Debt Buyers Charged With Violating Law

According to a study by activists for low income communities, buyers of uncollected debt won one point one billion dollars in court judgments in the past few years. The report, compiled by four nonprofit organizations alleges that on a consistent basis, buyers of uncollected debt violate state law by filing bogus lawsuits against low income New Yorkers, many times without presenting any proof of their claims or serving individuals properly. Typically, the debt buyers will obtain automatic default judgments in their favor because the people that are being sued aren’t aware of the cases and thus do not appear in court for their hearings.”It is clear that the worst players heavily benefit from illegal and abusive debt collection practices,” stated the lawyer in charge of the civil practice at the Legal Aid society, one of the four non profits.

The report studied the top twenty six debt buyers in New York City’s Civil Court from January 2006 through July 2008 and determined that they filed some 457,322 lawsuits and were awarded around one point one billion dollars in settlements and judgments. While sorting through a sample made up of 365 of the lawsuits, the report found that the debt buyers won almost ninety five percent of the cases, usually by getting a hold of automatic judgments because the person who was taken to court did not appear. Out of all of the lawsuits examined, only ten percent of those that were sued answered the complaint.

More than half of the people who were subjected to default judgments lived in mainly black or Latino neighborhoods, and nearly all lived in moderate to low income neighborhoods. Out of the twelve zip codes with the highest amount of lawsuits, one in four families lived below the federal poverty level.

Not one person that the report studied was represented by an attorney. Out of all of the cases, a minuscule one percent of people sued by debt buyers in New York City are represented by a lawyer, and once the judgments are entered, these people will be subjected to wage garnishment and other sorts of judgment enforcement, like frozen bank accounts.

In a fascinating twist, in nearly two thirds of the law suits, the debt buyers were represented by one of five local law firms, and the report charges these firms with filing suits without sufficient proof and using process servers that neglect to properly serve people, among other dishonest practices. The report calls upon Albany to pass legislation that would stop debt buyers from filing suit without sufficient evidence. The Assembly passed the bill last year, but surprise surprise. It died in the Senate.

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