--Minnesota AG says debt-buying firm forged bank employee signatures in legal documents
--Company bought debt portfolios from Wells Fargo, U.S. Bancorp and other banks
--Wells Fargo sued company last month
(Update adds comment from Wells Fargo in paragraph 17.)
By Andrew R. Johnson
A Florida firm allegedly created thousands of fake legal documents bearing the forged logos of banks including Wells
Fargo & Co. ( WFC ) and U.S. Bancorp ( USB ) to pursue consumers for past-due overdraft fees, Minnesota Attorney General
Lori Swanson said Wednesday.
United Credit Recovery LLC, the company in question, purchased debt portfolios from banks -- and then used computer
software to copy and paste images of bank employee signatures and bank logos to make the company's legal affidavits seem
legitimate, Ms. Swanson alleged in a lawsuit filed in Minnesota state court.
The company used the documents to pursue collections cases against borrowers and often resold the portfolios it
acquired to other firms, which also used the "false affidavits to collect money from consumers, both directly and
through court judgments," the suit said.
Minnesota's suit does not name any bank as a defendant, though Ms. Swanson said her office is scrutinizing the role
financial institutions play in the sale of charged-off debt to third parties, such as United Credit Recovery.
"The banking institutions do have responsibilities to their customers to help police this industry, especially knowing
that [debt portfolios] are often resold over and over again," Ms. Swanson said in an interview.
The case is the latest to highlight alleged problems that have come to light in the debt-collection industry, which
consumer advocates have accused of using faulty documentation to pursue legal judgments against borrowers. Such
complaints mirror the "robo-signing" accusations lodged against large banks in the wake of the mortgage meltdown.
A group of 13 state attorneys general, including Ms. Swanson's office, are investigating debt-collection practices in
the industry. That group is being led by Iowa Attorney General Tom Miller.
The Consumer Financial Protection Bureau is also reviewing industry practices, including allegations that firms
misrepresent the amount of debt that consumers owe and failing to post payments made by borrowers.
United Credit Recovery specializes in buying charged-off overdraft debt from banks, typically paying pennies on the
dollar for portfolios that can total hundreds of millions of dollars. Such debt stems from fees that banks typically
charge their customers when they overdraw their bank accounts.
Throughout its history, United Credit Recovery has bought debt from Wells Fargo, U.S. Bancorp, Bank of America Corp.
( BAC ), Fifth Third Bancorp. ( FITB ) and Huntington Bancshares Inc. ( HBAN ), Minnesota's complaint said. It often quickly
resells portfolios to other debt-buying firms, expanding the potential for the company's allegedly fake legal documents
to be used in suits against consumers.
Minnesota plans to ask a judge to require the company to provide an accounting of all the firms it sold portfolios to,
Ms. Swanson said.
"It's hard to put spilled milk back in the bottle," Ms. Swanson said. "That's why we're asking for the court's
United Credit Recovery did not respond to a request for comment Wednesday.
Wells Fargo and U.S. Bancorp, which have large presences in Minnesota, sold more than $1.5 billion of charged-off debt
to the company before ending their relationships with the firm, the suit said.
In U.S. Bancorp's case, United Credit Recovery forked over $31 million to the bank to acquire more than $820 million
in overdraft debt between 2007 and 2011. It also paid Wells Fargo about $19 million for $700 million of overdraft debt
between 2010 and 2012.
Wells Fargo sued United Credit Recovery in federal court in Florida last month, accusing the company of creating
fraudulent affidavits by forging its employees' signatures and using its trademarks. The San Francisco bank stopped
selling debt to the company in 2012, citing concerns about the company's operations, according to court filings.
"Through this lawsuit, we hope to stop United Credit Recovery's creation, execution, dissemination and proliferation
of what we believe to be false documents," Catherine Pulley, a spokeswoman for Wells Fargo, wrote in an email. "We have
brought this situation to the attention of our regulators and will cooperate fully with any investigations into this
Attorneys representing United Credit Recovery in that suit did not respond to a request for comment.
Teri Charest, a spokeswoman for U.S. Bancorp, said in an email that it has not sold the type of debt referenced in
Minnesota's lawsuit since March 2012.
"While we collect the vast majority of delinquent debt internally, we do maintain relationships with a small number of
agencies who collect on our behalf," the spokeswoman said. "Those agencies are required to meet very strict compliance,
ethical and customer service standards."
U.S. Bancorp will also work with the Minnesota Attorney General's Office to provide additional support in its case,
the spokeswoman said.
Among the focus areas for federal and state regulators looking at the debt-collection industry is the integrity of
documents used in suits against borrowers as well as what information banks provide third parties who purchase debt
The Office of the Comptroller of the Currency last month ordered J.P. Morgan Chase & Co. ( JPM ) to overhaul its debt-
collection practices, alleging the bank made errors in hundreds of thousands of debt-collection lawsuits against
The bank's settlement with the OCC requires J.P. Morgan to notify consumers when their debt is sold to a third party
and verify that information provided to those buyers about the accounts is accurate, among other steps.
J.P. Morgan said at the time that it had taken several steps to address affected customers and change its practices,
including halting credit-card collections suits and dismissing other lawsuits.
Write to Andrew R. Johnson at firstname.lastname@example.org
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