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Wednesday, August 25, 2010

Ind. Courts - "Caseloads mount like Hoosiers' unpaid debt: Consumer advocates contend system favors collectors filing suits"

Jon Murray of the Indianapolis Star has an important, front-page story today. Some quotes:

Debt collectors have dumped a mountain of unpaid credit card obligations and other bills onto Indiana courts in a last-ditch effort to get Hoosiers to pay up.

But the lawsuits clogging court dockets -- up by nearly half since the recession began -- have left people desperate in a conveyor-belt system where judges quickly issue default judgments, and portions of paychecks, bank accounts and other valuables go to collectors. * * *

Consumer advocates have long contended that the court system gives the advantage to the debt collectors in such cases. Last month, the Federal Trade Commission endorsed that view, calling the nation's consumer debt resolution system broken.

The increased volume -- in Marion County's courts, new civil collection filings against consumers and businesses increased by nearly 62 percent from 2006 to 2009 -- has only heightened such concerns.

In its report, the FTC urged states to adopt reforms to better protect consumers targeted by litigation. Among its recommendations were requiring more documentation and detail about an overdue debt in a lawsuit to help the debtor recognize it and other changes that might encourage more people to respond to a case at the outset.

Although creditors and the collection attorneys who represent them in Indiana dispute the FTC's findings, other observers say many of the same problems are evident across the state's courts.

"My biggest concern is that you have a population that is basically being victimized because they don't know what their rights are," said Chris Jackson, an Indianapolis attorney who is the state chairwoman for the National Association of Consumer Advocates. "When you get some of these unscrupulous debt buyers coming in, they just sue them without any documentation that will hold up legally." * * *

Most collections result in default judgments in collectors' favor after debtors fail to respond or don't realize they've been sued.

That means their first trip to court often comes once collectors use the judgments to request garnishments or seize valuables.

Consumer advocates say common problems in collection suits include excessive interest -- sometimes dwarfing the original amount owed -- as well as debts that have aged past the six-year statute of limitations and insufficient documentation to back up the debt.

But by the time most debtors get involved, it's more difficult to fight any shortcomings in a case. * * *

[P]eople who have run into trouble largely are on their own if they are sued for collection, since most can't afford an attorney.

Some states have supplemented federal protections for consumers, but Indiana lacks such a law. Jackson says she sees little prospect for action by the General Assembly.

But she is working with others to draft proposals for more stringent trial rules and other court procedures that would supplement a state courts trial rule that requires plaintiffs to provide some documentation to support financial claims.

Too often, some attorneys say, judges faced with stacks of new filings each day don't scrutinize them carefully enough.

The ILB has been following this topic for some time and has a number of useful entries, including specifically some from the NY Times.

[More] Doug Masson, who represents creditors, posts a different viewpoint.

Posted by Marcia Oddi on August 25, 2010 11:02 AM
Posted to Indiana Courts