In order to administer any kind of justice, our court system requires two parties participating in a lawsuit. When that doesn’t happen, plaintiffs generally prevail, even if they haven’t produced any proof of their claims. Ordinarily, a default is a bad thing for a plaintiff, because there is little or no chance of getting paid.
Defaults are just what debt buyers want, though, because they have thousands of lawsuits to file and little or no proof in any of them. And debt buyers are willing and able to pursue collections on a massive scale—garnishing salaries and bank accounts to satisfy all those default judgments. Essentially, the debt buyer industry has found a loophole in the court system—a way to exploit the default rules.
That’s why courts need to raise the bar for debt buyers. When the usual result of a debt buyer lawsuit is a deprivation of property, courts should endeavor to make sure it doesn’t happen unless the debt buyer has shown some right to that property.
The Maryland Court of Appeals recently decided just that. Since last week, debt buyers must show actual proof that the defendant owes the debt and that the debt buyer has actually purchased the debt. The court also made it clear that it does not trust the robo-signed affidavits that debt buyers routinely attach to their lawsuits.
It’s a step in the right direction, and I hope more states will follow suit.
GMAC, a large mortgage lender, has been foreclosing like mad, apparently without bothering to check its facts. Here is an excerpt from a deposition of GMAC employee Jeffrey Stephen:
Q. So other than the due date and the balances due, is it correct that you do not know whether any other part of the affidavit that you sign is true?
A. That could be correct.
In short, the affidavits might as well be faked. Caught in the act, GMAC has stopped evicting homeowners and foreclosing mortgages in 23 states. Or mostly stopped, anyway.
Believe it or not, there are laws against this sort of thing. It’s just that nobody has bothered to enforce them.