The affiants are a critical link in the litigation chain, swearing in many cases that they had “personal knowledge of the business records,” according to court records. But Transworld’s employees did not have personal knowledge, the consumer bureau said in its complaint against the debt collector.
Other companies had created the records reviewed by Transworld employees. Those workers, the consumer bureau said, did not know how the data was maintained and whether it was correct. Even so, employees signed the forms “for fear of losing their jobs,” according to the bureau’s complaint.
The hasty review process obscured defects. More than 800 cases involved apparent time travel: In those instances, Transworld employees swore that borrowers’ loans had been purchased by investors on dates that were months or even years before the loans were actually made.
Transworld, based in Fort Washington, Pa., said it disagreed with many of the consumer bureau’s accusations. The company agreed to settle the case, it said in a statement, to avoid the cost and distraction of litigation.
Transworld “processes thousands of affidavits, and while our error rate is exceptionally low, we believe that any mistake is unacceptable,” Mr. Zwick said. “We will continue to regularly review everything we do in order to ensure the highest standards of quality control.”
Lisa Kyser, in Pataskala, Ohio, said she got tangled up in one of Transworld’s mistakes. She took out half a dozen student loans as she juggled her college studies with full-time jobs, but she thought she had all of them under control.
In June 2016, Ms. Kyser got a summons notifying her that she was being sued for falling behind on a $12,000 loan made in 2006. Two weeks later, she got a second summons also seeking payment — to a different creditor, for a different amount — on the same loan.
“I called the opposing counsel from both firms and said, ‘You can’t both be right,’” said Emily White, a lawyer in Columbus, Ohio, who represented Ms. Kyser.
The cases lingered for five months, while Ms. Kyser racked up legal fees. In the end, after her lawyer continually pestered them, the law firms that sued Ms. Kyser — both working for Transworld — withdrew the cases.
Courts Digging Deeper
The stacks of legal documents Transworld prepared in that Georgia office park made their way to courts across the country.
Many of the cases sailed through, unchallenged. Borrowers often do not fight collection lawsuits, which allows the creditor to win by default.
Even when defendants did respond, some judges brushed off their objections. In Miami, a law firm working for Transworld brought a lawsuit last year against Antonio Fuentes, seeking payment on a $13,356 student loan. With interest and fees, Mr. Fuentes now owed $25,322.31, according to the complaint.
Mr. Fuentes, representing himself, admitted that he had taken the loan but disputed the amount he was said to owe. A Transworld employee swore in an affidavit that the tally was correct. The judge sided with Transworld and ordered Mr. Fuentes to pay the full amount.
“The courts are often not sympathetic to these cases,” said N. James Turner, a lawyer in Orlando, Fla., who represents borrowers. “Many judges take the attitude: ‘I paid my student loans. You ought to pay yours. Don’t give me this nonsense about technicalities.’”
But some judges are starting to raise questions about collection cases.
Last year, a California appeals court cast doubt on the company’s affidavits. Employees of Transword, then known as NCO Financial Systems, were not “personally familiar” with the records they swore were accurate, the judges wrote, and therefore could not vouch for them in court. The case was tossed out.
It’s not just debt collectors facing judicial skepticism, but also the creditors themselves.