Tuesday, June 5, 2012

Credit-Card Plaintiffs Are Often Unable or Unwilling to Prove Their Debt Collection Case at Trial

Recent experiences around the country suggest that even original creditors, such as credit-card companies, are unable or unwilling to go to trial and actually prove their cases.

In Florida, Chase Bank actually went to trial on a case in September 2011 in which it sought about $15,000 on a consumer credit card.  The consumer had a substantial defense in that she had opened the account as a zero-interest account, and Chase later raised the interest rate, allegedly without notice to her.  The consumer won the case at trial.  

As is common, the Bank called the consumer as its first witness and attempted to prove up its case through her.  While this is common, creditors often will neglect to actually ensure the consumer's presence by serving a trial subpoena.  The collection attorney's intention in doing this is to bully the consumer into admitting she received the account statements in the mail.  In this particular case, Chase attempted to do so with account statements that were such obvious frauds that the tactic seems to have monumentally backfired.  The consumer ultimately testified that she calculated the amount she actually owed as about $80. 

As I have discussed before, the use of obviously fraudulent account statements in debt collection lawsuits is common.  The fraudulent nature of the statements is often detectable when, for example, the consumer has moved to a new address during the life of the account, yet the statements attached to creditor motions or introduced at trial bear the current mailing address even when they pre-date the address by years.  In this particular Chase case, the Bank did exactly that, submitting statements that had an address that was a vacant lot as of the time of the statements.  However, they also apparently submitted some statements that contained a fictional address (1234 Main Street, Anytown, USA 00000).  This was unusually sloppy, but in principle, par for the course. 

In the Florida case, the consumer was, of course, all too willing to testify, because she strongly believed in her defense.  Having given the Bank nothing it could use, the Bank called its putative document custodian as its only other witness.  As is to be expected, the witness - unable to identify her own employer - acknowledged that Chase's records were all computerized, and admitted to having absolutely no knowledge whatsoever of how that computer system worked.  She was thus incapable of authenticating Chase's documents.  Ultimately the court entered judgment against the consumer for the $80 she admitted she owed.

I have previously written about the recent revelations about Chase Bank's credit card records, which an internal audit revealed to have numerous errors, apparently due to the keeping of separate databases for active as opposed to defaulted accounts, and an error-prone method to transfer data from one to the other.  Although the kind of whistleblowing that brought the Chase revelations to light has not happened with other banks, there is every reason to believe that unreliable record-keeping plagues the industry.  In a follow-up article after its piece about the Chase revelations, American Banker magazine discussed indirect evidence that other banks' account information is riven with errors.  According to American Banker, when Bank of America sells its credit card accounts to debt buyers, it expressly represents that it does not possess original account documents, and will not guarantee accuracy of the information at all.  US Bancorp will apparently guarantee accuracy to within 10% of the asserted account balance, but no better. 
Just this last April American Express went to trial in a case in Kings County Civil Court in which it sought to collect about $16,000.  The case is American Express Bank v. Tancredo, CV-24043-11/KI, NYLJ 1202551841663, at *1, 3 (N.Y.C. Civ. Ct. Kings County Apr. 27, 2012).  Here, the defendant had no attorney.  However, judges of the New York City Civil Court have in recent years been conscientious about ensuring that pro se defendants are not run roughshod over by represented creditors.  Here, American Express started its case with a putative document custodian that sought to introduce account statements and a cardmember agreement through formulaic recitation of no more than the elements of the business records rule exception to the hearsay rule.  The custodian did not identify the entity that issued the credit card.  AmEx called the consumer as a witness, and she indicated she did not know which American Express company issued her card.  In an opinion published in the New York Law Journal, Judge Dear, describing this as "robo-testimony," found it insufficient to establish that the documents were admissible as business records.  In particular, the witness described no office policy at American Express with respect to mailing account statements or cardmember agreements that would suggest these documents were actually mailed to the defendant.  Judge Dear dismissed AmEx's case.  

Notwithstanding that they do not actually want a trial and are not capable of winning at trial, some collection law firms in New York have begun to routinely serve a "notice of trial" early in the case, sometimes doing so improperly while discovery is still pending.  The logic of doing so against a self-represented consumer is plain.  If the consumer misses the court appearance, the creditor may obtain a default judgment.  If not, the consumer will likely be pressured by the judge and creditor attorney to settle the case for a payment plan on 100% of the claimed balance, notwithstanding that the balance may, for numerous reasons unknown to the consumer, be something that, in whole or in part, is not owed.  The logic of serving such a thing on a represented consumer's attorney, however, is mysterious.  It seems to be the product of nothing more than a mindless collection-firm bureaucracy that has decided to serve the same papers in every case.

To illustrate, I recently appeared for trial in a $3800 Citibank case.  Although the trial had been scheduled months in advance and I had served motions in limine seeking to exclude all of its evidence, Citibank did not send, or plan to make available, any witness, nor did it serve a trial subpoena to secure the consumer's attendance; and Citibank sent a local attorney to cover the trial who had no knowledge of the case and no documents to use as exhibits.  Citibank's strategy in its entirety was to have the case adjourned through a request made on the day of trial - not something that made the Judge happy.  Having been given the rest of the day to arrange a witness, Citibank ultimately offered to settle that account and a much larger account not at issue in the case for a small and affordable payment plan.  Although I was looking forward to voir dire-ing Citibank's witness, in the event that it procured one, my client was happy with the result.  

Past success does not guarantee success in any future matter.  Do, however, contact me should you have a debt case in need of defending.

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