Increasing numbers of judges, state attorneys general, federal agencies, and consumer financial services attorneys are concluding that banks may be vulnerable to claims of "robo testimony" in areas of consumer lending such as the credit card market. If banks fail to defend against claims that their record-keeping is shoddy, they risk inviting a new regulatory crackdown and lawsuits over the validity of claims involving tens of billions of dollars in unsecured debt.

“If I were a collector of consumer debt, I’d look at my entire process from start to finish for whether there’s an argument to be made that the process is not verifiable. I think there is substantial danger,” said Ballard Spahr's consumer financial services partner Christopher Willis.

The firm's mortgage banking partner Michael Waldron has spent years trying to stem the regulatory fallout from mortgage robo-signing. He stated: “Gone are the days when the collector or the servicer was given deference. I’d hang my reputation on there being several iterations of this in asset classes besides mortgages. The issue is how consumers are treated as assets are serviced and what the process looks like once the consumer goes into default and the stakes are higher.”

 

 

Related Practices

Bank Regulation and Supervision
Consumer Financial Services
Mortgage Banking