach Dear, who sees about 100 such cases every day.

But Dear is not the only judge who sees the problems with these credit card lawsuits.

The New York Times:

As they work through a glut of bad loans, companies like American Express, Citigroup and Discover Financial are going to court to recoup their money. But many of the lawsuits rely on erroneous documents, incomplete records and generic testimony from witnesses, according to judges who oversee the cases.

Lenders, the judges said, are churning out lawsuits without regard for accuracy, and improperly collecting debts from consumers.

…Interviews with dozens of state judges, regulators and lawyers, however, indicated that such flaws are increasingly common in credit card suits. In certain instances, lenders are trying to collect money from consumers who have already paid their bills or increasing the size of the debts by adding erroneous fees and interest costs.

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The problems with the card credit collection process are being compared to the same “robo-signing ones” that the foreclosure process was hit with before a multibillion dollar settlement with big banks was reached.

As Peter Holland, who runs the Consumer Protection Clinic at the University of Maryland’s law school, said: “This is robo-signing redux.”

— Posted by Tracy Bloom.