“Too Big To Fail” Banks Get Bailout, Gave Customers The Shaft
Posted by Warm Southern Breeze on Monday, December 19, 2016
Chalk One Up for the Working Man
By Donald V. Watkins
©Copyrighted and Published (via Facebook) on December 18, 2016
Used with permission
On Thursday, I tried a case for a close friend on mine in the Jefferson County, Alabama District Court in Bessemer, Alabama. My friend is a hard working Bessemer resident and family man whose world was turned upside down when Citibank sold his credit card account to San Diego-based junk debt buyer, Midland Funding, LLC. He is one of millions of bank credit card customers each year whose accounts are bundled in loan pools and then sold to junk debt buyers without the customer’s knowledge.
Midland Funding is one of several mega junk debt buyers in America. This group of financial sharks buys unsecured bank debt for pennies on a dollar and then strong arms debtors who miss one or more of their monthly payments. Midland is part of a multi-billion industry of shady financial predators.
In my friend’s case, Citibank sold his account to Midland Funding. The balance on the account was $6,800. My friend paid his credit card monthly on a regular basis, but had an unexpected hiccup in his monthly cash flow a couple of years after he opened the account. As a result he failed to make a couple of his payments on time. When this occurred Citibank sold my friend’s account to Midland, and Midland eventually sued my friend. This is how my friend became my client.
Remember, Citibank had a similar hiccup during the Great Recession of 2008. The bank requested and received a total of $181.6 billion in federal bailout assistance to keep from collapsing. In fact, Citibank led the banking industry’s “welfare queens” by receiving more financial bailout assistance than any big bank in the U.S.
Citibank’s “Thank You” to the taxpayers like my client, whose tax dollars made the financial bailout possible for these big banks, was the low-down act of selling his credit card account to a shark like Midland Funding. The big banks were quick to take taxpayer-sponsored financial assistance, but slow to give taxpayers similar financial assistance in return.
[Editor’s Note: Alamerica Bank, which is co-owned by me, has never sought or received federal bailout assistance. To this day, Alamerica Bank enjoys one of the highest Tier 1 capital ratios among the state’s banks and is profitable today.]
Citibank’s practice of selling its pools of unsecured debt to sharks like Midland Funding gave me an opportunity to see this ugly and disgusting financial practice on an up-close basis.
Trying the Case
I have not tried a case at the district court level in 41 years. My career progressed way pass small claims cases decades ago. Yet, I was compelled to take this case, for free. What I saw after reviewing Midland’s lawsuit against my client made me sick.
I began to list the violations of my friend’s constitutional and statutory rights in Midland’s lawsuit against him for a “Breach of Contract” and an “Account Stated”. I put my pen down after counting about a dozen violations. Had I kept going, I could have easily identified another dozen or so violations.
In a state of shock, I asked myself this question: How did we get to a place in this country where millions of hard working, taxpaying Americans routinely have their legal rights openly crushed by sharks like Midland each year and nobody seems to care?
Midland and its federation of sharks have perfected a “bum rush” technique in which they file “off-the-shelf” complaints against cash-strapped debtors in Small Claims or District Courts, depending on the size of the debt. Midland knows that most of these debtors (a) cannot afford an attorney or (b) will not appear in court to challenge the lawsuits in a timely fashion. When the debtors do not appear in court, Midland will ask for and receive a default judgment. The company then proceeds with garnishments and/or other oppressive judgment collection actions.
Debtors who show up in court to contest the lawsuits against them often have no lawyers representing their interests, and they do not have the legal skills to effectively make Midland meet the evidentiary requirements necessary to prove its case. The result is usually a judgment in Midland’s favor.
Midland’s “bum rush” technique has produced a river of tears and a gigantic cash windfall for a junk debt buyer who paid pennies on the dollar to purchase its portfolio of credit card debt. Midland is often awarded the full amount of the original debt, even though it is clearly NOT legally entitled to this amount.
When I looked at the evidence Midland intended to use in my client’s case, I was stunned that it was nothing but fourth and fifth degrees of hearsay. The affidavits offered in support of the debt were “canned” documents that were completed by individuals who had no personal knowledge of the credit card transactions at issue or my client’s payment history.
The Wall Street banks involved in these junk debt sales are regulated by the Securities and Exchange Commissions. These banks routinely sell billions of dollars worth of securities (i.e., credit card debt) to sharks like Midland that are typically NOT regulated by the SEC and are NOT licensed by a state to handle the exchange and resale of these securities. And, nobody seems to care.
I cared. I went to court Thursday ready to kick Midland’s butt. I prepared for my friend’s trial like it was a multi-million dollar case.
When I entered the courtroom, I felt nostalgic because it reminded me of the many battles I fought against loan sharks during my earl years as a lawyer. Then I realized that, as 2016 draws to a close, we are still battling the same loan sharks. Nothing has changed.
When they called our case for trial, Midland had no witnesses. The company wanted to use affidavits to prove its case. I objected and moved to strike the affidavits on the grounds that they were rank hearsay. District Judge Edward B. Vines agreed and entered a judgment in favor of my client.
At that moment, my friend’s long nightmare with Midland was over. In just 60 seconds of trial time, a very fair-minded and knowledgeable judge followed the law and did the right thing.
My friend was extremely happy with the outcome, but I was sad. All I could think about were the millions of hard working Americans whose rights are squashed in Midland’s legal machine every year. Usually, nobody is there to help them — not the Securities and Exchange Commission, which has the backbone of a jellyfish; not a majority of those federal, state and local elected officials who profess their love and care for working class Americans at election time, but go into hiding between election cycles; and certainly not the state legislators who have whored themselves out to the predatory lending industry.
In fairness to all, it should be noted that a couple of state attorneys general have sued Midland and other junk debt buyers for their unscrupulous loan collection practices, but Alabama is not among them.