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"Robo-Signing" Finds its Way to Consumer Debt Collection

Mock credit card.jpgA controversial paperwork practice used by lenders in mortgage foreclosure cases may have found its way to credit card collection debt.

Robo-signing is the latest wrinkle in unscrupulous debt collection practices. In the mortgage industry, a "robo-signer" is a person who quickly signs hundreds or thousands of foreclosure documents in a month, despite swearing that he or she has personally reviewed the mortgage documents. Robo-signers have also been accused of failing to notice that key documents are missing from a foreclosure file in spite of signing documents with the courts that the folder is complete.

In fact, in one 2010 Florida deposition, a mortgage lender's employee admitted that she signed about 750 mortgage foreclosure documents a week, that she did not read the documents as she only spent about 30 seconds on each file and that she rarely signed the documents in the presence of a notary public in clear violation of language in many of the documents.

Similar strategies are showing up in 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 debtor actually owes the money under dispute.

Apparently, robo-signing and sloppy paperwork isn't just a problem in New York debt collection cases. In January 2012, Maryland's Court of Appeals, the state's highest court, adopted new rules requiring that "debt buyers" provide more proof before being allowed to obtain affidavit judgments against consumers to recover alleged debts. Debt buyers get affidavit judgments when the alleged debtor does not respond to the lawsuit. The new rules require additional information from debt buyers bringing these cases to court, including better proof of an existing debt or interest owed on a debt, and proof from the debt buyer that they own the debt they are trying to collect.

Debt buyers are companies that specialize in buying debts owed to creditors, usually credit card companies. They buy those debts for a tiny fraction of the amount owed. Debts may be sold to other debt buyers several times, and the documentation - the proof - that the debt is owed is sometimes little more than the person's name, last known address and Social Security number.

Debt buyers sue the person they believe to be the debtor in District Court, seeking an affidavit judgment, "knowing from experience that the defendant often does not file a notice of intention to defend or appear for trial," according to a report issued by the court. The problem -- which has been well documented -- is that the plaintiff often has insufficient reliable documentation and had the debtor challenged the action, he or she would have prevailed, according to the court's study of the issue.

The Judiciary Rules Committee noted in its report that the problem "has received national attention and has generated concern in Maryland by the Commissioner of Financial Regulation, the Office of the Attorney General and the District Court."

Belsky, Weinberg & Horowitz have represented consumers in mortgage, bankruptcy and debt collection cases for many years. Although foreclosures are difficult to stop once they are started, our attorneys have represented individuals facing foreclosure for more than 20 years and have achieved a very high success rate in stopping foreclosure sales, reorganizing client finances and helping with unpaid income tax problems through the use of the Chapter 13 bankruptcy process.

In Chapter 13, the foreclosure, repossession, garnishment, seizure or legal action is "stayed" or placed on hold and a court-approved reorganization plan is put into place which pays the creditors an amount to satisfy their claims. Clients obtain a fresh start without the burden of long-standing past due debt. This process saves the clients' home, stops interest from accumulating and offers a great deal of emotional relief from pressing creditor action to collect debts.

Call our bankruptcy attorneys at 410-234-0100 or email us for a free consultation and let us help you to resolve your credit and debt problems through prompt and professional action that will make what otherwise would appear to be an impossible situation a very manageable one for you and your family!

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