Customers Pay Off Bank Of America Credit Cards, Get Sent To Collections Anyway

Over at AmericanBanker.com, there is the story of a Maryland woman who spent several years fending off debt collectors even though she had proof in writing that the Bank of America credit card account in question had already been paid off. And in a related investigation, it looks like she may be one of many BofA customers to end up in such a trap.

According to American Banker, BofA was selling off piles of supposedly credit card debts to at least one collections company with the caveat that it could not make “any representations, warranties, promises, covenants, agreements, or guaranties of any kind or character whatsoever” about the accuracy or completeness of the records.

The bank reportedly also warned that it might be unable to produce documentation to back up all the records and that some of the claims being sold might already have been extinguished or paid back in full.

And yet these possibly unreliable records were used to file thousands of lawsuits around the country, most of which ended in default judgments against the borrowers because they failed to show up in court.

Of note, reports American Banker, is that the documentation filed in these lawsuits includes only one page from the collection company’s purchase agreement with Bank of America — the section attesting to its ownership of delinquent credit card debt — but leaves out the 30 or so pages of disclaimers and caveats about possibly inaccurate records.

Collections companies say they are filing these lawsuits based solely on the information provided to them by the banks, so it’s ultimately the financial institutions who are responsible for the bad claims.

“We’re not getting what we need from the seller,” says a rep for the American Collections Association. “Consumer groups want to see original contracts and original documentation. That would make a lot of these debts disappear because a lot of that documentation may not exist.”

The Federal Trade Commission agrees that “Not enough information [is] flowing through to debt collectors… We can’t reach the banks to say ‘Thou shalt file the following pieces of information with the loans’… We’re trying to do most of this through either law enforcement, which is case-by-case, or by jawboning the industry.”

Unfortunately, because so few people challenge these potentially bogus lawsuits, the extent of the problem is not fully known.

Last month, the Consumer Financial Protection Bureau announced its intention to seek oversight of the nation’s largest debt collectors and credit bureaus.

A rep for the CFPB says the agency is “very concerned that the same shortcuts and violations may be occurring.”

Bank of America Sold Card Debts to Collectors Despite Faulty Records [AmericanBanker.com]

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  1. az123 says:

    First I highly suspect BofA is not the only bank doing this given the information in these articles. Secondly I think consumerist is doing a very poor job at representing the problem… which is that debt collectors are allowed to go sue people when they do not have documentation supporting the validity of a debt, well beyond someone saying X person owes me some money.

    BofA clearly should be acting with more care, along with probably a lot of other banks that probably due the same thing, however the CFPB is taking the smarter approach, get debt collectors under control, that will fix many more problems.

    • qwickone says:

      I’m pretty sure you can file suit without any evidence/support. It would get thrown out when you challenge it, but that’s what the judge decides. IANAL, anyone know if this is correct?

      • bhr says:

        Yes, but there are a couple of real problems with them getting filed at all.
        1) It’s scary to get sued. Suddenly lawyers are calling/mailing to offer to defend you (in certain states), you get served papers (often by a deputy) ect..

        2) Default judgments. If you don’t show up in court the plaintiff can get (with minimal proof) a judgment against you. While you can appeal it it will cost you time and money, plus it puts a judgment on your credit. Some people are never served or served improperly. (my former roommate was served by them leaving the papers tacked to the door)

        3) Credit damage. Even it they don’t go to court you wind up with a collection on your credit that is hard to remove. If you go to court (even if you win) that’s another public record.

        4) Court is scary. Lawyers are expensive, the other side has an attorney, often has a witness and a big file of paperwork. The judges are predisposed to believe them. There is often an offer of non-binding arbitration, and you will be pressured to settle.

  2. Lucky225 says:

    Wahoo!!!! I so want to see (Worst) Bank of America end up as Worst Company In America this year :)

  3. GMFish says:

    If you get sued for old credit card debt, FIGHT IT IN COURT. I work in the court system. The attorneys bringing these claims never have any proof concerning the debt. No signed contracts, no signed receipts, etc. Every time someone showed up to court and fought back, they won.

    Debt companies buy up the debt for pennies on the dollars. They then farm the lawsuits out to attorneys in bulk for a set price. The attorneys actually only profit if defaults are entered. In other words, the more you fight the less the attorney makes. Eventually he’s spending his own money on the case and that’s when it gets dismissed.

    • Sorta Kinda Lucky Soul says:

      Since you’re an insider do you have any tips or steps for people to do this? Court is scary, judges are imposing and, unless you’re a lawyer, the whole process seems overwhelming. You’ve seen what goes down, what are the buzzwords you use, etc?

      Any help would be appreciated, I’m sure, by a number of people.

    • Kate says:

      The problem is, this means you have to pay for a lawyer to do this. It’s not fair that anyone can just pretend you have a debt and make you hire a lawyer to defend yourself from it and not suffer any damages from doing so.

  4. Maltboy wanders aimlessly through the Uncanny Valley says:

    BoA is going to win WCIA in a landslide.

  5. BeerFox says:

    The short version, for those still considering a business relationship of any sort with BoA (yes, I’m talking to all three of you):

    “This person used to be a customer of ours. We dunno if they owe us any money or not, but…well, here’s all their info. See if you can get something.”

    • lovemypets00 - You'll need to forgive me, my social filter has cracked. says:

      That really warms my heart. I had a Bank of America Credit card, after they bought another bank – MBNA maybe – and I never used it, and I canceled it, with no balance, 2 years ago. I saved the letter stating the account was closed and in good standing.

      And it’s not like I ever intentionally did business with BofA – it was sort of by proxy when they bought the bank I had a card with.

      Just one more thing to worry about.

      • BeerFox says:

        Yep, I’m actually in the same boat. Had a Fleet card, BoA bought them out. I immediately zeroed out the card and canceled it, so I’m wondering when I’ll get served with papers.

        • MaxH42 thinks RecordStoreToughGuy got a raw deal says:

          You already have, according to the process server.

          (Just making a point that that’s how a lot of default judgments work.)

          • Difdi says:

            Yup, it’s called sewer service. The more “reputable” ones will make sure the process server has an old address for you. The true scum will stuff the paperwork in the first sewer grate they come across and claim they served it on you.

  6. jrwn says:

    What would happen if everyone who had a debt collector demanded proof of the debt? Wouldn’t the whole system fold?

    • Lyn Torden says:

      No. Debt collectors do not have to provide any proof of anything unless and until the matter ends up in court. The only thing that a debt collector needs to do is provide a thinly defined, mostly worthless, “validation” of a debt in order to continue collecting, and that only if you ask for it within the first 30 days of when they CLAIM they sent you the very first notice. They can satisfy this “validation” by identifying the original creditor and the original charged off amount. And this is not even enough to prove they are the current assignee of the debt (much less that the debt is real and accurate).

      If everyone would just stop paying these debt collectors until they show proof (including proof of assignment), then yeah, that could put them in a pinch.

      Once it ends up in court, then the opportunity (but you must act to take advantage of it) to force them to prove these things exists. Just be sure to also raise the point in court, if they do succeed in proving everything, that they refused to do so when asked to, to allow you to know that there was a legitimate debt, and/or that they did own it, which you would have paid when that was shown … to show they acted “suspiciously and out of malice” … and ask for the judgment to … 1: not include interest for the time frame … 2: not include legal fees … and 3: be suspended for 90 days and to not be entered on the record if payment is completed.

      But if they cannot prove, then demand judgment on the counter-claims entered at the beginning.

      • Not Given says:

        You should always send a cease and desist letter, asking for validation of the debt, to the jokers if you know you don’t owe the money or if it is time barred. Include a demand that they not resell the invalid debt. Then you can sue the pants off them if you are bothered again. Send it CMRRR and keep the proof. If it comes back, refused, send an identical letter with proof of mailing from the post office. Do not open the original letter if it comes back, keep it for court when you sue.

  7. Important Business Man (Formerly Will Print T-shirts For Food) says:

    Noooo! Post this story next week! I want AT&T to win!

  8. Gorbachev says:

    Impeccable timing. Go BofA for WCIA2012!

  9. dolemite says:

    “We are not getting what we need from the seller…but we are going forward anyhow.”

  10. Daniel Svoboda says:

    “According to American Banker, BofA was selling off piles of supposedly credit card debts to at least one collections company with the caveat that it could not make “any representations, warranties, promises, covenants, agreements, or guaranties of any kind or character whatsoever” about the accuracy or completeness of the records.

    The bank reportedly also warned that it might be unable to produce documentation to back up all the records and that some of the claims being sold might already have been extinguished or paid back in full. “

    Congratulations, BoA. You just locked in my vote for you as Worst Company in America.

  11. sirwired says:

    The debt collector has ZERO room to complain here. They bought the information knowing it was incomplete and that they are legally obligated to abandon collection efforts against anyone who disputes the debt.

  12. Fubish says: I don't know anything about it, but it seems to me... says:

    FTC: “We’re trying to do most of this through either law enforcement, which is case-by-case, or by jawboning the industry”

    Yeah. I don’t think the industry is the one getting boned here.

  13. failurate says:

    Woo hoo! New business plan and all I need to get started is a ream of paper and a phone book.

  14. longfeltwant says:

    “Consumer groups want to see original contracts and original documentation. That would make a lot of these debts disappear because a lot of that documentation may not exist.”

    Yes, exactly. Thank you for understanding. Yes, if a lendor cannot document a debt, then yes exactly we want the debt to disappear. Great, now that we are all on the same page, you can please change your business process.

  15. Dan T. says:

    The courts should start ordering multi-million-dollar punitive damage awards against companies who do this, and personally against the officers and employees involved, as well as putting some of them in prison.

  16. Republicrat says:

    Nice of the ACA to refuse to take any responsibility for harming innocent BOA customers.

    BOA was a scumbag for selling these alleged debts, but the ACA (or its members) knew it was receiving debts that may not in fact be actual debts and refused to do any sort of investigation before trying to collect and take them to court.

  17. Polish Engineer says:

    Here’s what I simply don’t understand: it’s completely legal for a bank to put a disclaimer on a product that what they are selling may not actually be what they say it is, but a food producer cannot.

    A false debt claim can screw up the rest of your life, expired milk might put you out of commission for 24 hours.

    Just seems dorked up to me…

    • Difdi says:

      It’s worse than that. An individual who did what BofA is doing would go to prison for fraud.

      But a corporation? Business as usual. They probably won’t even be fined.

  18. damicatz says:
  19. Lolotehe says:
  20. SoCalGNX says:

    B of A also thinks its ok for them to not worry about paying taxes. This came directly out of the mouth of someone in their corporate office in conversation with me.

  21. lovemypets00 - You'll need to forgive me, my social filter has cracked. says:

    Let me get this straight – some random scammy debt collector can come after me for a balance on a BofA card that I canceled, that had no balance, because the debt collector bought records from BofA that may or may not show that I owe any money…they can try to hit me up for money anyway?

    And if that happens, I can get them into court, in my hometown, and ask for proof, and get money from them if they can’t provide proof?

    Is there a downside, other than the vacation day I’d have to take from work?

    :)

  22. oldwiz65 says:

    Typical for the BofA and the other big banks; they don’t care if the info is accurate or not, they just want money. I would consider this criminal activity, but the banks own enough people in Washington to protect them from all harm.

    The Republicans don’t care since the banks provide them with huge bribes.

  23. Shorebreak says:

    Matt Taibbi: Bank of America Is a “Raging Hurricane of Theft and Fraud”

    http://truth-out.org/opinion/item/8145-matt-taibbi-bank-of-america-is-a-raging-hurricane-of-theft-and-fraud

  24. Sad Sam says:

    This is why when you pay off a credit card you and close the account, you must keep that paperwork for the rest of your life.

    And if you do get demand from collection company, best to demand proof and then fight if and when the sue you. Even if you have no idea how to represent yourself in court, you’ll do a better job than simply letting a default get entered against you and then have it follow you around for the next 20 years. You can represent yourself in court, show up for every hearing, respond to every filing and you’ll be better off than doing nothing.

  25. audguy says:

    Great, I just paid off and closed my account last night…

  26. Press1forDialTone says:

    BankOfAmerica = GoodInitiallyInEarly1900s + EpicFail1970sOnward

    I have a closed account (“customer requested account closed”, ALWAYS get that status
    not “lender closed account” which can bang your credit score bigtime.

    Anyway, I’ve been paying it off with much more than minimum payments at of course
    a usurious interest rate which they say they will not change, and have been ontime
    for 18 months or more. An unexpected serious medically-related expense occurred
    in my family and I called BofA and told them with lots of lead time that I could only
    afford the interest for about 3 months. Suprisingly, they said thank you for notifying
    them and that the interest-only payment plan was fine. We agreed on which payments
    and they entered in their vast Bank of Ameriplex computer overlord. Well, amazingly
    the next three minimum dues were exactly the interest for that month which I paid on-time.

    Much to my anger, I got a letter from a third-party collection agency saying that I was
    3 months late with my payment to BofA and that that fact has been reported to the
    credit reporting agencies and that my account had been sold to them for collection.
    I, furious, called BofA and asked what the F*** was up (redact the F***). They said,
    yes my account had been transferred to an outside collection agency and that to bring
    the account current and back into BofA hands, I would have to pay -immediately-
    all three of the minimum payments (minus the interest I had already paid) for those
    months I had made an arrangement with them about PLUS a $50 penalty for EACH of
    the three months.

    Clearly, BofA is in a state of chaos driven by demonic possession and end-of-days
    policies. None of the fingers of -any- hand or toes of -any- foot at BofA know what
    any of the others are doing. They intentionally lie in order to screw around with
    people trying to get out of their clutches. One customer service rep supervisor
    who had worked there (non-recorded line of course) 25 years say there are
    policies supporting what was done to me and the only way to get away from it
    is to pay off the balance in one payment (plus the dregs that appear on the last
    bill) and demand a letter saying the debt was paid off, the account closed by the
    customer and have that reported to the credit reporting agencies. She also blew
    my mind by saying that there is a long-term strategy to stop managing accounts
    that are closed and customers are trying to pay off and sell them off to not-so-nice
    collections agencies. What is the long long term strategy? To get OUT of retail
    banking by 2030, retaining only business and investment banking. She advised
    me that if I had a BofA checking account, to close it and get a credit union account.

    I have since paid off BofA and am now a one-man activist for people leaving
    large retail banks by the millions and switch to or create credit unions.