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Debt Collectors Are Transforming the Business of State Courts

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Re: Debt Collectors Are Transforming the Business of State Courts

#121

Post by pnw_hazor »

joshuaheard wrote: post #94
beervirus wrote: post #91

Earlier quoted context omitted.

I was under the impression that a well-plead complaint was sufficient if the defendant doesn't show up. What rule says you have to actually put on a case to get a default judgment?

In California, it's CCP 585. https://leginfo.legislature.ca.gov/faces/codes_displaySectio... . It's a two step process. First your get the default entered if they don't respond, then you ask for judgment for damages. Maybe that's where the confusion lies. The default is entered by request almost automatically if they don't respond. Getting your judgment for damages requires evidence to prove your case.

Don't forget the third step, collecting on the judgment. This is often the hardest part.

Re: Debt Collectors Are Transforming the Business of State Courts

#122

Post by edmundsauto »

netcan wrote: post #88
verylittlemeat wrote: post #81

Earlier quoted context omitted.

As I mentioned I have been to court for a debt collection. Before you go to court the debt collector has to send you proof they served you papers for your debt. They have to send you proof of the chain of debt from the original creditor on down. For a $3,000 debt I was sent a packet of at least 80 pages with tabbed chapters and detailed photos confirming service before I had to go to court. I did not request this inf…

Exactly the point. To win, they need to cross all the Ts you mention. OTOH, they can also win if the defendant no-shows. At the bottom end of the debt collection pool, one strategy is to buy debt with a high chance of no-show and win cases that way... no need for meticulous and expensive lawyering. If people aren't answering their phones or opening any official looking mail... It's not the only strategy, but it is on…

When a company sells a debt at discount, can they write off the rest of the loss?

Re: Debt Collectors Are Transforming the Business of State Courts

#123

Post by Kesseki »

verylittlemeat wrote: post #81
intopieces wrote: post #77

Earlier quoted context omitted.

> Why would a person who legitimately owes a debt win just by showing up? Debt collectors often don’t play by the rules, or don’t keep good records that are required to legally collect the debt. Even if they do, it’s not like the lawyers are likely to spend time tracking down the info for a single case to prove it. “Win” means the debt is found invalid due to one of these reasons.

As I mentioned I have been to court for a debt collection. Before you go to court the debt collector has to send you proof they served you papers for your debt. They have to send you proof of the chain of debt from the original creditor on down. For a $3,000 debt I was sent a packet of at least 80 pages with tabbed chapters and detailed photos confirming service before I had to go to court. I did not request this inf…

Rules vary from state to state, and even court to court. It sounds like your experience happened in a jurisdiction with rules that are unusually protective of debtors' rights. Maybe this was New York City?

The vast majority of jurisdictions do not require creditors to provide this information in most cases.

NYC's rules came into place within the last decade, after patterns of serious abuses by creditors.

Re: Debt Collectors Are Transforming the Business of State Courts

#124

Post by Frondo »

cwhiz wrote: post #93
Aloha wrote: post #20

The single largest thing we can do is undo the changes to bankruptcy law signed in 2005, it removed bankruptcy as a tool of the poor to discharge excess debt. It's caused there to be very little downside to lending, and lead to an explosion of debt.

The outcome of that will be that lending standards go up substantially. Significantly higher interest rates and required collateral. The eventual end result is fewer people able to qualify to buy a car, buy a house, get a credit card, or go to college. These are significant drivers of economic activity. It's hard to put the genie back in the bottle.

Offering debt as a way to finance regular life activities like school and housing is also a good way to paper over the other, equally serious problems we currently have in the US, an explosion in the cost of school and housing, compared to what people earn.

If people didn't have debt as a way to access these things, there might be more energy for addressing the income inequality and lack of class mobility we have, that's being obscured by the access to debt.

Re: Debt Collectors Are Transforming the Business of State Courts

#125

Post by [deleted] »

milesvp wrote: post #114
briffle wrote: post #53

Earlier quoted context omitted.

I have done that twice for family members, along with asking for proof of the debt, and that they are authorized to collect it. Both times, never, ever heard from the collector again.

My understanding with debt collectors, is that they usually purchase a spreadsheet with very limited data, and there is almost never a paper trail for said debt. Which also means debt has a habit of showing up on multiple spreadsheets that keep getting resold. I think planet money did a podcast on this topic. Patio11 also wrote about talking to debt collectors with regards to identity theft. https://www.kalzumeus.com…

[deleted]

Re: Debt Collectors Are Transforming the Business of State Courts

#126

Post by bigwavedave »

ensignavenger wrote: post #113
verylittlemeat wrote: post #102

Earlier quoted context omitted.

AFAIK harassment in most states is very illegal now and is a great way to get your debt dismissed. The same goes for fraud in debt collection. As I mentioned in previous comments, tactics like sewer service by debt collectors are a great way to get your debt dismissed. Many people with lapsed unsecured debt know they owe that money, they simply prefer to pretend the debt will go away if they ignore it. If they don't…

Harassment and fraud is illegal, but people do illegal things all the time. "court they can't get a judgment against you without you knowing about it" ... in theory, but in practice there are several ways to "serve notice" that don't involve the other party actually receiving the notice. Sure, if you can hire an attorney you may be able to get the default judgement overturned if you find out about it later, but again…

And to add to this, if a debtor doesn't get served (let's say that they took some bad advice from a friend and decided to dodge the constable trying to serve them in the hopes that "since I wasn't served, I can't be sued" is accurate), the constable will notify the attorney that contracted them to serve papers, saying that they couldn't serve them in person. At that point, the attorney sends a certified summons to the debtor's last known address and is then allowed to go to the court clerk and say that they've tried their best x number of times but the debtor can't be reached. They will enter their certified proof of mail into the record and the case will be tried on the scheduled date regardless, resulting in a default judgment when the debtor doesn't show up. Once that happens, if the debtor is employed (and even depending on the type of debt), they'll get a nasty surprise when their employer notifies them that their wages are being garnished and that there's no longer anything they can do.

Re: Debt Collectors Are Transforming the Business of State Courts

#127

Post by LurkersWillLurk »

netcan wrote: post #76
chrisseaton wrote: post #72

Earlier quoted context omitted.

> It's a misuse of the legal system, and the court shouldn't allow it. I really don't see how. They file a case. They present an argument. The other side doesn't. What should the court do? Keep asking the other side to bother to show up? If they did that you could block any claim forever by just not showing up. That's not justice. Our whole society's legal basis is 'show up and present your case and have it judged'.…

I'm not thinking about this as an individual case, or debating an individual case. I'm talking about a business model whereby an agency systematically buys "no show debt" at a tiny fraction of face and mass produces personal bankruptcy. As the article shows. This business model (subsidised by the state, which provides the court), in 2020, is civil law. That business model is not something the courts should play ball…

You can't address the business model if you can't explain how you would change how an individual case plays out.

The standard of evidence in civil court is "the preponderance of the evidence". Would you propose changing that standard, so that a debt collector's unchallenged word isn't good enough to prove their case? What exactly do you propose to do about the fact that most people default?

Should we make participation in civil cases mandatory and issue bench warrant when defendants fail to appear? Should we reduce how much income can be garnished so that garnishment is effectively useless? Should we require that every update in the case be personally served by a process server?

The business model would collapse overnight if debtors began challenging creditor plaintiffs en masse. I don't see how the failure of a defendant who has been properly served to defend their case reflects a systematic failure on the part of the courts or the law.

Re: Debt Collectors Are Transforming the Business of State Courts

#128

Post by sokoloff »

intopieces wrote: post #118
sokoloff wrote: post #110

Earlier quoted context omitted.

Why would selling debt make you morally not responsible for it? My mortgage has been sold multiple times. IMO, I still 100% have a moral (and obviously legal) obligation to pay it.

Unlike secured loans like mortgages, the cost of default for unsecured loans is already priced in to the interest rate of the debt. Once it gets sold a third party, that's just a bet by that company that they can strong arm you into paying them something above what they paid for it by exploiting your anxiety or misplaced sense of duty. They didn't earn anything -- they didn't create a service or good that you found v…

The existence of a secondary market for debt affects the price of primary issuance of debt (in a way that benefits borrowers).

Your argument could be applied equally to say that anyone who buys a share of stock in the open market (not during an IPO or secondary offering) hasn't actually made an investment in the company because the company didn't get those exact dollars.

Re: Debt Collectors Are Transforming the Business of State Courts

#129

Post by Paul-ish »

verylittlemeat wrote: post #85
TheOtherHobbes wrote: post #83

Earlier quoted context omitted.

No it isn't. Many people become debtors because they have no choice. If the choice is between clocking up an insane credit card bill at astronomical rates or not having your family thrown out onto the street for another month or two because maybe your job search will finally pay off, what would most people pick? Some people get into debt because they can't manage money. A lot of people get into debt either because th…

You're moving the goal posts on me. I'm talking about debt collection enforcement not the morality or circumstances of why people take on debt.

> You're moving the goal posts on me. I'm talking about debt collection enforcement not the morality or circumstances of why people take on debt.

Not all people chose to take on debt. From the linked article:

> Medical debt can be particularly devastating and accounts for more than half of all collections activity.

I don't think we can realistically characterize medical debt as a choice for most individuals. If someone is ill and and has medical debt, is it right to issue a default judgement against them for that debt? What if their illness is the reason why they couldn't show up to court in the first place?

Re: Debt Collectors Are Transforming the Business of State Courts

#130

Post by cwhiz »

Frondo wrote: post #124
cwhiz wrote: post #93

Earlier quoted context omitted.

The outcome of that will be that lending standards go up substantially. Significantly higher interest rates and required collateral. The eventual end result is fewer people able to qualify to buy a car, buy a house, get a credit card, or go to college. These are significant drivers of economic activity. It's hard to put the genie back in the bottle.

Offering debt as a way to finance regular life activities like school and housing is also a good way to paper over the other, equally serious problems we currently have in the US, an explosion in the cost of school and housing, compared to what people earn. If people didn't have debt as a way to access these things, there might be more energy for addressing the income inequality and lack of class mobility we have, th…

Neither side is necessarily wrong here but we changed the law to address the problems you describe.

I see this as similar to the payday lending debate. Payday lenders aren’t creating demand, they are responding to it. What happens when we eradicate that form of lending? Most things start from good intentions.

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