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US probing top banks over faulty debt collection    
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Source: btimes.com.my

THE largest US banks face a multi-state investigation into whether they helped debt collectors pursue faulty judgments against credit card customers, according to people familiar with the matter.

The issue is whether weak record-keeping by banks or a failure to pass accurate information to collection agencies harmed consumers.

The allegations against the banks echo those central to last year's US$25 billion (RM77.5 billion) federal-state mortgage settlement to resolve charges that the banks "robo-signed" documents and pursued foreclosures with faulty information.

This latest probe targets the same banks, including Bank of America, JPMorgan Chase, Citigroup and Wells Fargo, said the sources.

As with the mortgage cases, the investigation focuses on the banks' poor paperwork and their weak tracking of the debts.

When they sold delinquent credit card debt to the buyers, often at only a few cents on the dollar, they allegedly failed to provide them with the evidence that the borrowers owed the money. It is unclear, however, if the incomplete information was used to pursue borrowers who were not delinquent.

Mark Schiffman, vice-president for public affairs at ACA International, an organisation that represents debt collectors, said the industry agrees it needs proper information to pursue debts owed, but said policymakers could better define which documentation is necessary.

While states are still considering their options in how to proceed against the banks, the issue is "moving up in importance" and action could come soon, one state official said.

The probe against the banks marks an expansion of the scrutiny that to date has largely focused on the debt collectors.

Along with state attorneys-general, federal agencies including the Federal Trade Commission and the Consumer Financial Protection Bureau (CFPB) have been investigating the firms who buy the delinquent debt and then seek to collect on it.

In one of the more notable cases, the FTC last year accused debt buyer Asset Acceptance of misrepresenting that consumers owed a debt when it could not substantiate its representations. Reuters

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