US credit card companies have been churning out lawsuits and improperly collecting debt from consumers 90 percent of the time, at least according to a New York judge who deals with these cases.
Lawsuits produced by credit car companies to recoup unpaid bills often rely on inaccurate documents, incomplete records and generic testimonies from witnesses who repeatedly testify, the New York Times reported. The companies often sue clients for more money than is owed.
“I would say that roughly 90 percent of the credit card lawsuits are flawed and can’t prove the person owes the debt,” said Brooklyn civil court judge Noach Dear. The judge told the Times he sees as many as 100 such cases a day.
By “robo-signing” documents, banks “robotically” mass-produce similar papers for different clients, without properly reviewing them. In the process some of the papers get falsified.
Lenders often try to collect money from clients who have already paid their bills. Other times, they increase the lenders’ debt by unfairly adding fees and erroneous interest costs.
Some clients claim they don’t owe anything, but most disagreements come from credit card companies conflicting with clients about how much is rightfully owed.
But in 95 percent of lawsuits, the credit card companies win – even though the lawsuits sometimes include falsified credit card statements produced years after the borrowers fell behind on payments.
A former JPMorgan Chase employee admitted that nearly 23,000 delinquent accounts had incorrect balances.
Taryn Gregory said she was sued by Discover for more than $7,000 in credit card debt, even though she had only accumulated $4,000. Upon examining the lawsuit, the Times found that the documents said they were produced in 2004, even though the advertisements on the bottom of the page were from 2010.
American Express borrower Felicia Tancreto was sued for $16,000. She admitted having fallen behind on payments, but contested owing that much. After attending court, the judge dismissed the lawsuit for lack of evidence.
But in most cases, the borrowers do not attend court, causing the lenders to win 95 percent of the time.
“Our concerns center on the fact that debt collection lawsuits are a pure volume business. The documentation is very bare bones,” said Tom Pahl, assistant director for the Federal Trade Commission’s division of financial practices.
The extent of the “robo-signing” is not known, but the erroneous lawsuits have been a problem for years. In April 2011, JPMorgan Chase & Co. abandoned over 1,000 debt collection lawsuits after their bank documentation was questioned by courts.
But unless lawsuit victims defend themselves in court, suspicious judges suspect the credit card companies will continue to get away with overcharging their clients.
“I do suspect flaws,” said Harry Walsh, a superior court judge in California. “But there is little I can do.”