Robo-Signing and Consumer Bankruptcy Cases
When the term “robo-signing” comes up, most consumers think back to the use of robo-signed documents during the foreclosure crisis, and the harms many homeowners faced as a result. Can robo-signing also cause harm to debtors who file for consumer bankruptcy? According to a recent report in MarketWatch, Citigroup recently “agreed to pay $5 million to settle claims over robo-signing in tens of thousands of bankruptcy cases.”
How does robo-signing relate to personal bankruptcy cases, and what are the key facts to know about the recent Citigroup settlement?
What is Robo-Signing in a Bankruptcy Case?
When documents are filed in certain types of cases—including many foreclosure cases as well as Chapter 7 bankruptcy and Chapter 13 bankruptcy cases—they need to be signed by the party submitting them. In the case of foreclosures, a bank typically provides paperwork that confirms the details of the foreclosure, and that paperwork is supposed to be reviewed and signed by someone who ensures that the facts are correct. In most cases, a bank employee is the one who reviews the documents and signs them. However, during the foreclosure crisis, many banks had employees who signed the documents without actually reviewing them for accuracy. This is known as the practice of “robo-signing.”
When it comes to bankruptcy cases and robo-signing, the issue typically concerns the signing of—without properly reviewing—proofs of claim. In consumer bankruptcy cases, the creditor must file documents in order to get paid. More specifically, the creditor must file paperwork that provides specific information about the claim, including the type of the claim and the total amount that the debtor owes the creditor. This is known as the “proof of claim.”
Citigroup and Robo-Signed Proofs of Claim in Consumer Bankruptcies
In the Citigroup case, according to an article in Reuters, nearly 72,000 credit card account proofs of claim were “robo-signed,” meaning that the documents were signed without being properly reviewed. The MarketWatch report describes how “tens of thousands of proofs of claim [that] were filed in bankruptcy cases across the country . . . were improperly signed by employees of a third-party vendor who had not reviewed and/or lacked knowledge of the contents of the proof of claim.”
Indeed, as the Reuters article clarifies, Citigroup hired a third-party vendor to review and sign proofs of claim, yet between 2012 and 2015, thousands of documents were robo-signed. Citigroup learned of problems with the proofs of claim in 2015, and the article highlights that it has “adopted procedures to avoid a recurrence” at the same time it has “complied with applicable bankruptcy signing requirements” since it learned about the problems with the third-party vendor. Of the $5 million settlement, each affected credit card holder is expected to receive approximately $70.
Contact an Oak Park Bankruptcy Attorney
If you have questions about the consumer bankruptcy process, or if you have concerns about whether you may have been affected by robo-signed documents in your consumer bankruptcy case, you should speak with an experienced Oak Park bankruptcy attorney as soon as possible. Contact the Emerson Law Firm today for more information.
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