Managing Debt

Robo-Signing? Debt Collectors Invented It

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The entire mortgage industry nearly ground to a standstill after revelations that robo-signers may have illegally evicted families from their homes by signing thousands of foreclosure affidavits a day. But a recent story by The New York Times finds that debt collectors have been robo-signing for years.

The practice may be against the law. And while they may not cause anyone to lose their homes, robo-signing debt collectors do create the same problems, like assigning debt to the wrong person, the Times found.

By the time debt collectors get involved, “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,” Richard Rubin, a Santa Fe, N.M.- based consumer lawyer, told the Times.

Federal regulators already knew there were problems with the debt collection system.

“The system for resolving disputes about consumer debts is broken,” according to a report published in July by the Federal Trade Commission. Among the major problems, the commission found that debt collectors often file lawsuits against consumers based on insufficient evidence, and fail to properly notify consumers that they’re being sued.

One reason for such widespread problems is that debt collectors do not acquire all the background information they need about the debts and the people who owe them, the Times found. That’s usually because buying more information costs them money, according to the Times.

When these cases do go to trial, consumer attorney Jerry Jarzombek often compares debt collectors’ lawsuits to a traffic accident. “‘Your honor, imagine if someone came in here to give eyewitness testimony in a traffic accident case and they didn’t actually see the crash,’” Jarzombek told the Times. “’They just read about it somewhere. Well, this is the same thing.’ The debt buyers don’t know anything about the debt. They just read about it.”

Image by Sean MacEntee

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