New York: Consumer Fair Debt Collection Practices Rights Trampled On

New report blames “Sewer Service,” “Robosigning,” and lack of legal representation

Last month the New Economy Project (NEP), a New York-based non-profit advocacy group, released its report detailing abuses in New York courts that are to blame for overburdening the system and siphoning billions of dollars from the state’s low-income neighborhoods and communities. Chief among the listed abuses employed by predatory debt collectors are the practices of “sewer service” and “robosigning”.

Based on its findings cited in “The Debt Collection Racket in New York”, the NEP asserts that debt collection cases – over 200,000 to be more precise – were largely responsible for filling court dockets in 2011. More importantly, most defendants never had the opportunity to defend themselves against the debt collectors’ claims, often resulting in default judgments in favor of the plaintiff.

With “sewer service,” specifically, a debt collector fails to properly serve notice to defendants that they are being sued and should appear in court. This scheme severely hinders the debtors’ ability to receive a fair ruling as they are not given the chance to defend themselves.

Also skewing the process in favor of debt collectors is “robosigning“, the mass-production of ‘sworn’ affidavits used to prove outstanding debt in lawsuits against consumers. Because the person signing rarely has personal knowledge of the debt, the signature – which is supposed to evidence proof of good faith of a claimed debt – is entirely lacking in credibility.

Out of the 200,000 cases studied, the report found that nearly half of the cases were settled by default judgment, meaning the defendant was not present to defend their case. In 90 percent of cases, an employee or debt buyer who had no connection to the original creditor testified. And in 40 percent of cases, a sworn affidavit in support of a default judgment was completed before the defendant’s time to answer the lawsuit had expired. Nevertheless, in nearly every case where the debt collector sought a default judgment, it was granted.

The NEP report also goes on to find that legal representation for consumers in the debt collection cases examined was nearly nonexistent, with only two percent of the defendants across New York having legal counsel. In many cases, had the consumer retained an attorney, the debt allegations would unlikely hold up in court if disputed. With debt collector harassment cases, consumers can obtain free legal counsel under a federal law called the Fair Debt Collection Practices Act (FDCPA).

The FDCPA protects consumers from unfair or abusive debt collection practices, and grants consumers free legal representation because the offending debt collector is mandated to cover the costs. Consumers may also be entitled to recover for all the damages suffered plus an additional amount up to $1000.

If you’ve been the victim of debt collector abuse, including robosigning or sewer service, call 1-800-NOT-FAIR.

Source: Bob Sullivan, NBC News (link removed due to article being taken down by NBC)

New Economy Project, “The Debt Collection Racket In New York” http://www.neweconomynyc.org/