A nonprofit organization in Washington, D.C. has published a report on the debt collection litigation market, outlining a series of recommendations to state and federal lawmakers to make the process “safer and fairer” for everyone.
The report, published by The Aspen Institute, says the current system for collecting unpaid debts “is broken” is because plaintiffs are allowed to file lawsuits on invalid debts, because plaintiffs fail to provide individuals with proper notice that they are being sues, because the litigation process “unevenly” impacts individuals who are unable to navigate or participate in the process, and because “onerous” judgments and “badly designed” settlement agreements force individuals into “impossible” situations.
“The idea that our civil court system operates on a level playing field is an illusion,” according to the report. “The power asymmetry between plaintiffs and defendants in debt collection lawsuits leads most defendants to not even participate in the lawsuit.”
Among the recommendations made in the report to make the litigation process “safer” and “fairer” are:
- Ensuring debt entering the litigation system is legitimate;
- Ensuring defendants know that they are being sued;
- Ensuring defendants understand their rights and are able to fully participate in their case;
- Ensuring judgments do not permanently damage debtors’ financial security; and
- Ensuring case data is consistently and accurately tracked for all debt collection lawsuits in each state, and publicly reported.
To ensure legitimacy, the report recommends solutions at both the state and federal level to address the shortcomings and implement its recommendations, including banning any litigation on debt that has passed the statute of limitations and requiring that creditors document their ownership of a debt prior to initiating a collection lawsuit.
