Lawsuit filed against fradulent debt collectors

From the NY Times:

...thousands of New Yorkers...according to a class-action lawsuit, are victims of a network of debt collectors who used fraudulent documents to surreptitiously win court judgments — all without the debtors’ knowledge.

The lawsuit, filed in Federal District Court in Manhattan this week, takes aim at a decades-old practice known in legal circles as “sewer service.” This is when a debt collector fails to serve a notice of complaint and then files a false affidavit claiming the notice has been properly served. When the debtor doesn’t show up in court, the collector can then apply for, and almost always wins, a default judgment.

The first a victim often learns about the judgment is when a bank account is seized or a lien is threatened. The judgments can also ruin a person’s credit report.

Consumer advocates say the practice has grown in recent years, fueled by the recessionary rise in consumer debt actions and the emergence over the last decade of companies that buy up charged-off debt for pennies on the dollar, then seek to recover the full debt, along with interest, for themselves.