Debt Collection Litigation

The Federal Trade Commission’s recent report, Repairing a Broken System: Protecting Consumers in Debt Collection Litigation and Arbitration, saying that many consumers face debt collection lawsuits for unpaid bills even though there is scant proof against them, calls for tougher state and federal laws to protect the public. The report also called for safeguards to ensure that consumers do not first learn they have been sued only after a judgment has been recorded against them. The proposed reforms include requiring collection lawsuits to provide crucial information about the alleged debt, including a breakdown of the total amount owed by principle, interest and fees.

In the current economic downturn, consumer debt collection cases have flooded civil court dockets around the country, according to a NY Times article Automated Debt-Collection Lawsuits Engulf Courts. The article cites the Woodbury, NY law firm of Cohen & Slamowitz as filing some 80,000 lawsuits a year. The firm filed 59,708 cases in 2005, 83,665 in 2006, 87,877 in 2007 and 80,873 in 2008. One of the partners, David A. Cohen is a member of Brooklyn Law School’s Class of 1979. The firm’s 14 lawyers averaged more than 5,700 cases per lawyer because of computer software to help prepare its cases. With debtors selling their uncollectible debt to debt buyers at discounted rates and debt buyers facing non-payment from debtors, the increase in filings is straining the court system. The article states that “Collection law firms are able to handle such large volumes of cases because computer software automates much of their work. Typically, a debt buyer sends a law firm an electronic database that contains various data about consumers, including name, home address, the outstanding balance, the date of default and whether interest is still accruing on the account.”

The article tells of a civil court hearing in Brooklyn in which BLS alum Judge Noach Dear (Class of 1992) demanded documents from Cohen & Slamowitz to support its claim that the defendant owed $3,797.27 in credit card debt. When the firm’s lawyer responded that the only documentation was the Social Security number, date of birth and address, Judge Dear dismissed the case and issued an order requiring, among other things, that Cohen & Slamowitz provide further proof of a debt if a defendant challenged the firm’s claim.

The Brooklyn Law School Library has in its collection several items on the subject of debt collection including Collection Actions: Defending Consumers and Their Assets by Jonathan Sheldon (Call #KF1024 .S54 2008). The item record has a link to the online version of the consumer law manuals companion website. The National Consumer Law Center site has a large number of forms in PDF format including Statutes/Regulations, Federal Agency Interpretations and Pleadings.