Revenge of robo-signing: the credit card lenders

Robo-signing, the practice of approving large amounts of loans without properly verifying them, is back in the news after having been a major player in the mortgage melt-down a few years back. This time, however, credit card companies seem to be playing fast and loose with loan verification.

Different lenders, same robo-signing

Major mortgage lenders like Bank of America and JPMorgan Chase were forced to suspend foreclosure operations in 2010, following the discovery of a proliferation of false legal documents created by robo-signing. Those lenders eventually paid out $26 billion to misled borrowers and their lawyers.

But it seems the nation’s credit card companies did not take heed of the lesson learned by mortgage lenders. Companies such as Citigroup, Discover Financial and American Express are now revealing showing their hand by taking so-called delinquent borrowers to court. However, time and again, they are producing erroneous documents that point to a widespread use of robo-signing in the industry.

As high as 90 percent

The New York Times said that such court cases are littered with “erroneous documents, incomplete records and generic testimony from witnesses.” One civil court judge in  New York estimated that the problem is seen in as many as 90 percent of credit card lawsuits.

Some credit card companies are actually taking people to court who are paid up on their loans. Others are beefing up balances owed with phony fees and inflated interest charges. In some cases, says the New York Times, even when the lenders have a legitimate case, they still may not have followed legal procedures for approving the loans.

Taking borrowers to court to collect on inflated or erroneous debts is very reminiscent of the the foreclosure practices that brought down the mortgage industry.

Recouping losses to regulation

Adam Levin, co-founder of Credit.com, told ABC that credit card companies are desperate to make up the income they lost to federal regulations that restricted outrageous fees.

New York-based consumer attorney Brian Bromberg said that the courts are wising up to the tactics:

“What we’re finding more and more is, once you start taking depositions of the people who are signing off on the original documents, they know nothing.”

Your day in court

According to Daily Finance, however, as many as 95 percent of victims never show up for court, forcing a default victory on the side of the lenders.

Levin urged borrowers to seek out legal help if they feel they are facing erroneous collection proceedings from credit card companies.

Bottom line: don’t be afraid to take on card lenders. Often they may be banking on that fear with cases that are easily punctured.

Sources

New York Times
Marketplace
Daily Finance