ProPublica, which has written a series of articles that painted an incredibly negative picture of the collections and debt-buying industries, is calling for a reform of the way in which garnishments can be executed on consumers with unpaid debts.
Previous articles written by ProPublica have focused on how collection agencies and debt buyers seems to be focusing more on low-income and minority neighborhoods, and how the industry sues more people in states where it is cheaper to file lawsuits. This latest article is a summary of “What We’ve Learned About the Debt Collection Lawsuit Machine,” the article says in its headline.
Debt buyers are to blame for the increase in lawsuits filed against consumers with unpaid debts, according to the article.
In 1996, there were around 500 court judgments in New Jersey from suits filed by debt buyers. By 2008, that number had reached 140,000. It’s dipped since then, but the change over time is obvious. Debt buyers dominate the docket in New Jersey’s lower level civil court: In 2011, they accounted for 48 percent of the court judgments. And from 2001 through 2011, they obtained more than 1 million court judgments in New Jersey alone.
Consumers are also at a disadvantage because, ProPublica states, they are largely not represented by attorneys when they are sued by companies for non-payment of a debt.
In 2013 in New Jersey’s lower level court, for example, more than 97 percent of defendants in debt collection cases lacked attorneys.
That collection agencies and debt buyers can go into a consumer’s bank account and take some of the money in it to cover unpaid debts is also a great cause for ProPublica’s concern. It’s time for the federal government to wake up and improve consumer protection with respect to wage garnishments and bank account seizures, the article said.
Most centrally, the last federal law to limit garnishments was passed in 1968. It was inadequate to start with and is now clearly out-of-date, consumer advocates say: Overhauling that law to set a more reasonable limit on wage seizures (now at 25 percent of after-tax income) and setting some limit (there’s currently none) on bank account garnishments would make a big difference.
What is completely baffling is that — for the majority of participants and for what most of what ProPublica is describing — no laws are being broken. These consumers — victims, in the eyes of ProPublica — did not fulfill their financial obligation. And ProPublica places none of the responsibility for that obligation on the consumers. It is the debt collectors and debt buyers who are the criminals and thieves.
The industry is using the courts and the legal system because that is the only option left. Consumer advocates and the federal government have made it nearly impossible to contact consumers and the last resort for collectors is to sue borrowers instead. Consumers don’t open the collection letters. Consumers don’t answer the phone when a collector calls. What else can collectors do? What does ProPublica expect?
It’s likely that many consumers do not have legal representation when they are sued by collectors or debt buyers and yes, it’s likely that many consumers are unable to afford a lawyer. But that is not the industry’s fault. The industry should not be blamed for that. The industry is not advocating that consumers not be represented. The industry is simply using the most powerful tool they have at their disposal. If consumers would respond to a letter or pick up the phone, many, if not most, of those lawsuits would not be filed. That is the point that ProPublica has been blind to from the get-go.
In discussing the point that the number of collection lawsuits does not decrease when the economy is doing well, as conventional wisdom may suggest, ProPublica wrote this (the emphasis is mine):
The finances of some debtors don’t improve along with the economy, making them targets of collectors in good times and bad. You might expect collection lawsuits to go up when the economy tanks and go down as it improves. That’s generally what happened with big banks and credit card debt. But not so for debt buyers, high-cost lenders or those suing over medical debts.
The consistency of these suits suggests that they target a population that has trouble recovering from debts even after the economy has improved.
It’s that one word, that one verb, that makes the point for ProPublica and makes the point for anyone in the industry as well. That collectors and debt buyers are targeting a specific group of people or a specific geographic region when they file a lawsuit. All collectors want is to collect the money that is owed. They are not looking to make a point or to make an example of someone. That’s where the argument against collectors goes off the rails; that collectors are doing anything other than their job.
