Courts rubber stamp corporate suits against poor in US
Jan 22, NY: Courts across the United States have allowed multibillion-dollar corporations to secure judgments against alleged debtors en masse without providing meaningful evidence to support their claims, Human Rights Watch said in a report released today. Some legislatures and courts have also erected formidable barriers that block many alleged debtors from securing a meaningful hearing in front of a judge.
The 80-page report, “Rubber Stamp Justice: US Courts, Debt Buying Corporations, and the Poor,” scrutinizes how courts approach hundreds of thousands lawsuits brought every year by debt buyers – firms that specialize in buying up bad debts which they then try to collect for themselves. These suits have often been marred by patterns of apparent error, legal deficiency, and alleged illegality. Debt buyers have won court judgments against the wrong people, prevailed in suits that should have been barred by applicable state law, and garnished the wages or bank accounts of people who never received proper notice that they had been sued, along with other problems. Yet many courts continue to adjudicate these suits with astonishing speed and without subjecting them to any substantive scrutiny or even receiving meaningful evidence in support of the claims.
The report is based on interviews with people sued by debt buyers, judges, lawyers, public officials, and debt buyer representatives across several US states and at all levels of government. Some judges expressed frustration with legal frameworks, court rules, and resource constraints that they say prevent them from subjecting debt buyer litigation to the kind of scrutiny the cases deserve.Human Rights Watch detailed pervasive problems with the way courts approach debt buyer lawsuits. The cases often pit multibillion-dollar corporations against people who cannot afford legal representation. Many defendants are effectively railroaded into paying off debts whose existence has never been proven, even when strong legal defenses are available to them.
Most defendants either cannot or do not mount any kind of an effective defense to the suits against them and in these cases many courts award default judgments in favor of plaintiffs without requiring much if anything in the way of evidence, Human Rights Watch found. This creates a risk that some courts rubber stamp large numbers of lawsuits that debt buyers could never win against a competent adversary in court – including some that are legally deficient or without supporting evidence.
Some courts make it very difficult for defendants who appear in court intending to fight the case to secure a meaningful hearing before a judge. Many courts push defendants into unofficial “negotiations” with debt buyer attorneys in the courthouse hallways. Human Rights Watch observed “hallway conferences” in which debt buyer attorneys misled or hectored defendants into capitulating and agreeing to pay without ever having the opportunity to present their side of the case to a judge.
Debt buying companies pay pennies on the dollar for vast portfolios of delinquent credit card and other debt, and then try to collect the full face value of those debts. Because the debts are purchased so cheaply, even a very low rate of collection can yield huge profits. Encore Capital, the industry leader, claims that one in every five US consumers either owes it money or has owed it money in the past. Encore and its largest competitor, Portfolio Recovery Associates, each collect $1 billion from US consumers every year, roughly half of that through debt litigation.
Much of the debt sold to debt buyers is credit card debt, carrying interest rates that routinely exceed 25 percent. The companies often allow interest to accumulate for years before filing suit, which can add thousands of dollars to the debts they ultimately try to collect in court. Many of the defendants are struggling or at the margins of poverty.
Debt buyers rank among the heaviest individual users of the US civil court system, filing hundreds of thousands of suits every year. In New York’s state court system, eight of the 20 most prolific civil plaintiffs were debt buying companies in 2014, filing more than 70,000 suits. Debt buyer lawsuits add to the overwhelming backlog of cases many courts already struggle to deal with, creating an incentive to dispose of the cases quickly rather than carefully.
The Oslo Times/HRW