The Alice Through the Looking Glass practices, of at best adherence to the mere appearance of legality, increasingly appears to pervade the nether world where financial players go in search of money they think might be due to them. And the big problem is the word “might”. Banks proceed as if there right to collect was an ironclad certainty, when both the high error rate in their own processes, plus their cutting of legal corners to save costs, shows their confidence is unwarranted.
While we have seen abuses aplenty in mortgage-land over the last six weeks, they pale compared to normal practices in the debt collection arena. Some factoids from a New York Times story:
Debt collection robo signers way outdo their mortgage peers in productivity. The highest output figure I recall seeing for a foreclosure robo signer is 10,000 affidavits a month, while the Times identifies a debt collection robo signer, Cherie Thomas, who executed 2000 affidavits a day. Her former employer now claims that workers like her now sign a mere “several hundred” affidavits per day.
Because these debts (auto loans, student loans, credit card debt) are traded several times, errors creep in and compound. One JP Morgan Chase employee found errors in 5000 of 23,000 delinquent accounts the bank was in the process of selling. When her manager ignored the information she provided, she alerted the general counsel. She was fired within days, apparently in retaliation.
The debt collector records and practices are so bad that the attorneys who represent borrowers report extremely high success rates, with one claiming he has lost only four cases out of roughly 5000.
From the New York Times:
Banks have been under siege in recent weeks for widespread corner-cutting in the rush to process delinquent mortgages. The accusations have stirred outrage and set off investigations by attorneys general across the country, prompting several leading banks to temporarily cease foreclosures.
But lawyers who defend consumers in debt-collection cases say the banks did not invent the headless, assembly-line approach to financial paperwork. Debt buyers, they say, have been doing it for years.
“The difference is that in the case of debt buyers, the abuses are much worse,” says Richard Rubin, a consumer lawyer in Santa Fe, N.M.
“At least when it comes to mortgages, the banks have the right address, everyone agrees about the interest rate. But with debt buyers, the debt has been passed through so many hands, often over so many years, that a lot of time, these companies are pursuing the wrong person, or the charges have no lawful basis.” …
In some instances, banks are selling account information that is riddled with errors.
More often, essential background information simply is not acquired by debt buyers, in large part because that data adds to the price of each account. But court rules state that anyone submitting an affidavit to a court against a debtor must have proof of that claim — proper documentation of a debt’s origins, history and amount.
Without that information it is hard to imagine how any company could meet the legal standard of due diligence, particularly while churning out thousands and thousands of affidavits a week…..
That was made vividly clear during the deposition last year of Jay Mills, an employee of a subsidiary of SquareTwo Financial (then known as Collect America), a debt-buying company in Denver.
“So,” asked Dale Irwin, the plaintiff’s lawyer, using shorthand for Collect America, “if you see on the screen that the moon is made of green cheese, you trust that CACH has investigated that and has determined that in fact, the moon is made of green cheese?”
“Yes,” Mr. Mills replied.