Borrower Beware: B of A Customer Repaid Her Bill Yet Faced a Collections Nightmare

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Karen Stevens spent nearly $1,900 paying off delinquent credit card debt she owed Bank of America in 2006. She then spent another three years fending off demands from collections agencies that she repay the debt all over again. Neither a cancelled check or creditor's letter stating that she'd fulfilled her obligations deterred the collectors.

Stevens ended the nightmare only by hiring a lawyer and counter-suing her pursuers. Bank of America was not directly involved in the legal contretemps, but it appears to have set them off by selling rights to Stevens' account, even after assuring her she'd paid up in full.

Bank of America and other large institutions have for years sold off batches of charged-off accounts to outside collections specialists. The practice usually generates relatively small amounts of revenue and in many cases is entirely appropriate.

However, Stevens' case appears to be an example of what happens when banks sell batches of accounts without sufficiently scrubbing them of errors and discrepancies (see related story). Such oversights are drawing into collections quagmires an unknown number of consumers who owe nothing, or for whom debt records are incomplete or nonexistent. For banks, it's a problem that threatens to spark a legal or regulatory backlash or to do further damage to already tarnished reputations.

In the wake of the mortgage robo-signing scandal, the Office of the Comptroller of the Currency dispatched enforcement staff to a JPMorgan Chase card processing center late last year as part of a card collections investigation. The Consumer Financial Protection Bureau has also expressed its intention to look into collections practices.

Stevens, now 42, is a Hagerstown, Maryland resident who has spent the last dozen years working in a nearby warehouse for office supply retailer Staples. Around the time her mother died several years ago, Stevens says she lost track of how much she owed Bank of America in credit card debt. She was later contacted by Plaza Associates, a collection agency under contract with the bank.

Stevens sent Plaza a check for $1872.70 made out to B of A. It cleared on October 19, 2006, according to a copy of the check she later filed in Maryland District Court for Washington County. Plaza responded by sending Stevens a letter dated Dec. 20, 2006 that stated her account was "considered settled" by Bank of America.

Shortly after Stevens paid off her debt, Bank of America appears to have sold rights to her account to outside debt collectors affiliated with CACH LLC. The collectors began calling Stevens and sending her collection letters, according to Stevens' state court filings. They demanded she pay off — with interest — the B of A card account that Plaza had assured Stevens in writing she'd covered.

"They would constantly call, they would constantly mail stuff to me," Stevens says. Even when she sent the collectors proof of having paid her debt, "that just didn't seem to be good enough for them. They still ended up taking me to court. The proof is in the paperwork, what more do I have to present to you?"

Bank of America declined to comment through a spokeswoman. Plaza Associates also declined to comment.

In December 2006, Stevens received a collection letter from Bronson & Migliaccio LLP, a collector affiliated with CACH, according to Stevens' state court filings. Stevens says she responded by faxing the firm a copy of Plaza's letter.

Three months later, Stevens received a letter demanding payment from another collector affiliated with CACH called Pentagroup Financial LLP. She responded by faxing it a copy of Plaza's letter as well, Stevens says. In June, 2007, she obtained a copy of the check paying off her debt and faxed it and the Plaza letter to a different Pentagroup representative.

Debt collectors continued demanding payment throughout 2008, according to Stevens' state court filings. All told, she received six collection letters between February and August of that year from Northland Group, Inc., a debt collector affiliated with CACH. Stevens did not respond to those letters, she says.

Lance Black, president of Northland Group, confirmed that his firm does work for SquareTwo Financial, the owner of CACH. He declined comment on Stevens' case or to discuss how frequently his firm discovers it is seeking to collect debt that has already been repaid.

Representatives for SquareTwo, Pentagroup Financial and Bronson & Migliaccio (now known as Cawley & Bergmann) did not respond to messages left on their voicemail systems.

"They don't know what they're doing. They're just pulling stuff off the shelf," says Douglas Bowman, the Middleton, Md. lawyer whom Stevens eventually hired to counter-sue.

Bowman says he's defended more than 500 people facing demands similar to those Stevens received. He's won all but about 20 of those cases and attributes his high success rate to collections agencies' inability to produce paperwork to support their demands.

"This industry does business in a certain way and they've done it for a long time," Bowman says. "As long as nobody points out that the emperor has no clothes, they're good."

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Comments (5)
There is a high cost to consumers from faulty credit reporting including being charged significantly higher interest rates on auto and home loans. This raises serious issues about the integrity of collections data. If the collections data is inaccurate, it undermines the legitimacy of the entities trying to collect on bad debts. Kate Berry, Reporter, American Banker.
Posted by berryk | Friday, March 30 2012 at 4:47PM ET
At least some of these entities seem to have no interset in protection of reputation--except when they are suing counterparties for damage to it. For example I recently saw one instance where a DEPOITOR had created a $100 savings account and a checking account--then had to move out of the town [DC] on a medical emergency] . she later contacted the account officer at the Bank and asked to close the 2 accounts because there were no branches in her state--but for investment advisory/trust operation.

The bank refused to close the accounts unless the woman personally waled into an office--to pick up the $150 left. The depoitor had never opened a debt accont. Recently the woman came to me with a letter from the collection department of this TBTF operation. They were charging an overdraft fee and other charges for moving the money from her savings account to her checking account which was wiped out by service fees to a negative balance. Now the savings account was down to $69---after all the charges stemming from her failure to fly back to DC to close the account personally. The phone number on the collection letter was the collection dept--1st question was could they call that number to facilitate collections [on the pair of deposit accounts]. This conduct speaks for itself---setting up charges to wipe out depositos accounts--refusing to close accounts to enable fees to be generated,

This was Wells Fargo. This is how they treat depositors--what do they do if you actually owe them money---BTW they still wont close the account.
Posted by OLDER&WISER | Saturday, March 31 2012 at 7:28PM ET
We're kidding ourselves here, right? This practice has been going on for YEARS if not DECADES and now it's in the spotlight?

My mom had an issue with a collector phoning her stating that she owed the Commonwealth of Virginia taxes although the statute had run out. After retrieving the tax filing from her files and saw that there was never an audit and in fact had received a refund yet they still pursued here. After speaking with a tax attorney, and reading multiple blogs on the internet, she was advised to do nothing although Virginia had sold-off records the collection was outside the statute of limitations. I had similar as Karen Stevens did although not with a bank but issues with Sprint Wireless through its Nextel/Sprint merger: someone wasn't minding the collections systems and somehow created an early termination fee and although each time I received a zero balance bill and letter from Sprint saying I didn't owe anything, collections still came a calling: took me EIGHT months to resolve. Fast forward to 2012, an issue presents itself with AT&T Uverse: I close my account due to relocation, turn in 4 HD boxes w/ remotes per instruction to UPS for delivery to a central receiving location for AT&T and low and behold: they credit a MONTH after receiving the equipment the two weeks later debit my account back for half the equipment and I start receiving collection letter. I knew better not to telephone the collector through my Sprint experience so I spent FOUR straight weeks, two days a week on the phone with AT&T to resolve the issue. Finally, at last, I get FULL credit for the debacle on March 16th. Regardless of whether repeated phone calls advise that my accounts are clear I'll hang on to the documentation forever because one never knows when something will crawl up out of the collections nightmare hole.....
Posted by Michelle C | Monday, April 02 2012 at 12:19AM ET
I would love to know how much Bowman got in his lawsuit.

I know there are lawyers in Florida who are making a bundle representing people being hounded for money they already paid on their credit cards. Most people are frightened of lawyers and the potential expense and simply do not know how to find one. As a result they try to handle these collection efforts (mortgage and credit cards) on their own. Too bad. I know a case where the borrowers got $200K from BofA from a badly bungled mortgage modification and foreclosure in a law suit. The BofA representative perjured himself on the witness stand re knowledge of BofA's records.

The next wave will be auto loans.
Posted by Amity F | Tuesday, April 03 2012 at 9:50AM ET
While the comment by Amity F regarding my compensation is disappointing, it is not surprising. I did not make a "bundle," nor did I receive a fee that even Amity F would find offensive, for representing Ms. Stevens. The only way a consumer advocate makes any money is through successful class action lawsuits against deep pockets. The big money cases are as rare as hen's teeth.

Yes, most people are afraid of lawyers and do not know how to find one. There is no cure for either. I spent several years soliciting defendants in debt buyer cases on a contingent fee basis. The letter stated the fee -- never more than 10% of the amount sued on, except there was a minimum that varied from $100 to $500 depending on a number of factors. I also discounted even that meager fee if the client's income was solely social security or was a disable vet. I have defended over 750 such cases and lost fewer than 40 of those, yet got less than a 10% response to my solicitations. So, it is not necessarily the fee that keeps people from defending, but I cannot say what those reasons are.

It is unfortunate that people do not seek out help.

In Maryland cases, a good starting point, other than myself, 240-566-6050, is to call Civil Justice, Inc., for referral to a lawyer near you in Maryland, 410-706-0174 or see their website civiljusticenetwork.org
Posted by Doug Bowman | Sunday, February 09 2014 at 3:18PM ET
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