Lancaster County, Pennsylvania seems to be a vortex for inaccurate lawsuits filed by credit card companies. So much so, that in 2011, there were 1,184 lawsuits filed for credit card balances. By the time August had come to a close this year, there had been more than 700 lawsuits filed. On average, there are 88 cases filed every month regarding unpaid credit card balances. It might sound excessive, but Lancaster County’s numbers are close to the national average.
Lawyers in this area say many of these lawsuits are “rife with errors or an utter lack of documentation”. Worse, the lawyers say most consumers don’t appear in court, which results in a default ruling for the credit card company. In fact, said one attorney, between 85% and 90% of credit card customers who are sued never show up in court. Many say this is what the card networks are banking on.
Many have compared the lawsuits as similar to the robo signing mortgage scandal of two years ago.
Most of the card companies share the same procedures and lack of accuracy. They file the lawsuits, but there are a countless number of these cases that include errors in the documentation, incomplete files and what’s referred to as “generic testimony”. One New York judge said, “Lenders are churning out lawsuits without regard for accuracy, and improperly collecting debts from consumers.”
The card companies vehemently disagree with the numbers. American Express is the latest company that has defended its policies. A spokeswoman for American Express, said,
we strongly disagree and believe that we have a strong process in place to ensure accuracy of testimony and affidavits provided to courts.
As things are now, Lancaster County is on track to cross the 1,000 threshold before the end of the year. And here’s an interesting truth: despite insistence from our elected officials that the economy is on the mend, if there’s ever been an example that proves the opposite, that example would most certainly be found in Lancaster County. Bob Thomas, president of Tabor Community Services, said the high number of suits reflect
the fact that many local residents’ finances are in worse shape than ever before.
While credit card companies may certainly sue their past due customers, there was a time when that wasn’t even on most banks and credit card companies priorities – or at least they weren’t high on the list. “It was rare back in the 1990s to see a credit card company bother to sue,” said Lancaster County’s attorney Elizabeth Bartlow. “They also wouldn’t try to put liens against people’s personal bank accounts. But it’s not uncommon now, certain credit card companies are more aggressive, and when they get a judgment, they’ll freeze people’s checking accounts.” These days, card companies are suing for amounts less than $900 – and in fact, those smaller suits are popping up all over the country.
Part of the reason might be because of the tough restrictions banks and credit card companies are facing. The Consumer Financial Protection Bureau, which was part of the Dodd Frank law passed in 2010, has significantly cut the way financial institutions can collect monies, such as late fees and NSF fees on bank accounts. Recovering that revenue has become challenging and these companies aren’t missing any opportunity to increase their bottom lines.
Politics, of course, plays a role. Specifically, if President Obama is re-elected, these cases could become even more common due to the Obama Administration’s commitment to keep Dodd Frank in place. If Governor Romney is elected, there is a very good chance Dodd Frank will be appealed and with it, the tighter regulations which would allow financial institutions to begin picking up their former methods of earning revenue.
The Federal Trade Commission calls debt collection suits “pure volume business” and now, the agency is concerned that there’s not enough documentation in many of these suits to sustain the degree of proof needed for a judgment. Most of these suits are being won by the companies, but it’s because there’s no one to contest the evidence presented. Now, both the CFPB and the FTC say efforts are being made to better assist those with credit card debt and who have fallen behind in their payments. The goal is to put a dent in these lawsuits.
In Lancaster County, one attorney marvels, “Especially after years of litigating, you’d think credit card companies would have their act together more,” he said.
If they produce an account agreement between the debtor and company, usually they just throw a generic boilerplate form at you, and you can’t tell if there’s any connection.
In some instances, there’s nothing more than the basic contract, which in many instances don’t have signatures because the accounts were opened online.
As mentioned, Lancaster County’s courtrooms aren’t the only ones where these cases are being presented. They’re increasingly showing up around the nation.
Have you been sued by a credit card company? If so, did you attend the court hearing or was a default judgment entered? Share your story with us and other readers.