New York – In a recent rash of lawsuit filings, credit card companies are taking their cardholders to court over delinquent accounts. These lawsuits involve consumers who either deny owing any monies at all or concede they are behind on their payments, but dispute the amount they actually owe.
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The New York Times reports (http://nyti.ms/R99JCm) that borrowers owe a staggering $18.7 billion in credit card debt according to Equifax and Moody’s Analytics. Companies such as Citigroup, Discover Financial, and American Express are all trying to “clean up their books” via the courtroom.
Unfortunately, judges say that many of the documents presented to them as evidence of a customer’s delinquency are mass-produced, inaccurate or incomplete. A number of credit card statements offered into evidence are even falsified. In some cases, companies inflate debts by adding bogus fees and interest. In others, attempts are being made to collect debts from customers who have already paid their bills.
Noach Dear, a civil court judge in Brooklyn who said he presides over more than 100 such credit cases daily observed, “I would say that roughly 90 percent of the credit card lawsuits are flawed and can’t prove the person owes the debt.”
Last year, Judge Dear dismissed a suit brought by American Express which had sued Felicia Tancreto alleging she owed over $16,000 and had ceased making payments. Dear stated that the lawsuit lacked evidence and that the testimony against Ms. Tancreto amounted to “robo-testimony,” because the American Express employee who testified also gave the same general remarks and evidence in other consumer cases.
A spokeswoman for American Express, Sonya Conway, defended the practices of American Express. “We strongly disagree with Judge Dear’s comments and believe that we have a strong process in place to ensure accuracy of testimony and affidavits provided to courts.”
The Federal Trade Commission (FTC) is now working with the court system to make certain that the process for suing delinquent borrowers is a fair one. “Our concerns center on the fact that debt collection lawsuits are a pure volume business. The documentation is very bare bones,” said Tom Pahl, assistant director of the FTC’s division of financial practices.
A number of judges have said that unless a cardholder presents in court to challenge a lawsuit, judges are not permitted to fully investigate a bank’s documents to search for any irregularities. Rather, they are typically forced to issue a summary judgment, which hands an immediate victory to the banks.
“I do suspect flaws,” said Superior Court Judge Harry Walsh of Ventura, California. “But there is little I can do.”