By DeAnna Baumle and Katie Moran-McCabe
People are deeply in debt. Within the fourth quarter of 2023, complete family debt elevated by $212 billion to succeed in $17.5 trillion, in response to a report by the Middle for Microeconomic Knowledge.
Debt is linked to decrease life expectancy, larger mortality, despair, hypertension, and forgone medical care. Debt and ensuing weak credit scores can influence an individual’s means to safe housing, employment, and medical care. And it has a disproportionate influence on Black, Indigenous, and Latinx communities, contributing to the perpetuation of intergenerational and structural inequity.
When money owed should not paid — as is the case for the one-in-three U.S. adults who’ve a debt that has been turned over to a debt assortment company — the results may be extreme and should embrace garnishment of wages, checking account seizure, and even felony punishment. Regardless of the severity of those potential outcomes, debt assortment lawsuits are overwhelmingly skewed in favor of plaintiffs suing to get better the debt.
Legal guidelines governing the debt assortment lawsuit course of range broadly throughout the US, and even inside a single state depend upon the kind of debt, court docket venue, or quantity in controversy.
To that finish, the Middle for Public Well being Regulation Analysis at Temple College Beasley Faculty of Regulation has teamed up with The Pew Charitable Trusts to start monitoring state legal guidelines that regulate debt assortment lawsuits. The info, launched on February 14, 2024, present a complete overview of statutes, laws, and court docket guidelines governing debt assortment lawsuits that had been in impact as of January 1, 2023, in all 50 states and the District of Columbia.
By way of this analysis, we’ve recognized legal guidelines in 41 states and the District of Columbia that particularly govern debt assortment lawsuits. However these legal guidelines range vastly: some states have debt lawsuit-specific legal guidelines that govern only one or two explicit features of the method (equivalent to statutes of limitation, or venue), and debt assortment lawsuits in these states are in any other case ruled by usually relevant civil process legal guidelines. Alternatively, just a few jurisdictions have extra complete units of legal guidelines that goal to particularly tackle points distinctive to the debt assortment lawsuit course of and canopy a number of phases of the court docket proceedings.
Simply greater than half of jurisdictions have legal guidelines that might probably tackle the imbalance of energy and outcomes in debt assortment lawsuits by requiring sure plaintiffs (typically simply debt patrons or plaintiffs bringing shopper debt claims) to offer particular documentation to help the accuracy and validity of debt claims.
Even past these documentation necessities, the legal guidelines and guidelines that apply to a debt assortment lawsuit can range considerably relying on the court docket during which the declare is introduced. Lawsuits introduced as small claims actions are usually topic to much less formal and extra relaxed guidelines, which can be simpler for unrepresented defendants to navigate — however may make it simpler for debt collectors to acquire default judgments. A number of states deter shopper debt collectors from submitting in small claims court docket by way of numerous restrictions: 16 states prohibit third events (equivalent to debt patrons or assignees) from submitting in small claims court docket, 12 states prohibit plaintiffs from being represented by a lawyer in small claims court docket, and eight states impose a restrict on the variety of small claims actions a single plaintiff can file per week, month, or yr. Alternatively, seven states and the District of Columbia require all civil claims (together with debt claims) underneath a specified quantity to be filed as small claims.
The info, that are free and open entry, supply an important have a look at the panorama of debt assortment litigation legal guidelines and might information policymakers, advocates, and others as they work to form a extra responsive and affordable setting for customers.
Specifically, proof means that sure reforms could enhance outcomes for customers and mitigate the imbalance of energy in debt assortment lawsuits. Authorized consultants and shopper advocates have really useful a number of coverage reforms, together with necessities equivalent to these within the Uniform Regulation Fee’s mannequin Uniform Shopper Debt Default Judgments Act. As soon as these reforms are applied it’s as much as the courts and different officers to implement and implement them. After which we have to research them to see in the event that they’re working!
Given the huge variation of those legal guidelines throughout jurisdictions and even throughout totally different court docket methods inside a single jurisdiction, a full-scale authorized epidemiological research utilizing coverage surveillance knowledge might end in strong comparative evaluations of the regulation’s impact throughout jurisdictions and over time.
Discover the analysis at LawAtlas.org and learn our coverage temporary, which affords an in-depth evaluation of the panorama.
DeAnna Baumle, JD, MSW is a Senior Regulation and Coverage Analyst on the Middle for Public Well being Regulation Analysis at Temple College Beasley Faculty of Regulation.
Katie Moran-McCabe, JD is a Lead Regulation and Coverage Analyst with the Middle for Public Well being Regulation Analysis at Temple College Beasley Faculty of Regulation.
