According to Consumerist and the Wall Street Journal, Chase has dismissed a bunch of debt collection lawsuits against consumers nationwide. Several of my consumer colleagues have speculated that this move is spurred by the recent robo-signing scandal. I’ve even heard (unsubstantiated) rumors that there has been some housecleaning in upper management of Chase’s credit card litigation department. In any event, this is good news for consumers.
Chase Drops Thousands Of Debt Collection Cases Against Borrowers | Consumerist | July 1, 2011
Lender Drops Pursuit of Debt | The Wall Street Journal | June 24, 2011 (subscriber content)
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 want help answering a debt collection lawsuit, feel free to contact me by using the contact form in the upper right corner of this page. I offer a number of flexible representation options, so even if you can only afford to pay a few hundred dollars, I might be able to help you.
Automated Debt-Collection Lawsuits Engulf Courts | New York Times | July 12, 2010
Andrew M. Cuomo, the New York Attorney General, filed a lawsuit last week that named 35 debt collection law firms as defendants. The suit alleges that over 100,000 default judgments obtained by these debt collectors may have been obtained by fraud because the consumers were not properly notified of the lawsuits and given a chance to defend themselves. According to the suit, the debt collection law firms all used the same process server, American Legal Process, to serve the lawsuits. The suit alleges that ALP “repeatedly and persistently” falsified sworn affidavits that it had given proper notice of the lawsuit to consumers. There are multiple allegations of ALP process servers serving two or more people in different places at the same time. Since the consumers had no notice of the lawsuits, they did not respond to them. This resulted in thousands of court ordered default judgments. The debt collection law firms used these judgments to garnish the consumers’ bank accounts and wages. The average amount seized from each consumer was over $5,000.00.
The lawsuit is silent about whether the collection law firms knew about the falsified affidavits. My guess is that they didn’t, but I also imagine that they didn’t ask too many questions about ALP’s practices and procedures as long as their services kept the money rolling in.
New York Times: N.Y. Claims Collectors of Debt Used Fraud (via CL&P blog)
Minnesota Lawyer recently published an article about the increased need for consumer lawyers in the current economic climate. The article discussed the rise in debt collection lawsuits being initiated and some of the problems this has caused for consumers.
I was quoted several times in the article, which also featured quotes from fellow consumer lawyers Nick Slade and Sam Glover:
Minneapolis consumer attorney Todd Murray is fielding a lot of calls as well, many relating to issues surrounding garnishment. “There are a lot of people out there who the economy has hit pretty hard and who are having problems with debt collection.”
According to Murray, garnishment statutes tend to favor creditors, particularly the statutes involving exemptions. “A lot of times exempt funds are seized…and the process to resolve it is sort of this ping-pong process,” he said. “This often can take weeks to resolve and meanwhile the account is frozen and overdraft fees pile up.”
Murray added that while creditors are pushing hard to keep the arbitration process in place, many consumer advocate groups have targeted mandatory arbitration as “No. 1″ on their list of things to change.
If you’re in Minnesota and have been sued or garnished by a debt collector and need help defending yourself, please contact me.
Michelle Lore, Consumer lawyers keep busy as creditors push for payment, Minnesota Lawyer, April 13, 2009, at 3.