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 achieve $17.5 trillion, in line with 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 very bad credit scores can impression an individual’s skill to safe housing, employment, and medical care. And it has a disproportionate impression on Black, Indigenous, and Latinx communities, contributing to the perpetuation of intergenerational and structural inequity.
When money owed will not be 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 implications could be extreme and will embrace garnishment of wages, checking account seizure, and even prison punishment. Regardless of the severity of those potential outcomes, debt assortment lawsuits are overwhelmingly skewed in favor of plaintiffs suing to get well the debt.
Legal guidelines governing the debt assortment lawsuit course of differ extensively throughout the USA, and even inside a single state rely upon the kind of debt, courtroom 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 information, launched on February 14, 2024, present a complete overview of statutes, laws, and courtroom guidelines governing debt assortment lawsuits that have been in impact as of January 1, 2023, in all 50 states and the District of Columbia.
By means 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 differ vastly: some states have debt lawsuit-specific legal guidelines that govern only one or two specific features of the method (resembling 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. Then again, a couple of jurisdictions have extra complete units of legal guidelines that intention to particularly tackle points distinctive to the debt assortment lawsuit course of and canopy a number of phases of the courtroom 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 (usually simply debt consumers or plaintiffs bringing shopper debt claims) to supply particular documentation to assist 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 differ considerably relying on the courtroom by 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 additionally make it simpler for debt collectors to acquire default judgments. A number of states deter shopper debt collectors from submitting in small claims courtroom via numerous restrictions: 16 states prohibit third events (resembling debt consumers or assignees) from submitting in small claims courtroom, 12 states prohibit plaintiffs from being represented by a lawyer in small claims courtroom, and eight states impose a restrict on the variety of small claims actions a single plaintiff can file per week, month, or yr. Then again, seven states and the District of Columbia require all civil claims (together with debt claims) below a specified quantity to be filed as small claims.
The information, that are free and open entry, provide a vital take a look at the panorama of debt assortment litigation legal guidelines and may information policymakers, advocates, and others as they work to form a extra responsive and affordable surroundings for shoppers.
Specifically, proof means that sure reforms might enhance outcomes for shoppers 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 resembling these within the Uniform Regulation Fee’s mannequin Uniform Client Debt Default Judgments Act. As soon as these reforms are carried out it’s as much as the courts and different officers to implement and implement them. After which we have to examine them to see in the event that they’re working!
Given the broad variation of those legal guidelines throughout jurisdictions and even throughout totally different courtroom programs inside a single jurisdiction, a full-scale authorized epidemiological examine utilizing coverage surveillance knowledge might end in sturdy comparative evaluations of the regulation’s impact throughout jurisdictions and over time.
Discover the analysis at LawAtlas.org and learn our coverage transient, which presents 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.
