By Marnie Eisenstadt
SYRACUSE — Rosetta had no idea she had any outstanding debt until she was told at work that her wages were about to be garnished to repay the debt. The Syracuse woman, who didn’t want her last name used, said her identity had been stolen by someone who racked up more than $4,000 in debt.
Rosetta was sued in Syracuse City Court by two debt collection companies who obtained judgments against her without her ever knowing about it. The companies sent a process server to an address Rosetta hadn’t lived at in years, she said.
A new report by the New Economy Project — The Debt Collection Racket in New York — shows Rosetta is one of thousands of victims of a predatory debt collection system that abuses the court system. The New York City-based nonprofit group examined court data from across the state for 2011.
The report focused on the practices of debt buyers, companies that purchase the debt of other companies and municipalities for pennies on the dollar. The companies collect the debts and keep whatever repayments they get.
“We found that debt buyers were overrunning the courts and were winning,” said Claudia Wilner, an author of the report. The debt buying companies sued people who didn’t have lawyers, who didn’t know how to defend themselves, and who often didn’t even know about the lawsuits filed against them. Those companies obtained default judgments in more than 60 percent of their cases statewide, bringing in an estimated $230 million in judgments, Wilner said.
In Syracuse City Court, there were 7,222 civil cases filed in 2011. Of those 3,428 – 47 percent — were debt collection lawsuits. Debt collection companies were able to get 2,133 default judgments. ( A default judgment happens because the person being sued never shows up.) Only two percent of the people sued by debt collection companies in Syracuse had a lawyer.
In Syracuse, and across the state, the debt collection companies’ wins were concentrated in minority neighborhoods.
“Communities of color are bearing the brunt of these judgments – blemished credit, garnished wages, frozen bank accounts,” Wilner said.
The New Economy Project, a group focused on economic justice, wants the state to enact the Consumer Credit Fairness Act, which would ensure due process for people sued by debt collectors. It also wants the state Office of Court Administration to enact stronger rules that would prevent debt buying companies from getting into court without proper proof.
Rosetta, the Syracuse woman in the report, was able to get the judgments erased with the help of Syracuse University law professor Gary Pieples. In one case, the debt collection company never showed up for court. So Rosetta got a default judgment.