Robo-signing by debt buyer companies under fire

On Behalf of | May 9, 2013 | Debt Relief |

Did you know that about all it may take for a debt collection judgment to be won against a consumer is a signed affidavit from a debt buyer saying the money is owed? It’s a facet of the debt collection system in Texas and the rest of the U.S. that many courts have found acceptable and it’s resulted in many decisions allowing debt buyers to seize debtor assets; often without the debtor even knowing what’s happening.

But in the past few years, the power of the affidavit has begun to be called into question by federal regulators, state officials and courts. The reason is that a lot of the affidavits have been revealed to have been robo-signed. The same practice that undermined the validity of foreclosures in the past few years is now eroding confidence in the debt collection industry.

Worse, though, is the untold effect this has likely had on the systems that consumers depend on to obtain debt relief when they are thrown into financial difficulties. 

Here’s a quick snapshot of how the system has reportedly worked. Prospective debt buyers file a suit seeking the right to collect a debt. Rather than provide actual account records, the buyers submit a signed affidavit swearing that they have reviewed the accounts and know the debt claims are valid.

The problem is that in a lot of cases filed since 2005, it turns out that no one ever reviewed the accounts at all. They just robo-signed affidavits and sent them to the courts.

Some consumers were targeted for the same debt several times. Many never even knew they were targets, though the affidavits said they’d been informed. As a result of such tactics, one consumer advocacy group says that debt buyer actions during one 30-month period ending in 2008 resulted in more than $1 billion in judgments and settlements in New York City alone.

Officials in the debt collection industry say the issue was merely one of procedure and that it has since been addressed.

Whether that’s true or not, this story points out that the system is only as good as the accuracy of the information that is fed into it. And where the system appears to be stacked against the consumer, the need for protecting individual rights becomes ever more essential.

Source: Fox News, “Robo-Signed Collection Cases Under Fire,” Fred O. Williams, April 26, 2013