California sues JPMorgan Chase for Unlawful Debt Collection Practices

The California Attorney General's office has filed suit against JPMorgan Chase for their use of robo-signing affidavits to support debt collection lawsuits. 

What's robo-signing? It's a practice of signing legal documents where the signer has no real knowledge of the information they're stating is true with their signature. In credit card lawsuits, this is often done by signing affidavits claiming that the offered credit card statements are true and accurate records of the account. The reason it's called robo-signing is that the signer doesn't actually have any personal knowledge that the information is true. They are given a stack of affidavits at a time and, at best, confirm the information in the affidavit matches the information on their computer screen. Effectively, the affiant (the person who signs the affidavit) is just a robot.

The problem with robo-signing is that these affidavits are used in court to prove the debt is valid and the amount claimed is accurate. Courts rely on these affidavits the same as if the affiant actually testified. But if the affiant doesn't actually know if the information is true, then their testimony is inherently unreliable, but there's no way for a judge to know this just by reading the papers. It is the creditor's job to prove to the court the debt is valid, but instead of providing real proof, they sloppily produce these affidavits. These unreliable affidavits result in thousands of unlawful judgments against consumers. And judgments can give a creditor the right to attach wages and place liens on property.

I'm glad to hear that state agencies are taking notice of the egregious credit card debt collection practices. Hopefully, the trend continues and other states join the fray. Thanks to the LA Times for the coverage.

April News and Recalls

BBA Public Interest Leadership Program

One important component of my consumer advocacy practice is pro bono service. I volunteer every Wednesday to with the Volunteer Lawyers Project Fair Debt Collection Clinic at the Boston Municipal Court. This program has done an incredible job providing effective legal services to consumer debtors, saving pro se litigants thousands of dollars by identifying defenses to creditor complaints and counterclaims for unlawful debt collection practices.

The reason I mention the VLP program today is one of the staff attorneys for the project, Hsindy Chen, has been selected for the Boston Bar Association's Public Interest Leadership Program. The program selects 15 attorneys each year to implement public service initiatives, and this year they have certainly chosen wisely. You can see the list of all this year's selections along with their bios here.

Challenging Proof of Assignment

One of my primary practice areas is defending collection lawsuits. In most of these cases, the plaintiff (the one bringing the lawsuit) is a third party debt buyer. This means they aren't the ones who actually extended credit, but bought the rights to collect the debt from the bank. In order to win the lawsuit, the debt buyer must provide evidence it is the owner of the debt. This is called proof of assignment.

Challenging proof of assignment can be one of the most useful defenses for consumers. Debt buyers don't buy consumer accounts one-by-one. Instead they buy them in huge portfolios, often numbering in the thousands. Many have even started securitizing the debts, just like the mortgage industry, where loans are pooled into trusts and the income from the debt collection is sold to investors. With such complicated transactions, its often very difficult for a debt buyer to provide proof of ownership in any one lawsuit.

Most of the time the debt buyer will at best have two things, both insufficient. One is an affidavit from an employee who states they have read records that the debt was purchased. The problem? Its an after the fact description of the assignment without proof it really occurred, and the employee doesn't have any personal knowledge it actually happened. The other thing debt buyers will produce is the bill of sale for the whole portfolio. It'll say the debt buyer purchased a group of collection accounts from the bank, and a list of the accounts is attached as an exhibit, but the exhibit will not usually be included. Here, the problem is that they've provided proof they bought someone's debt, but not yours.

A consumer attorney can be key to effective representation in debt collection lawsuits because he or she will have the experience and knowledge to find out what proof the debt buyer has, and challenge it.

Corrective Solutions and BounceBack may be violating your rights

Coleman Herman of the Boston Globe recently wrote an article about Corrective Solutions and BounceBack engaging in contracts with Massachusetts District Attorney offices to collect fees involved with consumers writing bad checks.

These debt collectors were using stationary that looked like official district attorney letters. They included statements like "Official Notice - Immediate Attention Required" and "A conviction for a bad check of $250 or more is classified as Larceny with a potential jail sentence ranging up to five (5) years". The letters would go on to demand the full payment of the check as well as up to $235 in additional fees. 

The problem? Well these collection letters are unlawful. First, neither Corrective Solutions nor BounceBack are licensed by the Division of Banks, which is a requirement for any debt collector to collect against Massachusetts consumers. Second, these letters are illegal under the Fair Debt Collection Practices Act. Under the FDCPA, a debt collector cannot deceive a consumer into thinking it is a governmental agency or works for one. Debt collectors also can't threaten to take legal action it is not legally capable of. Even if the statement about the penalties for bad checks were true, a debt collector can't bring criminal proceedings. 

If you have received letters from either of these companies or letters that look like the ones described above, you should contact a consumer attorney immediately. Even if you owe the debt, you have rights.