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Debt Collection Suit Entering Arbitration

Tuesday, July, 16, 2013


Citibank, GE Capital and American Express recently won the right to arbitrate any class action putative claims regarding the legal debt collection practices.  The decision was handed down by a New York federal judge who determined that the class-action waivers listed in the credit card customer contracts were indeed enforceable.


The companies are up against a number of individuals who claim that debt collectors and issuers of credit cards fraudulently obtained judgments by using a legal affidavit signing, among other practices.  The plaintiffs allege that the companies listed on the suit, including Citibank, American Express and GE Capital, are guilty of conspiring with debt collection agencies across the country including Asset Acceptance LLC, Portfolio Recovery Associates LLC and Midland Funding LLC.  The plaintiffs argue that these credit card companies were able to get thousands of default judgments against debtors as a result of false affidavits and inaccurate evidence. 


In past cases, federal courts have supported plaintiff's claims where there is evidence regarding illegal signing practices.  Federal courts have determined that using “robo-signing” practices is against the law.  This is drawn from the concept that employees involved in these processes are often not familiar with or have direct personal knowledge of any of the debts they are seeking to collect.


The Supreme Court has recently ruled on issues similar to this claim.  This is because the antitrust case regarding Italian Colors determined that courts cannot overturn existing class arbitration waivers only because it would cost plaintiff's more to arbitrate the claim than any potential recovery amount.  Although the plaintiffs in this case were hopeful they would be able to obtain a judgment through traditional litigation process, the federal judge held up the arbitration clause in their signed customer contracts with the credit card companies.  From this stage, plaintiffs will be headed to arbitration the companies named in the suit.