A Fulton County sheriff's deputy sued a Norcross debt collector, claiming the firm used bad information, such as an affidavit signed by the firm’s employee, to accuse him of owing a debt. His case is just one of hundreds of consumer lawsuits in the U.S. against the firm, in under a year.   
Photo: Bob Andres/robert.andres@ajc.com
Photo: Bob Andres/robert.andres@ajc.com

Debt collection practices under debate as federal agency eyes new rule

Fulton deputy among those challenging Gwinnett debt buyer

Tracy Leckelt sat every day in a cubicle at the St. Cloud, Minn.-based offices of a debt collection firm, working through a stack of papers she had to cross check with a database of names and account balances.

Her job involved generating the many “affidavits” used by attorneys for Midland Funding as evidence in court that a consumer has a debt to pay.

“I would validate any information … and make sure it was all truthful,’’ she testified earlier this year.

But the accuracy of such affidavits continues to be the focus of debate, as debt collection lawsuits clog courts nationwide. The debt collection industry, in a drive to clean up its image, has tried to reassure the public that it has improved its process for verifying debt.

“Today’s debt buyers, like Midland Funding, over the years have developed and are utilizing very sophisticated processes to ensure that the affidavits are accurate,” said Joann Needleman, a Pennsylvania-based attorney who advises the industry on regulatory and compliance issues.

Consumer advocates, though, say that too often debt collection firms file suits based on flimsy or inaccurate information. “They still use bogus processes,’’ said David Addleton, an attorney who represents consumers in Macon-Bibb County. “The methods they use don’t prove a debt. They just sort of pretend to prove a debt.”

Midland Funding, for example, is facing hundreds of federal lawsuits across the country -- a number of them calling into question the legitimacy of affidavits reviewed and approved by clerks like Leckelt, a review of court records show. That’s a pin drop, though, compared to the number of claims the firm files against consumers all over the U.S.

Charles Delbaum, a senior staff attorney with the National Consumer Law Center, says that mass filing of lawsuits by the debt-buying industry can rely on inaccurate affidavits about the debt.

Charles Delbaum, a senior attorney for the National Consumer Law Center in Boston, says such affidavits are “a failure of fairness in the system.”

This spring, the Consumer Financial Protection Agency stepped into the fray, unveiling a proposal that puts some emphasis on the issue of adequacy in court filings, notably that attorneys should be reviewing information about individual debts.

The regulator says its emphasis is to assure fairness in the marketplace. But consumer advocates say the proposal doesn’t go far enough to prevent abuse. They are demanding that the agency require debt collection attorneys to conduct what they call adequate reviews of admissible evidence before going to court.

Under scrutiny

In Georgia, Midland sued Fulton County sheriff’s deputy Andre Hudson last year, alleging he had failed to pay a credit card debt. And it traced the debt back to the pile of papers on Leckelt’s desk.

Hudson filed a suit of his own, alleging improper and illegal debt collection efforts.

In the suit, he claimed that Leckelt couldn’t have known the details of his credit card information because she did not review bank statements from the original creditor.

This past February, Hudson’s attorney, John Nelson, questioned Leckelt about her review process during a deposition. She said that each time she arrived at work, she would review up to 75 affidavits and cross check them with a database of account information that the company kept on debtors. She said in her deposition that she was not able to alter the information in the stacks of papers but would not sign an affidavit if it contained errors.

Nelson said that was a problem. If she found an error, she was unable to fix it.

“She doesn’t know how Midland created the records,’’ Nelson told the AJC. “All she does is she accesses the database and compares it with what’s printed off. I don’t think that meets the standard.”

That process left Hudson in the dark about the debt he supposedly owed, Nelson said.

“Broadly speaking, he never owed money to Midland, not Midland,’’ he said. “To the extent that there was something owed, he wasn’t really sure what it was.”

R. Frank Springfield, the attorney for Midland, declined comment.

Hudson’s lawsuit against Midland was voluntarily dismissed in May after a confidential settlement was reached.

‘Valid or not’

Advocates want a records custodian with personal knowledge of the debt to swear under oath that the information is accurate, Delbaum said.

That’s unlikely. Original creditors who sell debts to Midland and others who buy uncollected debt in bulk warn that they cannot be held liable for the accuracy of the data. The information can be old or riddled with errors, and debt buyers often create their own datasets.

Joann Needleman, an attorney-advocate with the Association of Credit and Collection Professionals, says that the debt collection industry has been saddled with burdensome and uncertain regulations, but new rules proposed by a federal regulator could allow the industry to expand.

Needleman, also with the National Creditors Bar Association, said she believes that clerks who review underlying information about debts can establish a valid affidavit.

“If they made an affidavit and they didn’t look at any information, yes, that would be a false affidavit,’’ she said. “But if they look at the information and attest to what they saw and what they looked at, that doesn’t make it a bad affidavit.”

Finally, Needleman points out, it’s not up to consumer advocates to determine if the evidence is admissible in court.

“The advocates are not the ones that need to be satisfied,’’ she said. “The courts are the ones that need to be satisfied. It’s up to a judge to determine whether an affidavit is valid or not.”

Consumer advocates say that process has been undermined by the volume of lawsuits debt collectors are filing, saying some courts have been turned into debt-collection mills.

This spring, an AJC investigation found collectors in Georgia file hundreds of suits against consumers and devote little time to checking whether there was a basis for the claims or that they are suing the right person for the right amount.

A part of the proposal that was introduced by the federal regulator aims to set limits to help ease the number of cases that are filed each year.

The public has until Aug. 19 to offer feedback.

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