Many local courts are attempting to streamline debt collection litigation by eliminating judges from the process. While some courts automatically route cases to traditional mediation sessions with neutral third parties, consumer representatives say it is increasingly common that judges and courtroom staff steer defendants to "hallway conferences" with debt collection attorneys.
Courts are using such shortcuts to deal with a flood of debt collection lawsuits, though banks and debt buyers are facing increased regulatory scrutiny over flaws in their processes and paperwork. Some consumer advocates complain that banks and collections agencies have built their cases on robo-signed affidavits and used faulty or nonexistent account records.
"We know that the banks need more oversight in what [debt] they sell," says University of Maryland law professor Peter Holland. "We know that the debt buyers need more oversight of what they sue over. So putting them into a courtroom that doesn't have a judge or a neutral [party] overseeing the process just magnifies the potential for error."
According to consumer advocates and collections industry groups, millions of debt collection lawsuits are filed annually. Defendants tend to be members of minority groups with low incomes and lack the resources to hire lawyers. Claudia Wilner, a senior staff attorney with New York's New Economy Project, says it is common for courts to encourage parties to settle, but that the problem with encouraging "hallway conferences" in debt collection cases is that "there's always a represented party and an unrepresented party. … One thing that the court could do is just require a little more information from the debt buyers before they get into these extended settlements or hallway conversations."