By DeAnna Baumle and Katie Moran-McCabe
People are deeply in debt. Within the fourth quarter of 2023, whole family debt elevated by $212 billion to succeed in $17.5 trillion, in response to a report by the Heart for Microeconomic Information.
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 potential 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 usually are 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 implications might 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 recuperate the debt.
Legal guidelines governing the debt assortment lawsuit course of differ broadly throughout the USA, and even inside a single state depend upon the kind of debt, courtroom venue, or quantity in controversy.
To that finish, the Heart for Public Well being Legislation Analysis at Temple College Beasley Faculty of Legislation 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 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 enormously: some states have debt lawsuit-specific legal guidelines that govern only one or two specific elements of the method (corresponding to statutes of limitation, or venue), and debt assortment lawsuits in these states are in any other case ruled by typically relevant civil process legal guidelines. However, 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 levels of the courtroom proceedings.
Simply greater than half of jurisdictions have legal guidelines that might doubtlessly 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 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 through 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 can also 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 varied restrictions: 16 states prohibit third events (corresponding to debt patrons 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. However, seven states and the District of Columbia require all civil claims (together with debt claims) beneath a specified quantity to be filed as small claims.
The information, that are free and open entry, provide a necessary take 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 cheap surroundings for shoppers.
Specifically, proof means that sure reforms could enhance outcomes for shoppers and mitigate the imbalance of energy in debt assortment lawsuits. Authorized specialists and shopper advocates have beneficial a number of coverage reforms, together with necessities corresponding to these within the Uniform Legislation Fee’s mannequin Uniform Shopper 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 large variation of those legal guidelines throughout jurisdictions and even throughout totally different courtroom methods inside a single jurisdiction, a full-scale authorized epidemiological examine utilizing coverage surveillance knowledge may lead to strong comparative evaluations of the legislation’s impact throughout jurisdictions and over time.
Discover the analysis at LawAtlas.org and learn our coverage temporary, which provides an in-depth evaluation of the panorama.
DeAnna Baumle, JD, MSW is a Senior Legislation and Coverage Analyst on the Heart for Public Well being Legislation Analysis at Temple College Beasley Faculty of Legislation.Â
Katie Moran-McCabe, JD is a Lead Legislation and Coverage Analyst with the Heart for Public Well being Legislation Analysis at Temple College Beasley Faculty of Legislation.
