Consumer Alert

The problem of robo-signing mortgage related documents has received a great deal of attention in both the courts and the press. A similar problem, possibly affecting many more individuals, may exist in the debt collection industry. Peter Holland of University of Maryland Francis King Carey School of Law has written, “The One Hundred Billion Dollar Problem in Small Claims Court: Robo-Signing and Lack of Proof in Debt Buyer Cases,” published in 6 J. Bus. & Tech. L. 259 (2011)

Here is the abstract:

Recent years have seen the rise of a new industry which has clogged the dockets of small claims courts throughout the country. It is known as the "debt buyer" industry. Members of this $100 billion per year industry exist for no reason other than to purchase consumer debt that others have already deemed uncollectable, and then try to succeed in collecting where others have failed. Debt buyers pay pennies on the dollar for this charged off debt, and then seek to collect, through hundreds of thousands of lawsuits, the full face value of the debt. The emergence and vitality of this industry presents several legal, ethical and economic issues which merit exploration, study and scholarly debate.

This article focuses on the problem of robo-signing and the lack of proof in debt buyer cases. Although this problem has received limited attention from the media and from regulators, there is a paucity of legal scholarship about debt buyers in general, and this problem in particular. This article demonstrates that robo-signing and fraud are rampant in this industry, and that the debt buyers who pursue these claims often lack proof necessary to show that they own the debt, and often lack proof even that a debt was ever owed in the first place. The fact that this lack of proof has led to consumers being sued twice on the same debt demonstrates the due process concerns which are implicated when courts enter judgments against consumers based on robo-signing and insufficient proof.

This article calls on courts to hold plaintiffs in debt buyer cases to the same standards required of other litigants. Courts must require a demonstration of personal knowledge of the matter at issue before any affidavit is accepted, before any person testifies, and before any documents are admitted into evidence. Click here for more.

7 Tips for Holiday Shopping

Holiday shopping can be very stressful, time consuming, and expensive. If you plan it all out, you will find yourself far more prepared to handle the hectic holiday scene. From appropriately planning holiday expenses to finding the best price, a good game plan is the best way to maximize your time and money. For seven helpful tips for hassle-free holiday shopping, Click here for more.

Your Money

How should you allocate your assets? Click here for more.

For the Lawyers

Fair Credit Reporting Act preempts state law claims. The 7th Circuit held that the Federal consumer protection law completely preempts state claims brought by a borrower who claimed that her bank falsely reported to credit agencies that she was behind on her loan payments. The plaintiff sued in state court, alleging that Bank of America told credit agencies that she was behind in payments on a loan, even though the bank knew that she wasn’t. Her complaint asserted claims for willful violations of Indiana consumer protection law as well as violations of the Fair Credit Reporting Act [FCRA]. The FCRA generally provides that no requirement may be imposed under the “laws” of any state with respect to the furnishers of information to consumer reporting agencies. In finding complete preemption, the court rejected the plaintiff’s argument that the Act only prohibits claims brought under state statutes and not common-law causes of action, suggesting that such a conclusion was contrary to legislative-drafting manuals used by the House and the Senate. Click here for more.

To stop receiving email news alerts from the Center for Consumer Law, please click here.