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Credit Card Confidential

“90% of the credit cards lawsuits are flawed”

As the economy continues to sputter and consumers gasp for air, credit card issuers have been developing a strategy to cope with the chaos. Will they be offering longer terms? Lower interest rates? Perhaps rebates to long-time, loyal customers?

What? Me Worry?

Why bother trying to meet your customers half-way? If you’re a credit card issuer you have no downside. Are you out of money? Grab a taxpayer bailout.Have unemployment and bad debts skewed your risk profile? Jack up interest rates. Who’s going to stop you, right?

How arrogant are credit card companies? Consider this: over the last few years credit card issuers have been furiously filing collection lawsuits and, as expected, have a near perfect record of winning in court: near perfect. One problem however: courts and defense lawyers have become increasingly aware that such lawsuits are on shaky ground, full of holes, and sometimes frivolous.

The Usual Suspects
The big bank practice of “robo-signing” where banks produced highly similar documents in foreclosure court cases for different homeowners without reviewing them first, already having seized the home. Multiple state attorney generals caught on, and these fraudulently created documents were exposed. The banks were forced into a $26 billion dollar settlement as a result. A similar practice is taking place in credit card suits, with credit card companies playing the leading role of “perpetrating a fraud against the consumer” in place of the banks.

Major corporations such as American Express, Citigroup, Discover, and JP Morgan Chase have been aggressively pursuing alleged debtors in court in an effort to recover bad loans as they desperately try to improve their bottom line. These lawsuits are increasingly based on “erroneous documents, incomplete records, and generic testimony.” Where is that opinion coming from? The debtors themselves? No-it’s coming from the judges of these cases. Judges, some of which see over a hundred cases involving credit card debt collection a day, feel there is enough flawed evidence being presented by the credit card companies to discuss it outside of a judge’s chambers.

A Rigged Game
One of those judges is Noach Dear, a civil court judge in Brooklyn and has seen thousands of credit card debt cases. He doesn’t mince words when saying “I would say 90% of the credit card lawsuits are flawed and can’t prove the person owes the debt.” One of those frivolous lawsuits involved American Express suing for over $16,000 in unpaid credit card debt. The consumer confidently responded by challenging the entire $16,000 in court. A key witness, an employee for American Express, gave nearly identical testimony in the case as in several other cases in which the same employee testified, and the case was rightfully thrown out when the judge said the suspiciously similar testimony amounted to “robo-testimony.”

Judge Dear isn’t alone in his strong feelings on the inherently unjust practices of the credit card companies. Dozens of judges, state regulators, and attorneys feel these sham behaviors are becoming more and more the status quo. Credit card companies either go after consumers who have already paid their bills and use robo practices to suggest otherwise, or go after customers who are behind on payments by drastically increasing the amount owed through erroneous fees or questionable interest charges. In the latter instances, the issue is not that there is credit card debt, but the size of the debt itself is unlawfully large. Of course, credit card companies literally spend millions to get these cases into court to keep their businesses speeding along, while the average consumer might not even understand why they are being sued or may struggle to afford a lawyer to help them understand.

Eyes Wide Shut
According to judges, credit card companies aren’t playing by the rules when it comes to following proper procedures. Credit card companies are relying on mass-produced documents to prove a consumer’s debt, documents that could have been used for another consumer. The companies are avoiding submitting hard proof of outstanding debts, not using original sales contracts or individual statements that specifically pertain to the consumer facing suit. Even more troubling is the fact that credit card companies have falsified documents like a credit card statement and submitted them to the court. Peter Holland, a lawyer who runs the Consumer Protection Clinic at the University of Maryland School of Law, said the credit card companies are proving to be to no different than the banks of the foreclosure process, calling the suspect practices of the credit card companies “robo-signing redux.” What do the American Expresses and Discovers of the world have to say in response? The documents weren’t reviewed before they were used in court.

For corporate behemoths like Citigroup or American Express, pleading ignorance by arguing the replicated documents simply “weren’t reviewed” is nothing short of outrageous, considering the billions in profits these companies take in annually. JP Morgan Chase is currently under serious investigation by the federal government after an employee said over 23,000 delinquent accounts had incorrect balances. Linda Almonte, the employee who noticed these inaccuracies, reported it to her bosses. She was then fired.

“But if you Start to Follow the Money…”
The Federal Trade Commission has begun looking into the fraudulent behavior of the credit card companies. Tom Pahl, an FTC employee specializing in questionable financial practices stated that FTC “concerns center on the fact that debt collection lawsuits are a pure volume business…the documentation is very bare bones.” Translation: credit card companies have to bring lawsuits, and lots of them, to make money, and they aren’t even providing the bare minimum amount of evidence in court. Judges say these lawsuits are being churned out without regard for accuracy, but why aren’t these companies in more hot water? Why isn’t this receiving more attention?

Everyone Has Their Day in Court-As Long as They Show Up
In short, no one’s talking about it because it’s happening without a consumer knowing; these corrupt practices are going undetected. Unlike in the foreclosure crisis, where homeowners would show up in court to keep their homes, most consumers facing suit over credit card debt do not come to court to challenge the credit card companies. 95% of lawsuits end up in default judgments for the credit card companies because the consumer does not contest the case.

If the consumer does not show up and fight in court, there is little a judge can do. One judge noted that he does “suspect flaws (in the credit card companies methods of producing evidence), but there is little I can do (if the consumer does not show up in court).”

Consumers MUST show up in court to weed out suspicious documents and generic testimony from credit card companies in order to avoid being saddled with a court judgment against them.

Are you suspicious of your credit card statement? Have you made your payments promptly yet are suddenly facing legal action? Are you behind on payments but think your debt is far larger than it should be? Call M. Hedayat & Associates today. We have a proven track record for helping consumers for nearly twenty years, including going toe to toe with the big banks and credit card companies-and winning.

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