In courtrooms across New York State, lawsuits poured in by the hundreds as if manufactured on an assembly line. Some included generic testimony, others relied on bogus affidavits, churned out so rapidly that they were seldom viewed for accuracy.
Sound familiar? The same problems that dogged the foreclosure of homes — and prompted public outcry and a multibillion-dollar settlement by some of the nation’s biggest banks — are increasingly showing up in the practices of large buyers of bad consumer debt.
The companies, which buy huge swaths of soured bills from lenders for pennies on the dollar, are deluging the courts with shoddy lawsuits, according to a review of debt collection lawsuits along with interviews with state judges and prosecutors.
As part of an effort to stamp out such practices, New York’s state attorney general, Eric T. Schneiderman, reached a settlement on Friday with a debt buyer, the Encore Capital Group, over concerns that the company filed thousands of flawed debt collection lawsuits against state residents.
“New York has laws in place to ensure no one can prey on consumers, and debt collectors are required to follow those rules,” said Mr. Schneiderman. He added that “today’s settlement ensures that thousands of New Yorkers will see millions in relief from debts that were not enforceable in the first place.”
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