Being in financial difficulty is stressful enough as it is. Despite the legitimate avenues available to Arkansas residents for recovering some solid financial footing, it can still create undue feelings of anxiety. And what can make it worse is if, after debt relief efforts have been pursued, whether through bankruptcy or other means, collectors return apparently seeking more.

It’s not supposed to happen, of course. But there are indications that it does and that the reason it occurs is because of how one of the elements of the debt collection system has traditionally operated. That element is the use of signed affidavits by debt collection agencies when seeking court approvals to go after a debtor’s assets.

Here’s how it has tended to work. When a debt collection company wants the OK to pursue a debt, it files a suit in court. It has regularly been the practice for these companies to support their claim, not by presenting actual accounts for collection, but by submitting an affidavit swearing that they’ve checked those records and confirmed that the debt exists.

The papers get sent to court. They usually include a statement indicating that the debtor has been informed of the owed amount. When the matter comes up for a ruling, the only thing before the decision maker is often the affidavit from the company. The claim gets approved.

The problem is that since about 2005, a close look at a number of court cases have revealed that a lot of those affidavits were robo-signed. That is, someone put pen to paper with a signature without ever checking if the information was accurate.

In one class-action suit against the debt buying firm Midland Funding, employees admitted to signing affidavits at a rate of up to 400 a day. According to a study of one case out of just New York City, the yield in judgments to debt collector buyers over one 30-month period was more than $1 billion. Sometimes the consumers involved didn’t even know they were being targeted until after the judgment was signed.

For its part, the debt collection industry says the problem has been addressed. When it surfaced in 2009, procedures were modified to prevent robo-signing of affidavits.

That’s likely to be little consolation to those innocent consumers who got caught in the crosshairs after they thought they had resolved their debt issues through appropriate means. 

Source: Fox News, “Robo-Signed Collection Cases Under Fire,” Fred O. Williams, April 26, 2013