Consumer Law

Robo-Signers at Debt Buyer Firms Overwhelm Courts

By Sam Glover

http://flic.kr/p/4H9qPz

The foreclosure mess got messier over a month ago, when GMAC, Bank of America, and others were caught faking (essentially) affidavits supporting their foreclosure lawsuits. The irony of banks acting irresponsibly with their finances was not lost on the media. Of course, robo-signing, as it was soon termed, was already commonplace in another kind of business: debt buyers.

Debt buyers file millions of lawsuits a year. In New York, debt buyers apparently average over 14,500 lawsuits every month. I estimate debt buyer lawsuits are about a third of the courts’ business in Minnesota, with many more that never get filed.

Affidavit signers for debt buyers—”custodians of records”—may sign thousands of affidavits every day, based on nothing but what they see on the screen in front of them. This, despite the fact that, according to the New York Times (and my own experience), debt buyers’ information is “riddled with errors” and often missing key pieces.

Debt buyers and collectors believe they are protected as long as they don’t ask too many questions. For example debt collection law firm Messerli & Kramer recently argued to a court that “A debt collector may rely upon information provided by its client, and the FDCPA will shield a debt collector who is willfully blind to the inaccuracy of such information . . . .” CACH, a very busy, national debt buyer, apparently agrees:

“So,” asked Dale Irwin, [. . .] plaintiff?s lawyer [. . .], “if you see on the screen that the moon is made of green cheese, you trust that CACH has investigated that and has determined that in fact, the moon is made of green cheese?”

“Yes,” Mr. Mills replied.

So what we have here is numerous debt collectors filing millions of lawsuits based on willful ignorance of the truth or falsity of the evidence they are presenting. However, a well-known rule of court procedure—Rule 11, in most jurisdictions—requires parties to certify that “the factual contentions have evidentiary support or, if specifically so identified, will likely have evidentiary support after a reasonable opportunity for further investigation or discovery.”

Why isn’t Rule 11 coming into play in these cases? I think part of the explanation may be that most judges do not see a flood of lawsuits—or at least they have not noticed it until recently. Each judge sees only a small fraction of the cases that enter the court system. Further, in many states, default judgments go to a court clerk, not a judge. And clerks do not have the power to issue sanctions under Rule 11.

I also think judges may be reluctant to intervene when the defendant doesn’t show up, as is often the case. If the defendant does not defend himself, why should the court? It is easier—and more efficient—to grant a judgment and move on than prolong the proceedings with a Rule 11 hearing. State courts are already overworked and under-funded, and can ill afford the extra work (ironically, if they would toss out a few sanctions, courts could probably eliminate a huge chunk of their caseload).

Whatever reason, justice has been miscarrying for years, and the public is only now getting wise to the problem. Let’s hope this gets addressed by the courts, or if not, by the debt collection legislation now under consideration.

Related posts:

• Automated Debt Collection Lawsuits Overwhelm Courts
  At least one debt collection law firm, Cohen & Slamowitz,...


• Minnesota Needs Debt Buyer Regulation
  Minnesota Representative Joe Mullery and Senator Ron Latz recently introduced...


• Forms: Answer & Discovery Requests For a Debt Buyer Lawsuit
  We created a set of forms for Minnesota consumers facing...

Full post as published by Caveat Emptor on November 01, 2010 (boomark / email).