Bank of America and Cach LLC Involved in Suspicious Debt Collections Happenings

A disturbing piece of collection harassment news has come to our attention via American Banker: Bank of America has apparently sold a debt collector the rights to sue consumers over credit card debt that it has internally confirmed to possibly be repaid or inaccurate. The company sold off credit card receivables to a Denver, Colorado-based organization called Cach LLC throughout 2009 and 2010. Cach snatched up debt valued as high as $65 million for the bargain-bin price of 1.8 cents on the dollar. Some of the debts are said to have been legacy accounts acquired by Bank of America subsidiary MBNA.

Why did Bank of America sell the debt off for just pennies? Because it was unable to make “any representations, warranties, promises, covenants, agreements, or guaranties of any kind or character whatsoever” in regards to the records it had kept of the debt, according to a credit card sales agreement that was submitted to California state court in 2010 during a related civil suit.

An explicit warning was offered by Bank of America that it could not furnish documentation proving that the debt being claimed was actually owed at the time of the sale and that it very well might never be able to do so. American Banker quotes Bank of America as saying some of the balances might have been “approximate” amounts and that consumers could have possibly already paid in full some of the debts that were purchased. Karen Stevens, a Maryland resident, is one victim that is cited as suffering from abhorrent collection harassment as a result. It’s very likely that many other Americans have equally suffered as a result of these shady dealings.

That being said, there are those in the industry who believe the wording Bank of America used to describe the debt should be regarded as standard for the industry and that the onus ensure the debt figures were accurate should have been on Cach. “The buyer has the primary responsibility to test the…quality of what they’re buying,” Samuel Golden, a former OCC ombudsman who is a managing director at consulting firm Alvarez & Marsal in Houston, Texas, told American Banker.

Regardless of whether or not what Bank of America did and said can be considered standard operating procedure, the company, along with the rest of the banking industry, is responsible for handing bad debt over to voracious debt collectors. Bank of America itself has charged off $20 billion in delinquent credit card debt over the past two years. The bank collects on or settles part of that debt on its own; retires some of it when the debtors go bankrupt or pass away; and sells some to collectors. The rights to the debt are often sold and resold many times over the course of several years before.

The fact that fellow banks U.S. Bancorp and JP Morgan Chase have been involved in similar dealings that have led to collection harassment issues only underscores how bad the situation has become. In this particular case, thousands of lawsuits were filed against consumers by Cach as a result of the unreliable debt figures they obtained from Bank of America. The original bank-creditor is required to testify in any such cases that reach trial. However, most of the cases end with a ruling in the collector’s favor when the debtors don’t bother showing up. But consumers don’t have to just give up and give in; they can put an end to collection harassment.

Shockingly, Bank of America staffers submitted sworn affidavits in some of these cases stating that the debt amounts were accurate to the cent, despite the bank previously disavowing “the accuracy of the sums shown as the current balance.” It’s one of many discrepancies that arose during legal proceedings.

For its part, Cach repeatedly submitted a sole page from its purchase agreements with Bank of America. What’s wrong with that? It routinely didn’t bother including the other 30 pages that detailed how Bank of America admitted it could not guarantee the accuracy of its records.

“We’re not getting what we need from the seller,” said Mark Schiffman, a representative of the American Collections Association. “Consumer groups want to see original contracts and original documentation. That would make a lot of these debts disappear because a lot of that documentation may not exist.”

Washington is also concerned over the lack of regulation and documentation in these matters. “Not enough information [is] flowing through to debt collectors,” said Tom Pahl, an assistant director in the Federal Trade Commission’s division of financial practices. Unfortunately, the FTC has no authority to regulate banking institutes.

“We can’t reach the banks to say ‘Thou shalt file the following pieces of information with the loans,'” explained Pahl. “We’re trying to do most of this through either law enforcement, which is case-by-case, or by jawboning the industry.”

The Consumer Financial Protection Bureau (CFPB), on the other hand, has authority over credit card companies, and it’s now inspecting the collections industry. Spokeswoman Jennifer Howard said that the CFPB is “very concerned that the same shortcuts and violations may be occurring with other kinds of debt collection.”

As the investigation continues, consumers should not just wait idly by. Those being persecuted over possibly faulty debt should seek legal counsel in order to put a stop to collection harassment.