DURHAM, N.C. – Debt collection abuses rank first in the type of complaints filed by Washington State military servicemembers to the Consumer Financial Protection Bureau, and second for all consumers in the state. A new Center for Responsible Lending (CRL) report may help explain why.
“Debt by Default: Debt Collection Practices in Washington 2012-2016” found that over 80% of lawsuits filed by debt buyers against consumers are unchallenged in court, meaning the debt buyer wins by default. So people sued by debt buyers are frequently subject to a judgment or garnishment of their wages, without the debt buyer ever proving their case or the validity of the debt.
The analysis also found that only 1% of defendants were represented by an attorney among 21,254 cases filed over five years by one large law firm representing debt buyers. Of those cases where the debt buyer won by default, defendants were represented in only 45 cases.
And the report documents a startling figure indicating how many of those consumers may not be aware that their case may be subject to a default judgment if they don’t respond to a summons in 20 days, a time frame that applies even if no court case exists. This “pocket service” may be occurring in almost 70% of the cases reviewed.
“The numbers show quite a lopsided legal situation in favor of debt buyers in Washington, who we found typically don’t have to prove the debt they are pursuing is real and accurate in order to win cases against unrepresented consumers,” said Julia Barnard, Researcher at the Center for Responsible Lending and co-author of the report. “In fact, less than two percent of defendants have legal representation. And on top of that, problems with service and very speedy timelines result in the fact that many folks find themselves subject to monetary judgments or even wage garnishments before they knew what hit them.”
“Unfortunately, this report shows the people of Washington are experiencing the injustice to consumers that we’ve seen in other parts of the country,” said Ellen Harnick, CRL's Western Office Director. “These rushed default judgments, often for money that may not be owed, cause needless harm to people already struggling. These judgments show up on credit reports, impacting the ability to buy or rent a home, purchase a car, or even get a job. Debt buyers should provide basic proof before causing such damage to consumers. The problem with pocket service should also be fixed, so that consumers can at least find the cases against them when they contact the court.”
“Washingtonians are working hard to get by, often stretching limited resources to meet basic needs,” said Jay Doran of Statewide Poverty Action Network in Seattle. “A system that enables debt buyers to squeeze struggling consumers for precious dollars that they may not even owe is simply unjust. We need reform desperately, starting with the basic principle that debt buyers must prove the debt is real, as complaints make clear it is so often not inaccurate.”
“I see the abuses day after day, where debt buyers use the courts to push low income families deeper into financial distress, often without ever proving their claims,” said Scott Kinkley, an attorney with Northwest Justice Project in Spokane. “Providing proof when filing a lawsuit is a basic principle of our justice system. Debt buyers should not get away with draining desperately needed money from low-income consumers without documenting that the debt is real and accurate in each and every case.”
For more information, or to arrange an interview with a CRL spokesperson on this issue, please contact Ricardo Quinto at ricardo.quinto@responsiblelending.org.