Credit Card Companies Increasingly Using Robo Testimony, Erroneous Documents To Go After Customers In Court

We’ve all learned to fear the robo-signing reaper in home foreclosures, but now that same tactic of providing generic evidence of debt is sweeping the credit card collections world. Judges are calling out credit card issuers on this so-called “robo-testimony” tactic, but if a consumer doesn’t fight back, those robots might win by default.

The New York Times says that an estimated 95% of such lawsuits end up going the way of the lender in default judgments because consumers won’t often show up in court like they might for a foreclosure case. When that happens, credit card companies can freeze bank accounts or garnish a customer’s wages in an attempt to get their money back.

As it stands, the credit card industry as a whole is working to collect about $18.7 billion from borrowers. In the process judges say companies are relying on piles of falsified, erroneous documents and generic testimony from employees to prove that multiple consumers owe money.

One American Express customer sued by the company last year claimed that while she was behind on her payments, she didn’t owe the full $16,000 it claimed in a lawsuit. A judge found that the employee who testified in the case had also provided generic testimony about how American Express maintained its records in other cases. Hence, the robo-testimony.

But lenders insist that they’re reviewing all the proper documents in each case and making sure everything is right as rain.

A spokeswoman for American Express in that lawsuit said the company strongly disagreed with the judge’s comments and that it believed “we have a strong process in place to ensure accuracy of testimony and affidavits provided to courts.” She added, “We look at account records in our system to individually verify the accuracy of information before affidavits are filed and testimony is given.”

There’s a lot going on here — some consumers insist they don’t owe any money, or not as much as the credit card companies say. Judges and regulators say lenders could be increasing debts owed by tacking on extra fees and interest costs, and that companies aren’t always following the proper legal procedures even if they’re right to go after the money.

The Federal Trade Commission has teamed up with courts nationwide to tackle the process of going after borrowers who owe on credit cards, mortgages or other bills. It investigated consumer litigation and didn’t like what it saw in regards to dubious paperwork.

“Our concerns center on the fact that debt collection lawsuits are a pure volume business,” said Tom Pahl, assistant director for the F.T.C.’s division of financial practices. “The documentation is very bare bones.”

Where will this all go next — will the credit card industry be hit with as much federal might as the mortgage industry? Could be: So far, the Office of the Comptroller of the Currency has already started going after allegedly shady collections practices over at JPMorgan Chase. Investigators say the bank was using inaccurate records while going after delinquent credit card customers in court.

A word to the wise — keep fighting and show up in court if you have to, or the robo-testifiers will undoubtedly win.

Problems Riddle Moves to Collect Credit Card Debt [New York Times]

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  1. samonela says:

    At what point do we just go ahead with Debt Collection reform as opposed to further regulation? They just get more creative to get around new rules?

  2. PragmaticGuy says:

    Years ago I worked in legal collections for a major bank’s credit card division. When we sued the debtor if he/she was smart they’d ask for a bill of particulars. When that happened we had to provide not only a copy of the application but of EVERY charge slip they’d ever gotten. If we couldn’t produce the facts leading up to the amount we sued for the amount usually got cut down quite a bit.

  3. MarkFL says:

    If the information provided by the credit card company is false, is that not perjury? Remember, corporations are now people.