@CFPB: Here’s A No-Brainer

Posted by Claudia Wilner

Several times each month, lawyers from New Economy Project serve as volunteer attorneys at courthouses around the city, where we help New Yorkers defend themselves against debt collection lawsuits. Recently, while at Staten Island civil court, I met Mr. B, an older New Yorker, whose case struck me as a vivid example of why strong federal rules are urgently needed to put an end to abusive debt collection lawsuits.

Mr. B’s troubles began when he discovered that a debt buyer had placed a $24,000 lien on his bank account. It turned out that the debt buyer had sued and won a court judgment against Mr. B, which it was now using to seize his assets. Mr. B did not recognize the debt and filed court papers challenging the debt buyer’s claims. But, like 99% of people sued by debt collectors, Mr. B did not have a lawyer with him in court. The debt buyer’s attorney pressured Mr. B to accept a “deal” of 50% off the judgment, and Mr. B accepted.

When I looked over Mr. B’s court papers, I quickly saw that the case against him was completely bogus. The debt buyer clearly had no proof that Mr. B ever owed the debt. The process server in the case had never served Mr. B with court papers, and in fact had his license revoked by the City in 2009.

Had Mr. B not accepted the pressure-offer and persisted in court, the court surely would have dismissed the case against him. More to the point – the debt buyer should never have been allowed to sue Mr. B in the first place.

The CFPB will soon be issuing long-awaited debt collection rules. These rules must make clear that it is an unlawful, unfair and deceptive practice for a debt collector to sue someone in court if it can’t prove that the person owes the debt.

This might sound like an obvious point, but it’s a principle for which we’ve had to fight. As New Economy Project documented in its 2013 report, New York’s civil courts are clogged with hundreds of thousands of cases like Mr. B’s. For years, debt collectors have flooded NYC’s courts with fraudulent debt collection lawsuits, through which they have siphoned hundreds of millions of dollars from low-income neighborhoods of color. Unfortunately, the court lends a false aura of legitimacy to what are in fact frivolous claims.

Thanks to hard-hitting advocacy by New Economy Project and allies, New York has adopted strong debt collection rules in recent years – but gaps remain, and the rules don’t apply inside the courtroom.

It’s time for the CFPB to take action and put an end to this injustice.