Debt Collection Industry Perpetrates Systemic Fraud on Hundreds of Thousands of New Yorkers, Says New Report
|For immediate release
January 29, 2014
Susan Shin or Sarah Ludwig – 212-680-5100
DEBT COLLECTION INDUSTRY PERPETRATES SYSTEMATIC FRAUD ON HUNDREDS OF THOUSANDS OF NEW YORKERS, SAYS NEW REPORT
Industry Uses Courts as Collection Mill, Filing Non-Meritorious Cases en Masse and
Extracting Millions from Low-Income New Yorkers and Communities of Color
The debt collection industry perpetrates systematic, large-scale fraud against New Yorkers, using the courts as a collection mill and depriving hundreds of thousands of New Yorkers of due process, according to a report released today. Based on a statistical analysis of state-wide court data and a sample of debt-buyer cases, the report describes how debt collectors routinely engage in “robo-signing”
and “sewer service” to obtain automatic judgments and fraudulently extract hundreds of millions of dollars from New Yorkers each year.
“Each year, thousands of New Yorkers find out they’ve been sued by debt collectors, only after a court judgment’s already been filed against them,” said Susan Shin, a staff attorney with New Economy Project (formerly NEDAP), which produced the report. “The consequences are dire for so many people already living check to check, because debt buyers use these ill-gotten judgments to freeze people’s bank accounts and garnish their wages.”
Key report findings for 2011 include:
- Debt collectors filed 195,105 lawsuits against New Yorkers.
- Only 2% of all New Yorkers sued in debt collection cases had legal representation.
- Debt buyers obtained default judgments in an estimated 62% of their cases.
- The courts granted 97% of debt buyers’ applications for default judgments.
- The ten zip codes with the highest concentrations of default judgments are in communities of color.
“The courts are on notice about these abusive practices and need to take strong action. It’s a matter of fundamental economic justice, and it’s simply got to stop,” said Claudia Wilner, a senior staff attorney at New Economy Project.
The report, “The Debt Collection Racket in New York: How the Industry Violates Due Process and Perpetuates Economic Inequality,” includes personal testimonials from five New Yorkers harmed by abusive debt collection lawsuits; maps that show the disproportionate impact on people in neighborhoods of color; and specific policy recommendations that New York and the federal government should immediately follow to end these practices.
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New Economy Project (formerly NEDAP) works with community groups in New York City to promote economic justice and to eliminate discriminatory economic practices that harm communities and perpetuate inequality and poverty.