By: Scott Kinkley, Attorney at the Northwest Justice Project
Garnishment is a terrifying, if not catastrophic, event especially for someone living on the margins of poverty where a single garnishment can produce devastating collateral damage like divorce and homelessness. It should never be acceptable for this harsh remedy to be employed against people who never got their day in court or never owed the debt in the first place. Yet, with increasing frequency the media is reporting horror stories about poor people being garnished for debts they paid or never owed by a handful of billion dollar companies most people have never heard of. These companies, debt buyers, do exactly what their moniker implies. They buy debt. They buy debt in bulk for pennies on the dollar from creditors or other debt buyers. This industry has flooded state courts with lawsuits on defaulted credit obligations bought and sold in a number of unregulated markets. Fueled by the cold efficiency of collection computer software and an army of printers, debt buyers are able to bulk generate litigation, which is quickly reduced to judgment despite often having little or no evidence to prove the claim and with no meaningful review by an actual person. In some cases, the person being sued owed something to someone at some time. In others, people who owe nothing had the simple misfortune of being erroneously added to a list of names a computer indiscriminately used to pump out a summons and complaint.
The goal of these debt buyers is to quickly win a judgment and begin garnishing wages and bank accounts. But, to win a judgment, you need to win in court, and courts employ a myriad of procedural and evidentiary rules carefully crafted to ensure fairness and justice. So, how is it possible that the debt buyer industry is able to win a judgment in as many as 90% of the cases they bring with little or no proof? And how is it possible that in so many of these cases judgments are entered on claims plagued with errors?
On January 20, 2016, the Human Rights Watch published the latest comprehensive report addressing this practice and scrutinizing how state courts accommodate this industry at the expense of fairness to the consumer. The report, titled Rubber Stamp Justice: US Courts, Debt Buying Corporations, and the Poor, joins years of similarly alarming findings issued by federal agencies, law review articles, non-profit organizations and countless media reports condemning the practices of the debt buying industry and the state courts’ role in facilitating systematic injustice for the poor and working class. Yet, according to the report, little has been done to ensure the basic rules of evidence and procedure are equally and fairly applied. In eighty-one well researched pages, the report instead finds, “how many courts do exactly the opposite, treating debt buyer lawsuits with passive credulity so that their imprimatur is reduced to little more than a rubber stamp.”
The report follows its predecessors’ cry for industry reform, but goes further to take a pointed examination of the courts’ “direct responsibility for allowing abuses to take root and proliferate.” Abuses which result in judgments on claims filed against the wrong person, on fully paid debts, past the statute of limitations, in incorrect amounts, based on “robo-signed” affidavits and, most shockingly, without personal jurisdiction where “some debt buyer attorneys fail to serve defendants notice of the suits against them in order to obtain large volumes of uncontested judgments.” In Washington, there has been noticeable abuse of our State’s unique rule allowing debt buyers to serve superior court lawsuits on consumers without filing anything with the court unless the consumer fails to timely respond, in which case the debt buyer can simply file the case and default judgment simultaneously.
The Report also finds that while debt buyers are represented by “seasoned collection attorneys,” legal representation of consumers is rare since most defendants cannot afford to pay a private attorney, and private attorneys know that even in the most improvidently filed cases they will not get paid for their work when they win. However, many courts “under political pressure to clear their dockets quickly rather than carefully” often encourage, or even order, consumers to leave the court room with debt buyer attorney’s where they are “berated or misled into foregoing a hearing and agreeing to pay the debt buyer everything it had asked for.” Some state courts have gone so far as to create “judgeless court rooms” where consumers are summoned to court to participate in unsupervised discussions with debt buyer attorneys.
As the Washington State Supreme Court stated in Gray v. Suttell & Associates, 181 Wn.2d 329, 337, 334 P.3d 14, 18 (2014), “debt buyers purchase mass portfolios of charged off debt for pennies on the dollar, with little evidentiary basis, and get massive default judgments because the consumers have no notice of the lawsuit. Consumers have had to go to great lengths to rectify judgments based on fraudulent or paid-off claims that were sold to debt buyers who did not know they were buying illegitimate claims.”
Indeed, the process to undo an unjust judgment is an uphill battle, to put it mildly. In cases where a consumer was never served with the lawsuit, the consumer must prove the negative – that they were not served. For most people, this is simply impossible. In other cases, a consumer must convince a court to vacate the judgment within one year, after which there may be no relief even if the consumer can prove they never owed the alleged debt. This one year cutoff to vacate judgments allows debt buyers to wait a year before revealing they won a judgment, usually by garnishing the surprised consumer. Since judgments are good for up to twenty years, they have that luxury of time.
Rubber Stamp Justice argues for a number of safeguards to protect the rights of consumers and the integrity of the courts. First, “courts should not issue default judgment to debt buyers unless credible evidence is submitted in support of a claim.” New York recently became the first state to adopt special default judgment rules along these lines. The Northwest Justice Project recently submitted proposed changes for Washington, modeled on the New York rules. Second, the Report suggests “as an obvious first step” the “hallway conferences” should be banned. But, most importantly, courts should strictly adhere to the existing rules of procedure, evidence and fairness rather than simply process these cases in favor of efficiency over justice.