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]