Mass-produced collection lawsuits overwhelming New York courts
July 14, 2010 by Todd Murray · Leave a Comment
When I saw the headline for this recent New York Times story, I assumed it was just another story about the massive increase in debt collection lawsuits in a down economy. There have been dozens of similar stories in numerous media outlets over the last couple of years. But the article does contain a startling revelation:
As millions of Americans have fallen behind on paying their bills, debt collection law firms have been clogging courtrooms with lawsuits seeking repayment. Few have been as prolific as Cohen & Slamowitz, a Woodbury, N.Y., firm that has specialized in debt collection for nearly two decades. The firm has been filing roughly 80,000 lawsuits a year. With just 14 lawyers on staff, that works out to more than 5,700 cases per lawyer.
These figures are astounding for a couple of reasons. First, the collection industry–which consists of hundreds of law firms, including many that file a similar number of lawsuits as Cohen & Slamowitz–repeatedly accuses consumer lawyers of being overly litigious. The Times’ data exposes the obvious hypocrisy of this accusation.
And then there’s this: if you take the Times’ math a little further, each of the 14 lawyers at Cohen & Slamowitz are filing just under 500 lawsuits each month. And I’m willing to bet that Mr. Cohen and Mr. Slamowitz, as the founding partners of the firm, are not doing the mundane work of signing debt collection lawsuits. The senior partners at the collection law firm I used to work at certainly didn’t. So the 500 lawsuits per-lawyer-per-month estimate is probably an understatement.
Why is this such a big deal? First, mass-producing so many lawsuits will inevitably result in mistakes–such as suing the wrong person or demanding the wrong amount of money. Second, and perhaps more importantly, both the FDCPA and most states’ rules of civil procedure seem to require that lawyers ensure that the lawsuits they are filing are accurate and based on competent evidence. The FDCPA calls this “meaningful review”. Based on the absurdly high number of lawsuits they’re filing each month, it’s hard to imagine a Cohen & Slamowitz lawyer doing very much meaningful review.
Although the Times’ story features one New York judge that has held the debt collectors to the existing standard of meaningful review, the majority of courts seem willing to look the other way. So it’s unlikely that we’ll see a reduction in mass-produced lawsuits anytime soon.
If you live in Minnesota and have been sued by a debt collector, feel free to download and use my free Answer form and instructions. And if you would prefer to have an attorney defend you against a debt collection lawsuit, feel free to contact me.
Automated Debt-Collection Lawsuits Engulf Courts | New York Times | July 12, 2010
Star Tribune story on debt buyer lawsuits
June 30, 2010 by Todd Murray · Leave a Comment
The Star Tribune just ran an in-depth story about the surge in debt buyer collection lawsuits. The article does a great job of highlighting the major problem with debt buyers’ lawsuits: their lack of information and evidence to prove that the consumer actually owes the debt. As the story explains, the problems created by this lack of information are magnified when combined with debt buyers’ aggressive litigation practices and the guilty-until-proven-innocent attitude that they treat consumers with.
To me, the important thing for people to take from this story is to understand that the debt buyer industry is built on the premise that consumers will not answer their lawsuits, which results in thousands of default judgments for them. By obtaining the overwhelming majority of their judgments by default, debt buyers can get away with not having sufficient–or any–evidence that the consumer owes the money. But as the story shows, if the consumer fights back, many debt buyers will either walk away from the case or get roundly defeated in court.
If you live in Minnesota and have been sued by a debt buyer, feel free to download and use my free Answer form and instructions. And if you would prefer to have an attorney defend you against a debt buyer lawsuit, feel free to contact me.
Phantom debts, real anguish | Star Tribune | June 30, 2010
New report on debt buyer lawsuits
June 14, 2010 by Todd Murray · Leave a Comment
Last month, a team of organizations that provide legal help to low-income people issued a report on debt buyer lawsuits in New York City. The study draws on a sample of debt buyer lawsuits brought by 26 different debt buyers from 2006 to 2008. The study refers to this as the “Court Sample”. The study also draws some data from a sample of callers to New York City’s Neighborhood Economic Development Advocacy Project. The study refers to this as the “Client Sample”. Here are some of the study’s key findings:
- Debt buyers won more than 90% of the lawsuits they filed, most of them by default judgment.
- Not a single person in the Court Sample was represented by a lawyer. Overall, only 1% of people sued by debt buyers were represented by an attorney.
- Only 10% of the people sued by debt buyers answered the lawsuit.
- At least 71% of the people in the Client Sample were either not served with the lawsuit or were served improperly.
The first three findings don’t surprise me in the least. It’s long been known that debt buyers have a difficult time obtaining evidence for their case from the original creditor. They get away with filing so many lawsuits only because most of the people that the debt buyers sue can’t afford to hire a lawyer and don’t know enough to answer the lawsuit. So they win the case by default, not because they have strong evidence. And while I suspected that there were frequent issues with bad service in debt buyer cases, I’m a little shocked by how high the rate in this study actually is.
Based on its findings, the study makes the following recommendations:
- Prohibit debt buyers from filing suits without evidence.
- Ensure judicial review of default judgments
- Increase legal representation for people sued by debt buyers.
- Aggressively monitor and regulate process servers.
These are all excellent suggestions. Here in Minnesota, the state legislature is currently working on a bill that would require debt buyers to provide certain documents proving their claim before the court grants them a default judgment. But because of state budget shortfalls, it’s unlikely that Minnesota will see judicial review of default judgments or increased state funding for legal representation for low-income people any time soon. I strongly believe that someone needs to introduce a bill that calls for greater oversight and tougher regulations for Minnesota process servers. One of the fundamental tenets of our judicial system is proper notice to all of the parties, and based on the findings in this study, many people that are sued by debt buyers don’t received proper notice. It remains to be seen whether this is deliberate or sloppy, but I have my suspicions.
Debt Deception: How Debt Buyers Abuse the Legal System to Prey on Low-Income New Yorkers (PDF) | May 2010
If you live in Minnesota and have been sued by a debt buyer, feel free to download and use my free Answer form and instructions. And if you would prefer to have an attorney defend you against a debt buyer lawsuit, feel free to contact me.
MN Supreme Court amends summons language
May 5, 2010 by Todd Murray · Leave a Comment
The Minnesota Supreme Court just approved changes to Minnesota’s summons, which go into effect on July 1, 2010. The summons, of course, is the notice that comes with a lawsuit that notifies defendants that they’ve been sued. I’ve been critical of the old summons language because it’s confusing and filled with incomprehensible legalese.
I’m happy to report that the new summons is written in plain, clear English. It has 6 bold-faced notices, each followed by a brief explanation. It very clearly explains that: (1) you’ve been sued; (2) you must reply within 20 days; (3) you must respond to every allegation in the lawsuit; (4) you will lose your case if you don’t respond to each allegation within 20 days; and (5) you should talk to a lawyer if you don’t understand how to help. The new summons is much clearer and should allow consumers to better understand what they need to do to protect their rights.
You can read the new summons in its entirety here.
If you live in Minnesota, feel free to download my free Answer form and instructions. And if you want help defending yourself against a collection lawsuit, feel free to contact me.
New York Times story highlights the importance of answering a debt collection lawsuit
April 12, 2010 by Todd Murray · Leave a Comment
The New York Times recently published a story about the increase in wage garnishments due to the sour economy. The story tells the story of two struggling consumers who’ve had their wages garnished to pay back their debts. One man, who owed just over $4,000, actually had over $10,000 taken from his paycheck due to accrued interest and fees. But the lesson here–at least in my mind–is that in many cases, these garnishments can be prevented:
Most consumers never offer a defense, and creditors win their lawsuits without having to offer proof of the debts, much less justify to a judge the huge interest charges and penalties they often tack on …. In the rare event that a consumer battles back, creditors frequently lack the documentation to prove their claim, and cases are dropped. That is because many past-due debts are owned not by the banks that issued them, but by debt collectors who bought, for cents on the dollar, a list of names and amounts due …. “If the consumers were armed with more education about how to defend against these debts, they’d be successful,” said Jeffrey Lipman, a civil magistrate in Des Moines.
I’ve written extensively about the importance of answering a collection lawsuit, but I’ll repeat the message again: if you’ve been served with a collection lawsuit in Minnesota, you MUST answer the lawsuit within 20 days or the creditor will win the case without a judge ever seeing it. In most cases, the creditor’s next step is either a bank or wage garnishment. Even if you believe that you owe the debt, you’re entitled to answer the lawsuit and force the creditor to prove their case.
If you live in Minnesota and have been served with a collection lawsuit, feel free to download my free Answer form and instructions. And if you want help defending yourself against a collection lawsuit, feel free to contact me.
Pay Garnishments Rise as Debtors Fall Behind | New York Times | April 1, 2010
