The big-bank robo-signing scandal lifted the proverbial rock on the unsavory things financial institutions were doing to force people out of their homes, whether they had the legal grounds to do so or not. Apparently, similar strategies are being widely used in possibly groundless credit-card debt collection proceedings.
A New York judge who oversees up to 100 credit-card cases a day told the New York Times that 90% of the time, the creditor doesn’t have the proof that the pursued debtor actually owes the money under dispute. He blasted what he refers to as “robo-testimony,” when witnesses representing the collector recite generic statements about a lender’s record-keeping practices and never get into the specifics of the case, let alone actual offer evidence to prove the claim.
Unfortunately, many times people being sued over a debt never come to court to defend themselves. Some are victims of so-called sewer service, which is when a debt collector only pretends to send the defendant the necessary notifications to let them know about the suit and the court date. A class-action lawsuit was filed in New York over this practice in 2009. When debtors don’t show up, the bank or collection firm wins by default, which happens about 95% of the time, the Times says.
On the other hand, when consumers do show up in court to defend themselves, their chances of success are good, says NEDAP, an advocacy group for low-income New Yorkers. The burden of proof is on the creditor to prove that it has the right to sue you, that you are the person who owes the money, and that the amount is correct.
“You should not ignore a debt collection lawsuit because you cannot find a lawyer. Hundreds of low income New Yorkers defend themselves in debt collection cases every single day, and many do so successfully,” NEDAP’s website advises. “Debt collection attorneys often rely on the fact that unrepresented defendants do not know their rights.”
Robo-testimony isn’t just a problem in New York debt collection cases. The Times talked to “dozens” of legal and regulatory professionals around the country who described credit card collectors’ efforts to collect money from people based on the slimmest and most tenuous of claims as “increasingly common.”
JP Morgan Chase, the biggest bank in the U.S. by assets, came under investigation earlier this year after whistleblower Linda Almonte charged that the financial giant routinely pressured employees to verify debts that couldn’t be proven and in many cases were lower than the amount claimed. “Nearly half of the files her team sampled were missing proofs of judgment or other essential information … nearly a quarter of the files misstated how much the borrower owed,” an article in American Banker says. (Chase disputed the claims to TIME Moneyland.)
Earlier this year, a court in Tennessee threw out a pair of affidavits submitted by a debt collector suing a person over roughly $15,000 in debt originally connected to a Sears store credit card. In its report about the case, the National Consumer Law Center writes, “The affidavits did not refer to specific business records… Rather, the affidavit referred to representations that the original Sears records were provided to the debt buyer without identifying who made the representations or specifying any particular record.” The court ruled that this kind of sloppy paperwork is inadmissible as evidence.
The moral is: Never ignore a debt collector. “You have to file a formal written response to the debt collector’s claim with the Court. In a debt collection lawsuit, if you don’t file a formal written response with the Court, it’s like admitting that you owe everything they sued you for,” says Fred Martens, a Washington-based attorney, in an online know-your-rights worksheet for people facing a debt-collection lawsuit. “When you stand up to them and fight back, they sometimes run away.”