Robo-Signing Returns: A New Kind of Consumer Fraud

Robo-signing is back. An ugly practice that contributed to the

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massive foreclosure crisis between 2008 and 2011, robo-signing, or fraudulently signing off on unverified documents, opened the doors to a flood of foreclosure cases pressed by major lenders. Although that scandal was settled, the same strategy has resurfaced, this time in an attempt to collect credit card debt, with consequences affecting millions of Americans.

The term “robo-signing” was coined in 2010 to describe the way numerous banks and their contractors illegally processed masses of foreclosure documents. Various employees of these lenders signed off on thousands of cases without verifying the details of the case, forged documents outright, and processed cases lacking complete documentation in an effort to increase their collections on those cases. After news of the practices surfaced, several major lenders such as Bank of America and JP Morgan Chase agreed to a settlement totaling $26 billion.

The initial revelations about robo-signing and the subsequent settlement may have stopped these practices in relation to housing, but a recent report by Daily Finance reveals that major credit card companies including American Express and Discover have taken a page from Chase and B of A’s playbook, using fraudulent documents and incomplete records in an attempt to collect what they claim are millions of dollars in credit card debt.

Because new regulations have slapped new restrictions on the amount and kind of fees these agencies could char

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ge, they’ve turned to collections to make up the shortfall, in many cases resorting to fraudulent documentation and misleading language to claim collections on millions of accounts.

Credit card suits pressed by these companies have inundated the courts in many jurisdictions, with some hearing as many as 100 cases a day. But, according to some regulators and judges, these cases are frequently based on bogus fees and interest charges, as well as fraudulent approvals of borrowing limits and other card promotions. In some situations, borrowers are being sued for bills that have already been paid. And even when the debt is genuine, the credit card company’s fraudulent practices undermine the case.

Like the original cases of robo-signing on foreclosure documents, the new version practiced by major credit card companies aims to trap unwary consumers. In today’s developed economies, credit drives commerce, placing millions of Americans at risk for losing that much-needed credit rating, required for everything from renting an apartment to starting a job.

What can be done? Consumer credit experts emphasize that it’s essential to challenge claims by credit card companies and respond to court actions, which many victims ignore, resulting in a default judgment rate of around 95% in favor of the creditor. Taking charge of your own financial independence is the cornerstone of Jason Hartman’s recommendations; fighting robo-signing by being an active consumer is an important step in that direction. (Top image:

Flickr | ImagesOfMoney)

The American Monetary Association Team


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