“Robo-signing” is bigger than mortgages

Apparently debt-buyers (companies who buy consumer debt and try to collect on them for a profit) are often buying products more flawed than they know.  According to the New York Times this week, debt-buyers are expected to check the history of a debt before taking borrowers to court, but they’re often unable to do so given the volume of affidavits to sign each day (up to 2,000).  Clearly, “robo-signing” is not limited to the home mortgage market.

In some cases, this means the collectors end up pursuing the wrong person or cases with no legal merit.  And yet, the majority of debt collection lawsuits end with default judgments that favor creditors.  It’s because most debtors don’t respond to the lawsuits.  But some attorneys say the debtor is quite likely to win if the collector’s negligence is brought to light in court.

If you’re facing a lawsuit from a debt collector, it sounds like you should at least look into going to court.  But it seems the costs, time and stress of court could be avoided altogether in many cases with a little more research by the plaintiffs at the outset.

This issue hasn’t gone unnoticed in Congress. Senator Al Franken (D-MN) introduced a bill, the End Debt Collector Abuse Act, to provide consumers with additional protection from debt collectors. (h/t Consumer Reports)