Advocates Urge Court: "Don't Let Debt Buyers Cut Corners"

Mar 19, 2013, 11:39 ET from AARP

AARP Files A Friend of the Court to Protect Illinoisans from Debt Buyers

CHICAGO, March 19, 2013 /PRNewswire-USNewswire/ -- Illinois consumers consistently have complained to state and federal agencies about abusive debt collection more than for any other consumer problem.  AARP, the National Association of Consumer Advocates, and the National Consumer Law Center urged the Appellate Court of Illinois in a friend of the court brief filed Monday to protect Illinois citizens from debt buyers who seek judgments based on false affidavits and inherently unreliable summaries of old credit card accounts that cannot be verified.

Collection abuses can cause serious emotional distress, force people to pay money they don't owe, ruin reputations, make credit and insurance more expensive, make it hard to find a job or rent an apartment, and pinch people who cannot even afford to buy food or medicine.  "Most of the people who seek my help are older or have disabilities.  They can't afford to pay money they don't owe," says Dave Philipps, an Illinois attorney who works to protect consumers from debt collection abuses. 

The case is Unifund CCR Partners v. Shah, on appeal from the Cook County Municipal Court.  Unifund CCR Partners filed a lawsuit against Mr. Shah to collect on a debt allegedly owed to Citibank.  The Municipal Court dismissed the case because Unifund CCR Partners could not show under Illinois law that it owned the debt and had a legal right to collect it.  This law protects consumers from being sued when they don't owe debts and from being sued by more than one collector on the same debt.

Unifund CCR Partners filed a sworn statement called an affidavit claiming that it has a right to collect the debt.  The affidavit explained that Citibank sold the debt and it was sold 3 more times, finally to Unifund CCR Partners. The court said an affidavit is not good enough to prove ownership and insisted on seeing the series of contracts assigning the debt. Unifund CCR Partners failed to produce the contracts and the case was dismissed.

AARP's friend of the court brief urged the appeals court not to allow Unifund CCR Partners to cut corners by using an affidavit because they are not reliable.  Debt buyers nationwide have been exposed for engaging in widespread robo-signing practices – like those used to lie about foreclosures.  Normally a court can rely on an affidavit because it states facts based on personal knowledge that are sworn to under oath.  But robo-signing means affidavits are signed by the employee closest to the printer in such volume (200-400 each day) and with such speed (one every 13 seconds) that it would be impossible for them to have verified the information.  In short, the affidavits are lies because they nevertheless claim to be based on personal knowledge.

Robo-signing is just the tip of the abusive debt collection iceberg.  Credit card companies package millions of worthless accounts into portfolios which they sell for an average price of 4 cents on the dollar. The selling company gives the buyer only an electronic spreadsheet that summarizes information about the debt. They typically don't give buyers account statements or histories, information about the interest rates or fees, or even subtract amounts that have been paid or disputed.  Often such information is simply not available. Thus the affidavits that claim to be true and accurate are patent lies.   

AARP urged the court to uphold its important role as gatekeeper to protect Illinois consumers, especially because of widespread robo-signing and unreliable information.  "It is not too much to ask that a debt buyer show the court that it owns the debt, it is suing the right person, and for the right amount, using the actual contracts instead of a false, self-serving affidavit," said Julie Nepveu, Senior Attorney with AARP Foundation Litigation.  "Such affidavits mislead the court into thinking that trustworthy business records support the claims, but sellers typically warn the buyers that the information should not be considered accurate, cannot be verified by any records, may have already been paid, or, because of fraud and identity theft, may never have been owed at all."

Federal agencies are cracking down on these harmful practices, which leads predictably to abusive debt collections.  Every year, millions of people are sued in state courts for debts they don't owe, according to a new study from the Federal Trade Commission ("FTC"), one of the federal agencies that enforce the Federal Fair Debt Collection Practices Act.  The new Consumer Financial Protection Bureau will also supervise debt buyers.  Whether or not a person owes a debt, consumers need protection from improper debt collection.