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Debt collection practices compared to robo-signed foreclosures

At the height of the economic recession, many homeowners in Michigan found themselves facing the possibility of foreclosure. Given the high rate of foreclosures, mortgage lenders tried to find shortcuts to move forward with proceedings. As a result, a number of institutions adopted the error-prone practice of robo-signing. Now, it appears as though similar -- and equally troubling -- processes have spilled into debt collection.

Robo-signing is considered to be the practice of approving important financial documents, relating to foreclosures or debt collection, without actually examining them. Through this process, a number of people in need of debt relief have faced unwarranted scrutiny from lenders.

Just as lenders became the subject of lawsuits for unfair, sloppy foreclosure actions, some lenders are now facing legal claims for failing to accurately handle debt collection. In order to collect debt, lenders must sign affidavits. However, many of these sworn legal statements have been approved without being verified. As a result, people are facing multiple collections actions on the same debt or are being held responsible for debts incurred as the result of indentity theft.

When lenders fail to act carefully, borrowers are usually the ones who pay the price. As a result, it's important to not only take every collection action seriously, but also to make sure that banks aren't relying on flawed practices to collect debts.

Of course, it can be inimidating to deal with mortgage lenders alone when seeking out debt relief options. However, it's important to remember that a person doesn't have to go through this alone. By seeking out the appropriate advice and resources, financially distressed Detroit residents can find the solutions they've been seeking.

Source: Fox Business News, "Robo-Signed Collection Cases Under Fire," Fred O. Williams, April 26, 2013

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