SCOTUS Oral Argument Illuminates the Main Question in Foreclosures: What are the roles of the parties?

Two days ago in the case of Obudskey v McCarthy and Holthus LLP the  Supreme Court of the United States (SCOTUS) heard oral argument on issues relating to the application of the Federal Debt Collection Procedures Act (FDCPA).

The argument for including the law firm pursuing foreclosure was presented by DANIEL L. GEYSER, Esq. in a case that started in Texas.

In the course of reading the oral argument and comments by the court it is clear that everyone is struggling with defining the roles of each of the players in foreclosure.  The fact that such a struggle exists is a testament to the credibility of arguments raised by homeowners that claimants are misrepresenting their roles and capacity to pursue foreclosure or at least on dubious ground for claiming any rights in relation to the subject debt. While the SCOTUS ruling could go any number of ways, the fact that they took the case for review combined with the content of the oral argument, shows that the roles of all the parties who line up to pursue foreclosure are obscured.

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see scotus oral argument on fdcpa 17-1307_apl1

Hat tip to Charles Cox

Claims under the FDCPA are very interesting because in order to determine of the party that is acting is a debt collector you must first determine if they are a creditor and then determine whether their activities fall within the FDCPA. By alleging they are a debt collector you are implicitly stating that they are not a creditor — i.e. an owner of the debt seeking to collect it.

This opens discovery on the issue of who owns the debt and wether the party demanding payment is representing the owner of the debt . We know they are not representing the owner of the debt (there probably is no “owner of the debt”) and they are not owners of the debt — unless a presumption is made that possession of the original note raises the presumption of transfer of the debt.

That in turn raises the question of whether the note was delivered by someone who owned the debt.

And THAT is at the heart of the game for the banks. They lead foreclosure defense counsel, homeowners and the courts into believing that the existence of the chain of paper is sufficient to raise a virtually irrebuttable presumption that what is written in the chain of paper is true. It is not true. So the entire tsunami of foreclosures was based upon the premise of the banks that it is true because they say it is true.

This is accepted by courts because they automatically accept representations of bank counsel as credible —- and automatically reject assertions of foreclosure defense counsel —- as either not credible or just technical ways to either delay the inevitable (which is a prejudgment) or get out of a legitimate debt (making the frequently erroneous assumption that the debt is legitimate) without regard to whether it is owed to the claimant who is named in the foreclosure proceedings — or whether the claimant has a legal relationship (privity) with the owner of the debt.

CA Trial Court Upholds Claims for Improper Assignment, Accounting, Unfair Practices

Editor’s Note: In an extremely well-written and well reasoned decision Federal District Court Judge M. James Lorenz denied the Motion to dismiss of US Bank on an alleged WAMU securitization that for the first time recognizes that the securitization scheme could be a sham, with no basis in fact.

Although the Plaintiff chose not to make allegations regarding false origination of loan documents, which I think is important, the rest of the decision breaks the illusion created by the banks and servicers through the use of documents that look good but do not meet the standards of proof required in a foreclosure.

  1. I would suggest that lawyers look at the claim and allegations that the origination documents were false and were procured by fraud.
  2. Since no such allegation was made, the court naturally assumed the loan was validly portrayed in the loan documents and that the note was evidence of the loan transaction, presuming that SBMC actually loaned the money to the Plaintiff, which does not appear to be the case.
  3. This Judge actually read everything and obvious questions in his mind led him to conclude that there were irregularities in the assignment process that could lead to a verdict in favor of the Plaintiff for quiet title, accounting, unfair practices and other claims.
  4. The court recites the fact that the loan was sold to “currently unknown entity or entities.” This implicitly raises the question of whether the loan was in fact actually sold more than once, and if so, to whom, for how much, and raises the issues of whom Plaintiff was to direct her payments and whether the actual creditor was receiving the money that Plaintiff paid.  — a point hammered on, among others, at the Garfield Seminars coming up in Emeryville (San Francisco), 8/25 and Anaheim, 8/29-30. If you really want to understand what went on in the mortgage meltdown and the tactics and strategies that are getting traction in the courts, you are invited to attend. Anaheim has a 1/2 day seminar for homeowners. Call customer service 520-405-1688 to attend.
  5. For the first time, this Court uses the words (attempt to securitize” a loan as opposed to assuming it was done just based upon the paperwork and the presence of the the parties claiming rights through the assignments and securitization.
  6. AFTER the Notice of Sale was recorded, the Plaintiff sent a RESPA 6 Qualified Written request. The defendants used the time-honored defense that this was not a real QWR, but eh court disagreed, stating that the Plaintiff not only requested information but gave her reasons in some details for thinking that something might be wrong.
  7. Plaintiff did not specifically mention that the information requested should come from BOTH the subservicer claiming rights to service the loan and the Master Servicer claiming rights to administer the payments from all parties and the disbursements to those investor lenders that had contributed the money that was used to fund the loan. I would suggest that attorneys be aware of this distinction inasmuch as the subservicer only has a small snapshot of transactions solely between the borrower and the subservicer whereas the the information from the Master Servicer would require a complete set of records on all financial transactions and all documents relating to their claims regarding the loan.
  8. The court carefully applied the law on Motions to Dismiss instead of inserting the opinion of the Judge as to whether the Plaintiff would win stating that “material allegations, even if doubtful in fact, are assumed to be true,” which is another point we have been pounding on since 2007. The court went on to say that it was obligated to accept any claim that was “plausible on its face.”
  9. The primary claim of Plaintiffs was that the Defendants were “not her true creditors and as such have no legal, equitable, or pecuniary right in this debt obligation in the loan,’ which we presume to mean that the court was recognizing the distinction, for the first time, between the legal obligation to pay and the loan documents.
  10. Plaintiff contended that there was not a proper assignment to anyone because the assignment took place after the cutoff date in 2006 (assignment in 2010) and that the person executing the documents, was not a duly constituted authorized signor. The Judge’s decision weighed more heavily that allegation that the assignment was not properly made according to the “trust Document,” thus taking Defendants word for it that a trust was created and existing at the time of the assignment, but also saying in effect that they can’t pick up one end of the stick without picking up the other. The assignment, after the Notice of Default, violated the terms of the trust document thus removing the authority of the trustee or the trust to accept it, which as any reasonable person would know, they wouldn’t want to accept — having been sold on the idea that they were buying performing loans. More on this can be read in “whose Lien Is It Anyway?, which I just published and is available on www.livinglies-store.com
  11. The Court states without any caveats that the failure to assign the loan in the manner and timing set forth in the “trust document” (presumably the Pooling and Servicing Agreement) that the note and Deed of trust are not part of the trust and that therefore the trustee had no basis for asserting ownership, much less the right to enforce.
  12. THEN this Judge uses simple logic and applies existing law: if the assignment was void, then the notices of default, sale, substitution of trustee and any foreclosure would have been totally void.
  13. I would add that lawyers should consider the allegation that none of the transfers were supported by any financial transaction or other consideration because consideration passed at origination from the investors directly tot he borrower, due to the defendants ignoring the provisions of the prospectus and PSA shown to the investor-lender. In discovery what you want is the identity of each entity that ever showed this loan is a loan receivable on any regular business or record or set of accounting forms. It might surprise you that NOBODY has the loan posted as loan receivable and as such, the argument can be made that NOBODY can submit a CREDIT BID at auction even if the auction was otherwise a valid auction.
  14. Next, the Court disagrees with the Defendants that they are not debt collectors and upholds the Plaintiff’s claim for violation of FDCPA. Since she explicitly alleges that US bank is a debt collector, and started collection efforts on 2010, the allegation that the one-year statute of limitation should be applied was rejected by the court. Thus Plaintiff’s claims for violations under FDCPA were upheld.
  15. Plaintiff also added a count under California’s Unfair Competition Law (UCL) which prohibits any unlawful, unfair or fraudulent business act or practice. Section 17200 of Cal. Bus. & Prof. Code. The Court rejected defendants’ arguments that FDCPA did not apply since “Plaintiff alleges that Defendants violated the UCL by collecting payments that they lacked the right to collect, and engaging in unlawful business practices by violating the FDCPA and RESPA.” And under the rules regarding motions to dismiss, her allegations must be taken as absolutely true unless the allegations are clearly frivolous or speculative on their face.
  16. Plaintiff alleged that the Defendants had created a cloud upon her title affecting her in numerous ways including her credit score, ability to refinance etc. Defendants countered that the allegation regarding a cloud on title was speculative. The Judge said this is not speculation, it is fact if other allegations are true regarding the false recording of unauthorized documents based upon an illegal or void assignment.
  17. And lastly, but very importantly, the Court recognizes for the first time, the right of a homeowner to demand an accounting if they can establish facts in their allegations that raise questions regarding the status of the loan, whether she was paying the right people and whether the true creditors were being paid. “Plaintiff alleges facts that allows the Court to draw a reasonable inference that Defendants may be liable for various misconduct alleged. See Iqbal, 129 S. Ct. at 1949.

Here are some significant quotes from the case. Naranjo v SBMC TILA- Accounting -Unfair practices- QWR- m/dismiss —

Judge Lorenzo Decision in Naranjo vs. SBMC Mortgage et al 7-24-12

No allegations regarding false origination of loan documents:

SBMC sold her loan to a currently unknown entity or entities. (FAC ¶ 15.) Plaintiff alleges that these unknown entities and Defendants were involved in an attempt to securitize the loan into the WAMU Mortgage Pass-through Certificates WMALT Series 2006-AR4 Trust (“WAMU Trust”). (Id. ¶ 17.) However, these entities involved in the attempted securitization of the loan “failed to adhere to the requirements of the Trust Agreement

In August 2009, Plaintiff was hospitalized, resulting in unforeseen financial hardship. (FAC ¶ 25.) As a result, she defaulted on her loan. (See id. ¶ 26.)
On May 26, 2010, Defendants recorded an Assignment of Deed of Trust, which states that MERS assigned and transferred to U.S. Bank as trustee for the WAMU Trust under the DOT. (RJN Ex. B.) Colleen Irby executed the Assignment as Officer for MERS. (Id.) On the same day, Defendants also recorded a Substitution of Trustee, which states that the U.S. Bank as trustee, by JP Morgan, as attorney-in-fact substituted its rights under the DOT to the California Reconveyance Company (“CRC”). (RJN Ex. C.) Colleen Irby also executed the Substitution as Officer of “U.S. Bank, National Association as trustee for the WAMU Trust.” (Id.) And again, on the same day, CRC, as trustee, recorded a Notice of Default and Election to Sell. (RJN Ex. D.)
A Notice of Trustee’s sale was recorded, stating that the estimated unpaid balance on the note was $989,468.00 on July 1, 2011. (RJN Ex. E.)
On August 8, 2011, Plaintiff sent JPMorgan a Qualified Written Request (“QWR”) letter in an effort to verify and validate her debt. (FAC ¶ 35 & Ex. C.) In the letter, she requested that JPMorgan provide, among other things, a true and correct copy of the original note and a complete life of the loan transactional history. (Id.) Although JPMorgan acknowledged the QWR within five days of receipt, Plaintiff alleges that it “failed to provide a substantive response.” (Id. ¶ 35.) Specifically, even though the QWR contained the borrow’s name, loan number, and property address, Plaintiff alleges that “JPMorgan’s substantive response concerned the same borrower, but instead supplied information regarding an entirely different loan and property.” (Id.)

The court must dismiss a cause of action for failure to state a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). A motion to dismiss under Rule 12(b)(6) tests the legal sufficiency of the complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). The court must accept all allegations of material fact as true and construe them in light most favorable to the nonmoving party. Cedars-Sanai Med. Ctr. v. Nat’l League of Postmasters of U.S., 497 F.3d 972, 975 (9th Cir. 2007). Material allegations, even if doubtful in fact, are assumed to be true. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). However, the court need not “necessarily assume the truth of legal conclusions merely because they are cast in the form of factual allegations.” Warren v. Fox Family Worldwide, Inc., 328 F.3d 1136, 1139 (9th Cir. 2003) (internal quotation marks omitted). In fact, the court does not need to accept any legal conclusions as true. Ashcroft v. Iqbal, 556 U.S. 662, ___, 129 S. Ct. 1937, 1949 (2009)

the allegations in the complaint “must be enough to raise a right to relief above the speculative level.” Id. Thus, “[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to `state a claim to relief that is plausible on its face.'” Iqbal, 129 S. Ct. at 1949 (citing Twombly, 550 U.S. at 570). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. “The plausibility standard is not akin to a `probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. A complaint may be dismissed as a matter of law either for lack of a cognizable legal theory or for insufficient facts under a cognizable theory. Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530, 534 (9th Cir. 1984).

Plaintiff’s primary contention here is that Defendants “are not her true creditors and as such have no legal, equitable, or pecuniary right in this debt obligation” in the loan. (Pl.’s Opp’n 1:5-11.) She contends that her promissory note and DOT were never properly assigned to the WAMU Trust because the entities involved in the attempted transfer failed to adhere to the requirements set forth in the Trust Agreement and thus the note and DOT are not a part of the trust res. (FAC ¶¶ 17, 20.) Defendants moves to dismiss the FAC in its entirety with prejudice.

The vital allegation in this case is the assignment of the loan into the WAMU Trust was not completed by May 30, 2006 as required by the Trust Agreement. This allegation gives rise to a plausible inference that the subsequent assignment, substitution, and notice of default and election to sell may also be improper. Defendants wholly fail to address that issue. (See Defs.’ Mot. 3:16-6:2; Defs.’ Reply 2:13-4:4.) This reason alone is sufficient to deny Defendants’ motion with respect to this issue. [plus the fact that no financial transaction occurred]

Moving on, Defendants’ reliance on Gomes is misguided. In Gomes, the California Court of Appeal held that a plaintiff does not have a right to bring an action to determine a nominee’s authorization to proceed with a nonjudicial foreclosure on behalf of a noteholder. 192 Cal. App. 4th at 1155. The nominee in Gomes was MERS. Id. at 1151. Here, Plaintiff is not seeking such a determination. The role of the nominee is not central to this action as it was in Gomes. Rather, Plaintiff alleges that the transfer of rights to the WAMU Trust is improper, thus Defendants consequently lack the legal right to either collect on the debt or enforce the underlying security interest.

Plaintiff requests that the Court “make a finding and issue appropriate orders stating that none of the named Defendants . . . have any right or interest in Plaintiff’s Note, Deed of Trust, or the Property which authorizes them . . . to collect Plaintiff’s mortgage payments or enforce the terms of the Note or Deed of Trust in any manner whatsoever.” (FAC ¶ 50.) Defendant simplifies this as a request for “a determination of the ownership of [the] Note and Deed of Trust,” which they argue is “addressed in her other causes of action.” (Defs.’ Mot. 6:16-20.) The Court disagrees with Defendants. As discussed above and below, there is an actual controversy that is not superfluous. Therefore, the Court DENIES Defendants’ motion as to Plaintiff’s claim for declaratory relief.

Defendants argue that they are not “debt collectors” within the meaning of the FDCPA. (Defs.’ Mot. 9:13-15.) That argument is predicated on the presumption that all of the legal rights attached to the loan were properly assigned. Plaintiff responds that Defendants are debt collectors because U.S. Bank’s principal purpose is to collect debt and it also attempted to collect payments. (Pl.’s Opp’n 19:23-27.) She explicitly alleges in the FAC that U.S. Bank has attempted to collect her debt obligation and that U.S. Bank is a debt collector. Consequently, Plaintiff sufficiently alleges a claim under the FDCPA.
Defendants also argue that the FDCPA claim is time barred. (Defs.’ Mot. 7:18-27.) A FDCPA claim must be brought “within one year from the date on which the violation occurs.” 15 U.S.C. § 1692k(d). Defendants contend that the violation occurred when the allegedly false assignment occurred on May 26, 2010. (Defs.’ Mot. 7:22-27.) However, Plaintiff alleges that U.S. Bank violated the FDCPA when it attempted to enforce Plaintiff’s debt obligation and collect mortgage payments when it allegedly had no legal authority to do so. (FAC ¶ 72.) Defendants wholly overlook those allegations in the FAC. Thus, Defendants fail to show that Plaintiff’s FDCPA claim is time barred.
Accordingly, the Court DENIES Defendants’ motion as to Plaintiff’s FDCPA claim.
Defendants argue that Plaintiff’s letter does not constitute a QWR because it requests a list of unsupported demands rather than specific particular errors or omissions in the account along with an explanation from the borrower why she believes an error exists. (Defs.’ Mot. 10:4-13.) However, the letter explains that it “concerns sales and transfers of mortgage servicing rights; deceptive and fraudulent servicing practices to enhance balance sheets; deceptive, abusive, and fraudulent accounting tricks and practices that may have also negatively affected any credit rating, mortgage account and/or the debt or payments that [Plaintiff] may be obligated to.” (FAC Ex. C.) The letter goes on to put JPMorgan on notice of
potential abuses of J.P. Morgan Chase or previous servicing companies or previous servicing companies [that] could have deceptively, wrongfully, unlawfully, and/or illegally: Increased the amounts of monthly payments; Increased the principal balance Ms. Naranjo owes; Increased the escrow payments; Increased the amounts applied and attributed toward interest on this account; Decreased the proper amounts applied and attributed toward the principal on this account; and/or[] Assessed, charged and/or collected fees, expenses and miscellaneous charges Ms. Naranjo is not legally obligated to pay under this mortgage, note and/or deed of trust.
(Id.) Based on the substance of letter, the Court cannot find as a matter of law that the letter is not a QWR.
California’s Unfair Competition Law (“UCL”) prohibits “any unlawful, unfair or fraudulent business act or practice. . . .” Cal. Bus. & Prof. Code § 17200. This cause of action is generally derivative of some other illegal conduct or fraud committed by a defendant. Khoury v. Maly’s of Cal., Inc., 14 Cal. App. 4th 612, 619 (1993). Plaintiff alleges that Defendants violated the UCL by collecting payments that they lacked the right to collect, and engaging in unlawful business practices by violating the FDCPA and RESPA.

Defendants argue that Plaintiff’s allegation regarding a cloud on her title does not constitute an allegation of loss of money or property, and even if Plaintiff were to lose her property, she cannot show it was a result of Defendants’ actions. (Defs.’ Mot. 12:22-13:4.) The Court disagrees. As discussed above, Plaintiff alleges damages resulting from Defendants’ collection of payments that they purportedly did not have the legal right to collect. These injuries are monetary, but also may result in the loss of Plaintiff’s property. Furthermore, these injuries are causally connected to Defendants’ conduct. Thus, Plaintiff has standing to pursue a UCL claim against Defendants.

Plaintiff alleges that Defendants owe a fiduciary duty in their capacities as creditor and mortgage servicer. (FAC ¶ 125.) She pursues this claim on the grounds that Defendants collected payments from her that they had no right to do. Defendants argue that various documents recorded in the Official Records of San Diego County from May 2010 show that Plaintiff fails to allege facts sufficient to state a claim for accounting. (Defs.’ Mot. 16:1-3.) Defendants are mistaken. As discussed above, a fundamental issue in this action is whether Defendants’ rights were properly assigned in accordance with the Trust Agreement in 2006. Plaintiff alleges facts that allows the Court to draw a reasonable inference that Defendants may be liable for various misconduct alleged. See Iqbal, 129 S. Ct. at 1949.

NY Judges Slamming Debt Collectors

Eltman, Eltman & Cooper was one of 35 law firms sued last July by the state, which claimed that they had improperly obtained more than 100,000 judgments in consumer-debt cases. Editor’s notes: The dubious “enforcement” of mortgages, notes and “obligations (that have been paid many times over through credit enhancement) is both mirrored and amplified in the debt collection industry. Servicers are merely debt collectors since they are collecting for a third party. In an investigative report coming soon to these pages you will see that servicers are actually the “real trustee” for the investors, separate and apart from the Special Purpose Vehicle. But that is for later.

For now, before you slide into grief and shame over your financial condition, know this: the people hounding you for money are doing so in most cases illegally and Judges are reversing themselves across the country as they take a closer look at the the procedural tricks routinely employed by those who prey upon consumers with “debt” claims have that long since been extinguished, written off, repackaged into resecuritized asset backed securities, with even more credit swaps on top of the old ones.

In this article from the New York Times, the clarity of the scam is being revealed and unraveled. The ultimate conclusion of this mess will take years if not decades, to move us back to a state of equilibrium. In the meantime, the major piece of advice you will probably get from any consumer law advocate or attorney is this: don’t pay anyone unless you are sure you owe THEM the money. The question is not whether you owe money (i.e., the existence of the obligation), the question is the identity of the creditor and whether the obligation, without your knowledge was already paid in whole or in part by credit default swaps, other credit enhancement techniques, etc.

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May 7, 2010

In New York, Some Judges Are Now Skeptical About Debt Collectors’ Claims

By WILLIAM GLABERSON

As New Yorkers have tumbled into credit card debt in large numbers during the great recession, bill collectors have inundated the courts to get what they say is due. In turn, the courts have issued hundreds of thousands of orders against residents. Some consumer groups argue that by doing so, the courts have become little more than an arm of the debt collection industry.

Now, a few judges in New York State are suggesting that they agree, at least in part, with the consumer groups. They have fumed at debt collectors and their lawyers, scolding them for interest as high as 30 percent a year and berating them for false statements and abusive practices.

Some of the rulings have even been sarcastic or incredulous. In December, a Staten Island judge said debt collectors seemed to think their lawsuits were taking place in a legal Land of Oz, where everyone was supposed to follow anticonsumer rules invented by some unseen debt-collection wizard.

Last month, a Manhattan appeals court threw out a credit card case, saying a debt collection company had sued the wrong person but pursued the case anyway.

“I think these judges are outraged at the status quo, and they’re trying to change it,” said Janet Ray Kalson, a Manhattan lawyer who is the chairwoman of a City Bar Association committee that has studied the deluge of credit card cases.

Debt-buyer businesses purchase debts — along with lists of names and amounts supposedly due — for pennies on the dollar from credit card companies and sometimes have no real evidence about whom they are suing or why. They then file tens of thousands of suits, often with little to back up their claims.

A Nassau County District Court judge said recently, for example, that one of New York City’s high-volume debt collection law firms, which has close ties to a debt-buying company, did not provide “a scintilla of evidence” that there was even a debt in a case against a Long Island woman.

The suit received an unusual amount of attention. The judge, Michael A. Ciaffa, said that it “regrettably, involves a veritable ‘perfect storm’ of mistakes, errors, misdeeds and improper litigation practices.” Judge Ciaffa said the law firm, Eltman, Eltman & Cooper, ignored court orders, made a “demonstrably false” assertion and harassed the woman for payment even after its suit was dismissed.

The case before Judge Ciaffa ended with an order that is far from typical in a credit card suit. The woman who had been sued, Patricia Bohnet, a bookkeeper and single mother, did not have to pay anything. But Eltman, Eltman & Cooper had to pay $14,800 in sanctions for violating ethical rules at least 18 times. Under the judge’s order, $4,800 is to go to Ms. Bohnet and the remainder to a state fund that works to reimburse clients for dishonest conduct by lawyers.

“They don’t care if you’re sick; they don’t care if you’re poor,” Ms. Bohnet said in an interview at her job in Woodmere. “Their only job is to collect money, and they’ll do it in any way possible.”

In response to questions, the law firm said in a written statement that Judge Ciaffa had not had all the facts but that the firm would not appeal. “As with any firm or business that handles this type of volume,” it added, “there exists a potential for errors or omissions in the normal course of business.”

Eltman, Eltman & Cooper was one of 35 law firms sued last July by the state, which claimed that they had improperly obtained more than 100,000 judgments in consumer-debt cases. Separate files in Federal District Court in Brooklyn show that without admitting fault, the Eltman law firm settled a class-action suit in 2006 that claimed it used “false, misleading and deceptive means” to collect debts.

Privately, some judges say they are embarrassed that in many New York courts, debt-collection lawyers have grown so comfortable that they give the impression they are in charge of the proceedings and do not need prove their claims with strong evidence.

In the recent pro-consumer rulings, skepticism of the debt collectors’ claims has been obvious. A Civil Court judge in Brooklyn, Noach Dear, has written decisions that come close to saying that the collection cases are sometimes based on falsehoods.

In a case in August, Judge Dear observed that there was nothing to substantiate a lawyer’s claim that she somehow remembered mailing a document to the credit card holder that was the foundation of the collection suit. The document, Judge Dear noted archly, had been mailed three and a half years earlier.

Behind the legalese of the credit card suits, some judges have suggested, there is often a disorganized jumble of documentation. A Mount Vernon City Court judge noted that one case was based on little more than “a self-serving computer printout.” A Manhattan judge said one company that bought debt claims from credit card companies had filed suit against a cardholder although it did not own that particular debt.

In the Staten Island case, the judge, Philip S. Straniere, said a credit card company was claiming interest of 28 percent on the balance due, which would be illegal as usury under New York law. The company argued that the credit card issued to a New Yorker that seemed to be from a national company had actually been issued by a one-branch bank in Utah, which had no usury law.

“Like the Land of Oz, run by a Wizard who no one has ever seen,” Judge Straniere wrote, “the Land of Credit Cards permits consumers to be bound by agreements they never sign, agreements they may never have received, subject to change without notice and the laws of a state other than those existing where they reside.”

The judge ruled that the supposed agreement allowing unlimited interest charges was not enforceable in New York.

Industry officials said that tales of abusive collection cases were misleading. “There are certainly colorful stories,” said Joann Needleman, an officer of the National Association of Retail Collection Attorneys. “People think that handful is the rule, not the exception, but it’s not.”

But Ms. Bohnet, the Long Island woman who was sued by a New York law firm, said just one case could be harrowing. When she received a call last year at the charity where she keeps the books for $39,000 a year, the voice on the other end told her the debt collectors had a five-year-old court judgment against her for a $4,861 debt. She had to pay, or they would start taking money out of her salary, she said she was told.

The address of the debt-collection firm and its lawyers at Eltman, Eltman & Cooper seemed to be the same, she noticed.

Ms. Bohnet did not know she had ever been sued. She started to cry, she said, worried that with a chunk of money taken every month, she might lose the modest apartment she needed to share custody of her teenage daughter.

“I was in all-out fear,” she said, adding, “After I got off the phone, I realized I didn’t even know what the debt was for.” She might have had an old credit card debt, but she had had some years of problems with alcohol and drugs and tangled financial problems. In recovery, she said, she had worked to clean up her financial affairs.

The next time the collectors called, she said, she told them that she was willing to pay if she owed any money but that she needed to see some proof that they had the right person. Then, without a lawyer, she went to the court, in Hempstead, to check into the order the debt collectors said they had against her.

After some digging, she found the case. The debt-buyer’s lawyers had filed a sworn statement that they said was proof she had been given notice of the suit. A process server for Eltman, Eltman & Cooper claimed she had been given a copy of the suit personally on July 30, 2004.

Judge Ciaffa doubted that. Ms. Bohnet, he wrote, “hadn’t lived at that address since 1998.”

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