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Fighting robo-debt collections agents

Americans seeking debt relief are increasingly being warned against so-called "robo-collectors," banks who are attempting to recover funds using the same robo-signing techniques employed by the foreclosure companies who faced sanctions earlier this year. The firms, which include American Express and Citigroup, are accused of filing erroneous lawsuits against thousands of borrowers.

Many credit card holders with delinquent accounts say the banks are suing them for more than the value of their debt. Some lenders have even been unable to demonstrate that any debt is owed at all, according to borrowers.

Banks are known to sell their collections accounts to other firms for pennies on the dollar. This not only increases the risk for generic testimony and so-called "robo-signing" scandals, but also ups the likelihood that the lender will be mistaken for someone else with a different debt. You could be subjected to phantom debt, which occurs when someone with a similar name or Social Security number has their debt added to your accounts.

To avoid this, consider taking a few preventive measures that can protect your credit. First, get the name and phone number of the person who is calling to collect your debt. Experts say that it is important to find out whether the person is calling from the bank or an outsourced collections company.

In addition, it is important to demand that the bank send along appropriate documentation to back their delinquency claims. This is required by the Fair Debt Collection Practices Act, legislation designed to protect borrowers from unfair collections proceedings. Be sure to read through these documents carefully to confirm dates and amounts owed. One person's statements were supposedly from 2004, but the documents contained advertisements from 2010, for example.

Additionally, if you notice a discrepancy, be sure to document it and put all disputes in hard-copy writing. Complain to financial authorities if your dispute is mishandled. Lastly, be sure to enlist the help of a qualified financial attorney if you are facing significant challenges with your debt.

Source: CBS Money Watch, "How to fight robo-debt collectors," Kathy Kristof, Aug. 14, 2012

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