subject: Kissing Cousins: Mortgage Foreclosure Abuses and Debt Collection Abuses [print this page] Kissing Cousins: Mortgage Foreclosure Abuses and Debt Collection Abuses
Huge banks across the country have recently grabbed headlines for jamming foreclosures through the legal process using affidavits that said information was verified when it wasn't. As recently reported in the New York Times, these "robo-signing" practices mirror those engaged in by debt buyers. The question becomes, Why do banks that cut corners with paperwork cause an uproar, while debt buyers who have been cutting corners for years still scurry in the shadows?
The New York Times revealed that an employee at Asset Acceptance debt collection agency said under oath that he had to sign hundreds of legal documents a day that attested to him having reviewed and verified the records of consumers who owed debts. Similarly, a woman who worked for Asta Funding debt collection agency said under oath that she had signed 2,000 affidavits per day declaring that she had validated consumer debts. That would leave her hardly enough time to look up a consumer's name, much less validate a debt.
Taking a step back, it's important to note that achieving success in the debt buying arena is simply a numbers game. Debt buyers purchase written-off debt for pennies on the dollar, and then try and collect from consumers. Sometimes they contact the right people, sometimes they harass the wrong people into paying, and other times they try and collect even when the statute of limitations has run out.
The Times illustrates this numbers game beautifully, citing JPMorgan Chase as an example. Chase was getting ready to sell 23,000 accounts for 13 cents on the dollar. The debt had a face value of $200 million, and Chase expected to get $26 million. Even if the debt buyer collected a quarter of the outstanding debt, he would be able to make close to 100% profit.
But the larger point is that the veracity of the data Chase was planning to sell was questionable. Indeed, when an employee brought errors to the attention of her manager, she was urged to ignore them. When the employee went to Chase's legal counsel, she was fired.
When inaccurate data gets into the hands of debt buyers, they seem to run with it. Debt buyers essentially swear to having verified the debt, when they most often rubber stamp whatever data is on the computer screen. Because debt with greater substantiation is more expensive than debt that just has the consumer's name, address, and dollar amount, debt buyers really have to dig to validate the debt. And that's not cost-effective. Instead, they often simply file lawsuits against consumers and obtain default judgments - even if they have the wrong information or the consumer doesn't realize he or she is being sued.
What's the takeaway? Consumers must realize that debt buyers routinely engage in shady practices that mirror those for which mortgage lender have come under fire. It's important that consumers assert their rights under the Fair Debt Collection Practices Act and demand that the debt be validated. If a debt buyer can't or won't provide proof, that's a violation of the law.
