Thursday, December 29, 2011

Remember those Barbarians in the Capital One Credit Car Commercials – They Are Trying To Collect Debts Already Discharged

Illegal Yes – But Apparently That Doesn’t Matter; These are Bankers We're Talking About

Going through bankruptcy is not a pleasant experience, sort of like bowel surgery without anesthetic.  But at the end of the process a person’s debts are settled.  Some creditors get paid in full, some get paid partially, some remain as obligations of the debtor and some do not get paid at all.  But whatever the outcome, whatever certain debts that are not paid in full are discharged.  The debtor no longer owes the money and can move on with his or her life.

Unless of course, the lender is Capital One.  Capital One has decided to go after people whose debts are no longer owed.  They may do this because their records are so shoddy that they cannot determine the debt is already discharged, or they may do it because they don’t care as long as they can get the money.  It would be nice to give them the benefit of the doubt and assume incompetence over malfeasance if the problem wasn’t so large.

A court-appointed auditor concluded earlier this year that Capital One pursued 15,500 "erroneous claims" seeking money previously erased by a bankruptcy-court judge.

The reason there is a court appointed auditor is that one judge has had enough.

Separately, David W. Houston III, chief judge of the U.S. Bankruptcy Court in Aberdeen, Miss., said he plans to demand that Capital One show up in his courtroom to explain its debt-collection practices.

In October, the judge rejected the company's request to throw out a lawsuit that alleged Capital One tried to collect $43,396.59 that was legally erased in an earlier bankruptcy case filed by the same person.

"I want some proof from the company that this was a legitimate error and not a conscious, malevolent effort to go out and collect a debt that's been discharged," Judge Houston said in an interview.

And there is evidence of bad behavior in the past

In 2008, a U.S. bankruptcy trustee in Massachusetts accused Capital One of illegally trying 5,600 times to collect debts already wiped out by a bankruptcy judge.

The trustee concluded that Capital One was guilty of incompetence, and did not maintain adequate records on which of its debtors had debts discharged, but then, it would not be in Capital One’s best interests to do so, would it.  The good news here is that victims are fighting back, and there is at least one judge on the side of justice.  That alone is enough to give The Dismal Political Economist a slight boost here in the holiday season.

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