Peter A. Holland of University of Maryland Francis King Carey School of Law has just written Junk Justice: A Statistical Analysis of 4,400 Lawsuits Filed by Debt Buyers, 26 Loyola Consumer Law Reporter 179 (2014). Here’s the abstract:
Debt buyers have flooded courts nationwide with collection lawsuits against consumers. This article reports the findings from the broadest in-depth study of debt buyer litigation outcomes yet undertaken. The study demonstrates that in debt buyer cases, (1) the vast majority of consumers lose the vast majority of cases by default the vast majority of the time; (2) consumers had no lawyer in ninety-eight percent of the cases; and (3) those who filed a notice that they intended to defend themselves without an attorney fared poorly, both in court and in out of court settlements.
This study challenges the notion that there is an “adversary system” within the context of debt buyer lawsuits. The findings suggest that no such adversary system exists for most defendants in consumer debt cases. Instead, these cases exist in a “shadow system” with little judicial oversight, which results in mass produced default judgments.
The procedural and substantive due process problems which are endemic in debt buyer cases call for heightened awareness and remedial action by the bench, the bar, and the academy. As lawyers who are “public citizens, with a special responsibility for the quality of justice,” the profession can do better. This article proposes suggestions for further study, and several common sense reforms.
Peter A. Holland of University of Maryland Francis King Carey School of Law has just written Debt-Buyer Lawsuits and Inaccurate Data, Communities & Banking, v. 25, no. 2, spring 2014, p. 20-21. Here’s the abstract:
Advocates for lower-income families need to be aware that many debt buyers are suing the wrong people, and for the wrong amounts.
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A class action lawsuit has been filed on behalf of credit card customers of JPMorgan Chase against whom Chase obtained default judgments using allegedly robosigned and fraudulent affidavits. The lawsuit, Moya v. JPMorgan Chase & Co., et al., No. 1:14-cv-20922 (S.D. Fla.), was filed in the United States District Court for the Southern District of Florida, and is brought on behalf of all credit card borrowers in the United States who have been sued by or on behalf of Chase to collect on a credit card debt and had the court enter a default judgment based on a robosigned affidavit submitted by Chase.
Specifically, the case alleges that Chase and its subsidiaries created and participated in a scheme of generating and robosigning affidavits on a mass scale that did not involve adequate controls to ensure that the information in the affidavits was correct and based on the affiant’s personal knowledge. The complaint further alleges that the affidavits were then notarized by a notary who falsely attested to witnessing the affiant’s execution of the affidavit. Chase then submitted these affidavits by the thousands to state courts in order to obtain default judgments against its credit card borrowers who were past due on their credit card bills. Once the default judgment was obtained, the complaint alleges that Chase aggressively pursued post-judgment remedies such as garnishing wages, levying bank accounts and assessing post-judgment interest.
Lawsuits with similar allegations against Chase have been filed by the California Attorney General and the Mississippi Attorney General. Under pressure from regulators, Chase halted its collection litigation operation in 2013.
“Chase has profited from its abuse of the legal system,” said Shanon J. Carson of Berger & Montague, P.C., one of the attorneys representing the plaintiff. “It is ironic that Chase would hold borrowers to the letter of the law in fighting collections, but has attempted to use its power and resources to obtain an unfair and unjust advantage against its customers, which must be addressed.” “This practice is widespread,” said Joseph Cohen of Scott + Scott, Attorneys at Law, LLP, who also represents the plaintiff. “A company of Chase’s size and sophistication either is or should be aware that its scheme was unlawful. We look forward to vindicating the rights of credit card borrowers who have been subject to these wrongly-obtained default judgments.” Edward Millstein of Sacks Weston Petrelli Diamond & Millstein LLC, also representing the plaintiff, said “the relief sought in this lawsuit will bring justice to thousands of borrowers. Borrowers who have been affected by Chase’s robosigning policies and practices should be made aware of their rights.
The lawsuit seeks an order by the court requiring Chase to cease using robosigned affidavits, and provide notice to class members of Chase’s misconduct so borrowers can take steps to reopen their cases and expunge the default judgments. The lawsuit further seeks reimbursement of all monies unlawfully taken by Chase following the default judgments such as through wage garnishments, attachment of bank accounts, and asset seizures.
Source: Berger & Montague, P.C.
This Article uses a unique collection of contracts for the sale of consumer debts — e.g., delinquent credit card accounts — to examine the sale transaction. It finds that in many contracts, sellers disclaim all warranties about the underlying debts sold or the information transferred, sometimes as far as specifically refusing to stand by “the accuracy or completeness of any information provided.” The Article argues that the collection of consumer debts sold through these transactions is in violation of the Fair Debt Collection Practices Act’s prohibition against using deceptive or misleading representations in connection with the collection of a debt. After considering some potential explanations for why this illegal collection has gone on for so long, the Article proposes a regulatory and a market solution to the problem.
(This article was previously titled: Illegality in the Sale and Collection of Consumer Debts).
Source: Harvard Law Review