Debt Collectors Suing Credit Card Holders

Bill Bartmann (pictured) is a consumer advocate and president of CFS 2, a debt-collection agency. Here are excerpts from Kiplinger’s recent interview with Bartmann.

You say there’s a scandal brewing in the credit card industry. What’s going on?

It’s essentially the same “robo-signing” problem that took place in the mortgage arena a few years ago, when lenders signed off on foreclosure documents without sufficiently reviewing them. Customers are being sued, typically by people who buy delinquent credit card debt from the bank. But because the collection agency frequently relies on incomplete information from the banks when signing off on an affidavit, it may sue an innocent person who has the same name as the debtor. Or it may sue someone for debts that have expired under the statute of limitations or have been discharged in bankruptcy.

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Why is this coming to a head now?

Thirteen state attorneys general allege that banks, including Bank of America, JPMorgan Chase, Citigroup and Wells Fargo, sold loans to debt buyers with sloppy practices. Separately, the California attorney general filed suit against Chase for debt-collection abuses against as many as 100,000 customers. The Office of the Comp­troller of the Currency is also investigating Chase. For the past two years, the Consumer Financial Protection Bureau has been collecting data on this issue. I’ve never seen a problem attacked by so many groups simultaneously. It’s a big deal, and it’ll hit the banks’ bottom line.

How many people might be affected?

Judging by the volume of lawsuits and reports on how many of them rely on flawed information, I think the number of customers affected could reach the tens of millions.

How could so many faulty documents find their way into lawsuits?

It has become easier and less expensive for lawyers to sue thousands of people at once. Thus debt collectors found that they could afford to sue all of their debtors, even those with small balances.

What are the signs that you’re a victim?

You may get a letter from a lawyer or your wages might be garnished. Pull your credit reports at least once a year to spot problems -- errors in your name or address, a collection item that you don’t owe or that has expired. If you’re improperly sued, contact an attorney. To file a complaint, you can call the Better Business Bureau and your state attorney general’s consumer protection office. Or submit a debt-collection complaint on the CFPB’s Web site.