Debt Collection Robo-signing May Be More Prevalent Than Foreclosure Robo-signing

Last fall, mortgage lenders came under fire for a practice called "robo-signing

," whereby employees signed thousands of affidavits attesting to the accuracy of financial documentation without truly investigating the documentation. This practice led to lenders foreclosing on people's homes without the proper documentation. It also, understandably, led to public outcry. People were being kicked out of their homes unnecessarily and unfairly, simply because of shoddy documentation.

It turns out that robo-signing may be even more prevalent in the debt collection industry than it is in the mortgage industry. As was recently reported, one of the country's largest debt buyers has taken consumers to court based on affidavits signed by an employee who had died in 1995. Although the debt collection agency subsequently said that the affidavits were supplied from the company from which they'd purchased the debt, the problem seems rampant.

For example, a New York federal judge has allowed a class action suit against a debt collector and a law firm to move forward. The suit alleges that the debt collector and law firm engaged in racketeering (violating the RICO Act) by robo-signing debt validation affidavits and obtaining judgments against consumers, then threatening to freeze their bank accounts or garnish their wages. The law firm named in the suit apparently filed more than 100,000 lawsuits against consumers, and is being accused of what's termed "sewer service," telling the court that it delivered the proper notifications to consumers but never actually doing so.

Why is this a big deal? Because these affidavits are supposed to provide supporting documentation that the consumer being sued actually owes the debt. Judges use this documentation to decide in favor of the debt collection agency. With a judgment in hand, the debt collection agency can then garnish a consumer's wages or freeze his or her bank account.

All too often, consumers don't understand the importance of debt validation, or the role that attestations can play in court cases. That's why some state attorneys general are investigating the robo-signing practice, and why the Federal Trade Commission has urged states to require debt collectors and debt buyers to disclose more information to consumers.

If you're a consumer who has been served with court papers regarding a debt, it is critically important that you request (in writing) and obtain validation of the debt. The information you receive should include information about when the debt was incurred, the name of the original creditor, and the amount of the debt. If the information you receive doesn't match your records, you should dispute the debt (again, in writing) within 30 days of being contacted by a debt collection agency. Filing a dispute helps you preserve your rights.

If you've receive documents that you are being sued in court regarding a debt, and you think the documentation is inaccurate, it's crucial that you appear in court and either dispute the debt or the validation process. If you find that your bank accounts are inexplicably frozen or that your wages are being garnished, contact a fair debt attorney immediately. You could be the victim of an all-too-prevalent robo-signing practice.

by: Sergei Lemberg

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