10/12/2012 01:38 EDT | Updated 10/12/2012 01:40 EDT

National Bank Of Canada's Credigy Receivables: California Foreclosures Spark Outrage, Lawsuit


A collection agency owned by the Montreal-based National Bank of Canada has been accused of intimidating Californians into paying old credit card debt by threatening to foreclose on their homes.

Credigy Receivables is the target of a lawsuit in Orange County alleging that it is “purposely misusing mortgage foreclosure statutes to extort consumers into satisfying its demands for payment on judgments arising from entirely unrelated and unsecured … credit card and other debts,” according to a report at the Bay Citizen.

According to the article, Credigy Receivables collects old credit card debt and other forms of consumer debt by buying judgment liens from creditors, then using those liens to file foreclosure proceedings in California courts against the debtors.

The company has been accused in past lawsuits of misleading debtors into missing court dates, and attempting to collect on debts on which statutes of limitations have run out. In one case, the collection agency was ordered to pay up after demanding payment from a North Carolina woman who had incurred no debt, but was the victim of identity fraud.

Helen Jones, a 71-year-old resident of Oakland, told the Bay Citizen that Credigy Receivables came after her over a $1,636 debt owed by her ex-husband by threatening to foreclose on her $180,000 home. The collection agency had asked for $7,000 to settle the debt, which Jones said her husband incurred after they were divorced.

Jones paid up just “to get it over with,” she said, “because they [Credigy] are awful.”

The National Bank of Canada — which is a private bank not affiliated with the government — did not immediately respond to requests for comment from The Huffington Post.

Although in most cases creditors can only come after the paycheques and bank accounts of debtors, once a lien has been issued by a court, creditors have more leeway to use a debtor’s real property to get their money back under California law.

Pepperdine University law professor Grant Nelson told the Bay Citizen it’s “a very common procedure in the commercial world,” if not in the consumer debt world.

In an analysis, AllGov pins the blame for the situation on the U.S. banking deregulation of the 1990s, when it became common to package debt into securities and trade them on open markets.

“By the time the loan ends up in the hands of a debt collector, it may not be at all clear who owes what to whom,” AllGov’s Ken Broder writes.

The National Bank is Canada’s sixth-largest bank, with assets totaling more than $150 billion. It was recently named by Bloomberg Markets as the fifth strongest bank in the world.

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