Credit Card Lawsuits Replay Foreclosure Mess

Credit card lawsuitsCredit card firms and collection companies are churning out slapdash lawsuits to collect unpaid sums.

Judges complain that many lawsuits are so lacking in documentation, it?s impossible for them to know who?s right or wrong. Advocates say the companies sometimes victimize card holders by inflating the amounts owed, not giving their targets proper notice, and suing for debts already paid.

?They do get pretty loosey-goosey on documents,? said Frank Cox, the chief magistrate court judge in Georgia?s Cobb County. ?When they are contested, most of the time they can?t present sufficient evidence to win the lawsuit.?

The companies defend their practices and accuse consumers and their lawyers of using diversionary tactics and legal loopholes to deprive them of money legitimately owed.

?The vast majority of these cases are accurate,? said David Kleber, a Decatur, Ga., attorney who represents credit card companies and the others that purchase debts. ?If it is a volume business, that doesn?t make it wrong.?

Many suits are filed with little more than an account number and a figure for what is supposedly owed, judges say. But even when the documentation is shaky, few cases get thrown out, because the great majority of people simply don?t show up to fight them. Some know they owe the money or some of it, some can?t afford an attorney, and some feel intimidated by the legal system.

It?s happening across the country as companies work through an abundance of bad loans. The suits are nothing new, but the increasing wave of litigation marks the latest fallout of a sustained and unforgiving economic downturn. The slump, coming on the heels of an era of easy credit, left many people in financial trouble for the first time.

Catherine Evoy acknowledged she owed Discover $11,000. The debt piled up, she said, because her husband was out of work for 10 months. About half of it was for medical care, said Evoy, who lives in Gwinnett County, Ga.

She said she was sued after the debt was transferred to a collection company in Atlanta, Frederick J. Hanna & Associates. That suit was dismissed, she said, because she was never served notice of it. The company filed again and that was thrown out because the company didn?t show up in court.

?They were so rude,? said Evoy, 44. ?They wouldn?t even work with me.?

Joseph Cooling, a managing partner at Hanna, said that while he cannot discuss specific cases, the lawsuits filed by the company ?are completely consistent with the spirit of Georgia law.? In most cases, the company uses county sheriffs or marshal?s offices to serve suits, he said.

Cooling acknowledged that debt collection ?is not a popular enterprise and most folks are not happy to hear from us. ? If Ms. Evoy did not receive professional or courteous treatment from our staff, then I sincerely apologize.?

Discover declined to comment. Now Evoy said she?s being sued for the third time by a company from New Jersey.

Nationally, the system of litigation ?provides inadequate protections for consumers,? concluded a 2010 report by the Federal Trade Commission. FTC officials have raised concerns about the bare bones documentation that accompanies many debt recovery lawsuits.

?Some companies file lawsuits without necessarily having the paperwork lined up,? said Reilly Dolan, assistant director for the commission?s division of financial practices.

Lynn Hutchinson of Austell, Ga., was taken to court by Capital One Bank in August, but he said the attorney only showed up with about three pieces of paper to explain the debt. Hutchinson demanded more.

Hutchinson said he?s been contacted by several attorneys and collection agencies regarding the approximately $2,000 debt, which he said built up after a work injury.

?I just want to see the paperwork,? said Hutchinson, 36. The paperwork ?doesn?t have anything that says he owns my debt.? The Cobb judge continued the case while the company seeks more paperwork. The attorney representing the credit company declined to comment.

Kleber, who was not involved in that case, said the law is sketchy on what evidence is required, and different judges demand different levels of documentation. While companies will usually provide a copy of a final billing statement, some consumer attorneys press to see every statement on the account.

?Attorneys have developed this ability to play with technicalities and loopholes in the law to avoid their clients? liabilities,? said Kleber, former president of the Georgia Collectors Association.

Jack Williams, a law professor at Georgia State University who studies consumer debt, thinks debtors often come out on the raw end, though.

?It?s not unusual for people to be sued for debts they?ve paid, or they?ve settled already, or that they don?t owe as much as the companies say,? Williams said.

The depth of the problem can vary from court to court. George Hutchinson, the chief magistrate judge in Gwinnett County, said that while some debt cases come in with inadequate paperwork and other major problems, the great majority do not.

As with the mortgage foreclosure debacle ? to which the credit card suits have been compared ? ownership of the debts may have changed hands several times. Paperwork is sometimes lost along the way. Some companies buy credit card debts in huge numbers, paying pennies on the dollar and recouping what they can. Many contested cases end in compromise, judges say.

When pressed, the companies that file suit often cannot even provide sufficient evidence that they are the sole owner of the debt, said Cox, the Cobb judge. Such cases are thrown out ? if the consumer contests the lawsuit, he said.

In other cases, neither the debt holder nor the consumer has enough itemized documentation to prove how much is owed.

Wayne Purdom, chief judge of the state court in DeKalb County, Ga., counts himself among the more stringent judges on evidence. He said he?s frustrated by the incomplete records and often generic testimony from witnesses called by the debt companies. ?People testify about records when they are not familiar about what?s in them,? Purdom said.

A former attorney who worked on consumer protection cases, Purdom said he?s also come across cases in which a person was sued a second time for debts they had already paid off.

Source: MCT Information Services