Joe Nocera Highlights Bank’s Debt Collection Practices
I’ve been following Jeff Horwitz’ excellent series on credit card debt collection at American Banker, which I’ve chronicled in a couple posts. The short version is that the attention to detail in credit card debt information is as thorough and well-kept as it is in foreclosure and mortgage information.
Now Joe Nocera has picked up on this series and brought it from more of a trade publication to the pages of the paper of record. Good for him.
You can’t read the series without wondering whether banks have learned anything from the foreclosure crisis, which resulted in a $25 billion settlement with the federal government and the states. That crisis was the direct result of shoddy, often illegal practices on the part of the banks, which caused untold misery for millions of Americans. Part of the goal of the settlement was simply to force the banks to treat homeowners with some decency. You wouldn’t think that that would be too much to ask. But it was never going to happen without the threat of litigation.
As it turns out, this same kind of awful behavior has been taking place inside the credit card collections departments of the big banks. Records are a mess. Robo-signing has been commonplace. Collections practices hurt primarily the poor and the unsophisticated, just like foreclosure practices. (I sometimes wonder if banks would make any profits at all if they couldn’t take advantage of the poor and unsophisticated.)
Not only are the banks ripping off customers by selling their debt to collection agencies with wrong information, they’re really ripping off the collection agencies. They have put them in a position where all the records about the credit card debt are essentially unverifiable. And it’s given people harassed by these debt collectors a very simple path to eliminating the issue totally: just contest the debt in court and watch the collection agency melt away:
But if you do find out that a collections agency is suing you for unpaid credit-card debt, then you should absolutely turn up in court and ask for documentation. By that point, of course, any hit to your credit will already have happened, so you can’t damage your credit score by fighting the suit and refusing to pay.And the simple act of asking the plaintiff to prove that you owe what they say you owe will very often make the whole suit disappear.
So get the word out: if you, or anybody you know, gets sued for unpaid credit-card debt, the first thing you should do is simply ask the person suing you to prove that you owe what they say that you owe. The onus is not on you to provide documentation that you paid off the debt, or anything like that. The onus is on them to prove that the debt exists.
This doesn’t mean that this is an easy task. One woman who did contest a purported debt on a balance she paid off took three years getting the collector to back off. And lots of people – most of them who deal with this, in fact – not only don’t have lawyers on retainer, but cannot afford them for this purpose.
But there is very little legal training you actually need to contest this. “Show me the debt” will do. The collection agencies don’t want to go through the trouble of providing proof. In most cases, they buy the debt with the knowledge that the bank cannot even attest to the accuracy of the information.
Legal aid counselors and groups should distribute this knowledge quickly, along with the Consumer Financial Protection Bureau. If done in a coordinated fashion, it could actually significantly reduce the scourge of debt collection agencies.