As Yves says, if you thought the mortgage servicers used robo-signers, wait until you see what the debt collectors do!

While we have seen abuses aplenty in mortgage-land over the last six weeks, they pale compared to normal practices in the debt collection arena. Some factoids from a New York Times story:

Debt collection robo signers way outdo their mortgage peers in productivity. The highest output figure I recall seeing for a foreclosure robo signer is 10,000 affidavits a month, while the Times identifies a debt collection robo signer, Cherie Thomas, who executed 2000 affidavits a day. Her former employer now claims that workers like her now sign a mere “several hundred” affidavits per day.

Because these debts (auto loans, student loans, credit card debt) are traded several times, errors creep in and compound. One JP Morgan Chase employee found errors in 5000 of 23,000 delinquent accounts the bank was in the process of selling. When her manager ignored the information she provided, she alerted the general counsel. She was fired within days, apparently in retaliation.

The debt collector records and practices are so bad that the attorneys who represent borrowers report extremely high success rates, with one claiming he has lost only four cases out of roughly 5000.

What we’re basically seeing is a financial sector that neither fears accountability under regulation or the law. They have no problem tacking on undeserved fees. They don’t check their work, rush into bad lending deals, and then rush just as quickly out of them. They never met a record they didn’t want to keep, never built a staff that wasn’t woefully unequipped. And they don’t expect to be called on any of this. The high success rate for the few consumer lawyers out there represents the cost of doing business – most people with these kinds of debt events probably don’t hire lawyers to sort this kind of thing out, they pay the fine and move on.

I know because I’ve been there. Several years ago, I shut down an account with Bank of America several years ago, and shut down every direct payment out of that account. One of the vendors, a gym, just decided to keep drawing off that account for an extra month. Because there was no money in the account, it triggered overdraft protection that I neither sought nor wanted, and a sum was pulled into the account. That debt was sent via a credit card I no longer had to an address I no longer lived at. For two years this festered before I ever even knew about it. The debt was sold to a collections agency, and they made no effort to contact me. I took out a credit report at a time when I was considering buying a house, and say this credit event on my statement, based on a lapsed gym membership that incorrectly tried to get an extra payment out of me. After trying for a couple months to deal with the situation, I just settled the bill. The cost of the inadvertent $39 gym payment came to something around $450.

I assume that’s how many people handle this – just pay it off and wash your hands of the deal. I always thought my story was just a comedy of errors and bad timing. Now it looks more like the norm.

The full NYT story is here.