The problem of zombie debts, that’s debts that come back to life, is well known. What is becoming more of a problem is what happens when an old debt has been sold, sold, and sold again. The current debt buyer can’t really prove they own the debt at all.
In fact just recently we published an article about this problem. See “Most Debt Buyer Lawsuits Foiled By Inability To Prove Debt Owed” for a look at this problem.
Today there was an article from the Star Tribune in Minneapolis-St. Paul that brought up some interesting related points. From the article:
The nation’s five publicly traded debt buyers last year paid $835 million to acquire $20 billion in old debts. That’s 4.2 cents on the dollar.
Last year, the 10 largest debt buyers in Minnesota accounted for nearly 20 percent of default judgments in the state, up from a 6 percent share in 2005, court data show.
One of the worst abuses in the industry involved the dead woman who seemingly pursued debtors from the grave.
The signature of Martha Kunkle appeared on thousands of sworn affidavits prepared over the past five years attesting to credit card debts in many states.
Kunkle, of Texas, died in 1995. For reasons that remain unclear, workers at a bank kept signing her name on debt-verification documents furnished to 30 debt buyers nationwide.
Last year, Portfolio Recovery Associates Inc. of Virginia and CACV of Colorado LLC, two of the nation’s largest debt buyers, agreed to pay more than $1 million in damages in a class-action lawsuit representing about 30,000 people whose case documents allegedly contained the forgery. The two firms denied wrongdoing.
The Kunkle case wasn’t the only one to bite the industry.
In an Ohio case, a federal judge found that a Midland Funding LLC employee had signed debt-verification documents at random.
Under questioning, Midland employee Ivan Jimenez admitted he signed up to 400 affidavits a day, asserting “personal knowledge” about each debt case, though he knew nothing about them. Midland, a unit of one of the nation’s largest debt buyers, Encore Capital Management of San Diego, said any missteps were unintentional.
U.S. District Judge David Katz rejected Midland’s explanation. The judge ruled in August that the firm’s sworn assertions of personal knowledge were “clearly false statements” for which Midland “offered absolutely no legitimate explanation.” He ordered the company to cease the practice.
You can read the full article here. It’s worth the time to read it for even more shocking examples of debt buyer malfeasance.Phantom Debts Come Back to Life. It's Alive! by Steve Rhode