According to Consumerist and the Wall Street Journal, Chase has dismissed a bunch of debt collection lawsuits against consumers nationwide. Several of my consumer colleagues have speculated that this move is spurred by the recent robo-signing scandal. I’ve even heard (unsubstantiated) rumors that there has been some housecleaning in upper management of Chase’s credit card litigation department. In any event, this is good news for consumers.
Chase Drops Thousands Of Debt Collection Cases Against Borrowers | Consumerist | July 1, 2011
Lender Drops Pursuit of Debt | The Wall Street Journal | June 24, 2011 (subscriber content)
Yesterday, Minnesota Attorney General Lori Swanson sued Midland Funding, one of the nation’s largest debt-buyers, over robo-signed affidavits. Here’s more from the press release:
The Attorney General alleges that Midland aggressively filed thousands of lawsuits against individual citizens for collection of old, purchased debt, often supporting those lawsuits with “robo-signed” affidavits generated at its St. Cloud offices. Midland filed the robo-signed affidavits in state courts in Minnesota and around the country to obtain judgments against individual citizens.
“Robo-signing” is the practice of signing off on mass-produced, computer-generated legal documents without reading them or verifying the accuracy of the contents in order to speed up the collection process. In recent months, the mortgage industry has come under intense national scrutiny for supporting mortgage foreclosures in court with “robo-signed” affidavits. Like the mortgage industry, some debt buyers, including Midland, have used false, robo-signed affidavits to support their debt collections lawsuits.
Although robo-signing is widespread in the debt collection business, all of the attention until now has been focused on mortgage lenders’ use of the practice. It will be interesting to see whether Midland capitulates early or whether they engage Swanson’s office in lengthy and drawn-out litigation.
Press Release | Office of the Minnesota Attorney General | March 28, 2011
Led by Iowa’s Attorney General Tom Miller, up to 40 states’ attorneys general are working together to review the shoddy foreclosure practices that have come to light recently. “We want the companies to put in a system such that this will not happen again,” Miller said in an interview with The Associated Press. “We want to explore what other remedies might be available, in a way that makes homeowners and the general housing economy better off.”
To recap, in about half of the states in the country, lenders are required to file a sworn statement with the court about the underlying facts that give the lender the right to foreclose. The person signing this statement–or affidavit–is swearing under oath that he has reviewed the facts in the affidavit and that everything is accurate. But bank employees have admitted in depositions that they were not actually reviewing the case before signing the affidavit. This comes as no surprise to anyone familiar with the banks’ procedures. As reported by the Washington Post, many banks engage in a practice known as “robo-signing”. For example, the head of GMAC’s foreclosure document processing team signed about 10,000 affidavits per month. By my math, that’s over 60 affidavits per hour, which means GMAC’s robo-signer spent less than a minute “reviewing” each affidavit. Think about this for minute: millions of Americans have lost their houses to foreclosure without banks even taking the time to, you know, make sure that they had the right to foreclose. And courts have been signing off on many of these foreclosures. Awesome!
And robo-signing is not limited just to foreclosures. Most debt collectors rely heavily on boilerplate affidavits signed by the thousands with little or no review of the underlying facts. But like the foreclosure affidavits, courts routinely accept the facts in these affidavits as gospel. My hope is that the foreclosure document scandal will result in more courts and judges viewing all of these boilerplate affidavits with more skepticism.
UPDATE: This Salon.com story details some of the astonishing testimony from several of the employees tasked with signing these foreclosure affidavits. The story is littered with a lot of revealing information, but this is my favorite:
The depositions paint a surreal picture of foreclosure experts who didn’t understand even the most elementary aspects of the mortgage or foreclosure process — even though they were entrusted as the records custodians of homeowners’ loans. In one deposition taken in Houston, a foreclosure supervisor with Litton Loan couldn’t define basic terms like promissory note, mortgagee, lien, receiver, jurisdiction, circuit court, plaintiff’s assignor or defendant. She testified that she didn’t know why a spouse might claim interest in a property, what the required conditions were for a bank to foreclose or who the holder of the mortgage note was. “I don’t know the ins and outs of the loan, I just sign documents,” she said at one point.
UPDATE 2: It’s unanimous. All 50 states have joined the probe. Washington Post story here.
States Set To Unveil Joint Probe Into Foreclosures | NPR | October 13, 2010