The following is an excerpt of a question from a CRN educational subscriber that was sent to his CRN specialist and forwarded to me for my take on the issues raised. I think it is a compelling topic so I am sharing the questions and concerns and the response I gave.
“What is Consumer Recovery Networks take on increasingly rampant assertions (see the two articles from American Banker Article 1, Article 2) that the documentation that underlies what was the securitization of credit card receivables, is worse than that of mortgages? And now Chase has suddenly withdrawn litigation collection efforts, further suggesting same? As I continue to talk to Chase, Citi, and B of A on my accounts, I am a bit concerned that the conversations are recorded and could be used against me to suggest that I acknowledged the debt in those conversations, when the creditors could not otherwise document the existence of the debt.”
“My Chase account is 93 days past due…..they offered 60% last night (I countered at $1,000, under 10%). The 3 B of A accounts are pushing 150 days delinquent and they’ve offered 40% (I countered at $3,000 (under 10%), and the Citi account is about 120 days past due and they’ve offered 80% (I countered at $1,000 (under 10%).”
“Knowing that they sell this debt at 7 cents and strongly suspecting there are documentation problems in the securitization of credit card receivables, just as in mortgages, along with the fact that I am unemployed and own nothing other than a 2005 PT cruiser with debt on it, my plan is to hold out for far better than what they have offered thus far. Your thoughts?”
You are correct that there are issues in the securitization chain of credit card receivables. It does not necessarily reach to the level of the issues in the MBS markets. There are several reasons:
Credit card securitization is a short duration investment vehicle. Investors are in and out of a trust pool with the profit in no more than a few years as compared to the longer duration associated with mortgage backed securities.
Banks are required to have “skin in the game” and maintain an equity position in each credit card securitized pool AND the bank is the servicer. They have all documentation.
CC securitization is not governed by century’s worth of title and land case law.
There are very exceptional consumer advocate attorneys in the country who provide creditor defense. They know the issues backwards and forwards. They have not cracked the nut you bring issue to. Generally you end up holding banks feet to the fire through discovery and then try and force them to go to the expense of flying in a document custodian/record keeper who is competent to testify at trial. As I understand it, you would first have to convince a judge that an affidavit is deficient for some reason(s) and that he/she should not allow one in as testimony under some exemption (some judges apparently allow them).
You also have judges who will flat out ask “did you use the card”.
You say: Your honor, I am not disputing the use of the card, but I am suggesting….
Judge: “I don’t care what you’re suggesting. I am asking you if you opened this credit card and used it and then failed to make payments”.
Things just may not go very well from that point. You are best served by having an attorney represent you in these issues, or better yet, settling the issue before it gets to that point.
Also, the state you live in is a very credit card litigious county in a litigious state. Some banks suing as the original creditor have taken to coordinating their cases on the same day of the week and flying out a document records expert to testify.
The arguments for chain of title and producing evidence of a debt are far more developed when dealing with debt buyers than with original creditors. Debt buyers show up with an excel spread sheet and an affidavit from an employee at their own company and not the original creditor. I understand arguments for inadmissibility of this type of substantiation of a debt in a debt buyer suit are fairly solid. Defending a suit from a debt purchaser is far simpler and more successful these days.
Not all creditors sell debt. Those that do will not typically sell ALL debts right outside of charge off – 180 days of nonpayment. They will drop accounts into established assignee collection channels that are partially made up of law firms who are authorized to sue. Some debt will be later sold e.g. another 6 months down the line, and more sold another 6 months after that.
Chases decision to pull litigation files may/may not stem from the whistle blower case file by Alamonte about a year ago. The case was settled and later (couple weeks ago) we see published reports of pulled active litigation files. I think the active litigation cases were dropped in several states as far back as last June. It is safe to assume Chase has taken steps to address the concerns that led to a full stop on collection suits. Your accounts may not be part of those concerns as they have not charged off.
Believe me; I know where you are at with your assertions and concerns. I share them. How to capitalize on them successfully, if at all, would be best handled by a skilled attorney. That attorney will require a retainer. The amount of money that would most likely be required to take the initiative expressed in your email could reach to an expense in excess of what you would settle at.
If you maintain the settlement % targets you have indicated you are aiming for in order to settle with the creditors prior to charge off, which would greatly reduce your risks of being sued, it is unlikely you will be met with success. 10% settlements do randomly occur. I saw one with an assignee for one of your creditors 2 weeks ago. They are rare though.
I recommend you stay consistent with the targets for settlement that were outlined in the good faith estimate provided at the time you enrolled. Those figures are purposefully provided with a cushion margin. Stay plugged in with your CRN specialist and targets – the amounts that are consistent with funding pre charge off settlements that meet your financial ability; followed by settling each of the remaining accounts post charge off. If one of your accounts is purchased you can then look to capitalize on the shoddy record keeping you expressed concern with. There are experienced attorneys in Chicago that can assist you in the effort should it arise.
If I can assist you any further with your concerns and strategy please let me know.
Michael Bovee has worked with financially challenged consumers for the past 17 years and is a recognized expert in his field. Michael founded Consumer Recovery Network (CRN) in 2006. CRN offers debt settlement services and educational resources nationwide. He has served as its president since 2006.
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