Phantom Debts and the Law!
Chris Serres of the Minneapolis Star Tribune wrote a very disturbing article in last Sundays paper, June 27, 2010. The Title was "Phantom Debts, Real Anguish." The article was reporting on a series of cases in Minnesota where a company would purchase supposed debts from credit card companies, and then sue the debtor without any proof of the claim in the first instance. (I couldn't find the article to link.)
One of the cases reported was against a defendant with an alleged Citibank credit card debt. The defendant said he has never had a Citibank card, and the only proof of the debt was a computer print line with his name an a series of numbers. Somehow, without any more the court awarded a judgment in the favor of the Plaintiff, Debt Equities LLC. Debt Equities had allegedly purchased the claim from Citibank.
The problem is that even in a default situation, the plaintiff needs to prove their right to a judgment. The article claims that in Minnesota, "the court system rubber-stamps most debt claims without scrutinizing them for accuracy. Proof is needed only if the debtor disputes a claim in writing." This is not consistent with my experience, but my experience is not in the individual debt collection business.
A colleague of mine, Sam Glover, is a lawyer who specializes in representing consumers against abusive debt collectors.Sam has also noted the problems with these abusive practices in his blog.
With respect to the Star Tribune article, I am assuming that they mean that a debtor needs to answer the complaint and defend the claim. Only a very small percentage of the defendants in this situation do this. This article is disturbing if the courts are in fact doing this. No matter what the situation, it is up to the plaintiff to be prepared to prove their case, whether in a default situation of not. Proof doesn't need to be extensive, but you at least need enough to prove the debt and the failure to pay.
I would think that the best defense to any complaint is to answer and deny the claim. Make the Plaintiff - especially one like Debt Equities, prove their case. If all they have is an incomplete computer printout, there are going to lose more times than not. If they have more and can prove the debt and their right to collect the debt, they should win.
Another disturbing note in the article is a mention that some of the debts are as much as 15 years old. In Minnesota, the statute of limitation on a contract claim is 6 years. There is much in this report that concerns me and should concern everyone. Especially since, as Serres reports, there are so many errors in the credit industry records.
Serres Report includes a number of stories of people that fight the claims, and win - and that is good. But it is expensive and there is no assurance of winning. The article also reports on abusive collection practices employed by Debt Equities and others to try to force people to pay. These collection operations need to be regulated, and controlled.
The one question I have is, why aren't the credit card companies liable to the defendants for selling alleged debts that are fictions. The article has some great examples of false and fraudulent affidavits. It seems to me that one way to control this problem is to file a claim against the credit card company for fraud. It is clearly fraud to sell a fictitious claim, and sign false affidavits to support the claim. This is just a thought.
