When we collect accounts using a legal channel, courts in certain jurisdictions require that a copy of the account statements or applications be attached to the pleadings to obtain a judgment against the account debtors. If we are unable to produce account documents, or if courts require documentation that the original creditor is not able, or contractually required, to provide, these courts may deny our claims. As our industry has increased its use of legal collection tactics significantly over the last several years, we have witnessed the institution of increased documentation requirements, evidentiary requirements in excess of those required for claims brought by entities other than debt purchasers and more consumer friendly behavior from judges and courts in various jurisdictions. We believe the current trend toward consumer protectionism could lead to judicial proceedings or practices that create increasingly challenging requirements that could limit our ability to effectively pursue litigation on accounts, or substantially increase our costs incurred in pursuing our legal remedies.
Jog down a bit and Square Two also says this:
Negative attention and news regarding the debt collection industry and individual debt collectors may have a negative impact on a debtor’s willingness to pay the charged-off receivables we acquire.
As Audit contributor Felix Salmon says over at Reuters, this is what should happen, if only to force the banks to start keeping good records about who owes them how much.
A tip of The Audit’s green eyeshade to American Banker for bringing the news, and it’s good to see Joe Nocera adding a little negative attention too.
Ah, the old "zombie debt" game. This has been a problem for at least a decade. A lot of the debts--or parts of them, anyway--are valid. But a lot of them aren't. I got dunned twice, by two different banks, for "low account balance" and "overdraft" fees on checking accounts I had closed. The notices came years after the fact, but as I save a lot of my financial stuff and correspondence, I was able to piece together what happened.
I'm moving; call the bank and ask how to close the account. They tell me (a version of "write a check to yourself and send us a letter"), and I comply.
Next, the bank notices my empty account, but fails to register my "please close it" letter. It charges me a "low balance fee" of, say, $10 per month. But because the account is at zero, this "low balance fee" then triggers an "overdraft" fee--another $30, plus compound interest at whatever punitive rate they've set. This goes on for maybe three months. It happens without my knowledge.
Next, the bank, now holding an "asset" consisting of this trumped up debt, reports whatever it reports to regulators, shareholders, and the like. It also tells Trans Union, Equifax, etc. about my shameful delinquency. My credit rating plummets. But I still don't know this, because no one has notified me. I do get a mortgage at a substantially too-high rate but, being a first-timer, I don't realize I'm being hosed.
A year goes by, the bank takes a "charge-off" and sells my debt. The buyer tacks on some fees and other nonsense bringing it to an even $300 or so. Then they track me down and present the bill.
I demand they validate the debt. The debt buyer sells the debt on. The new owner tacks on their fees and again sends me a dunning letter.
Rinse and repeat.
In my case, I was able to contact the appropriate VPs at the originating banks with letters outlining my understanding of their business model ("brilliant but, unfortunately, fraud") and, in relatively short order saw the dunning letters cease.
The credit agencies--which had libeled me by publishing false claims which they failed to fact-check and which materially damaged me? No satisfaction there. I've since been informed that they are exempt from libel laws. Still not sure how or why that is.
Still, the business model lives on. And why should it not? Even at .5 cents on the dollar, the banks are creating money out of nothing. And they face no consequences for doing it.
#1 Posted by Edward Ericson Jr., CJR on Thu 5 Apr 2012 at 01:37 PM
BofA's reputation is not the best, so I am not surprised with this unfair game.Scheme is quite simple, when a creditor( in this case it's a Bank of America) sells bad credit-card debts to a third party,collection agencies.These collection agencies have a very agressive reputation, and it's good if people who are in such situation and who's debts was bought by collection agency can afford to hire attorneys to fight these debt collectors.So I think that better to be careful with banks and pay off your bills and
bad credit cash advance in time, because if you will stop paying off your debt and leave it, later one of collection agencies will buy it, and it doesn't mean anything good.
#2 Posted by Nick Adams, CJR on Fri 13 Apr 2012 at 05:46 AM