HomeHealth LawAmerican Debt Assortment Lawsuits: State Legal guidelines Fluctuate Broadly and Most Nonetheless...

American Debt Assortment Lawsuits: State Legal guidelines Fluctuate Broadly and Most Nonetheless Provide Little Safety to Customers


By DeAnna Baumle and Katie Moran-McCabe

People are deeply in debt. Within the fourth quarter of 2023, complete family debt elevated by $212 billion to succeed in $17.5 trillion, in line with a report by the Heart for Microeconomic Knowledge.

Debt is linked to decrease life expectancy, greater mortality, despair, hypertension, and forgone medical care. Debt and ensuing below-average credit scores can influence an individual’s means to safe housing, employment, and medical care. And it has a disproportionate influence on Black, Indigenous, and Latinx communities, contributing to the perpetuation of intergenerational and structural inequity.

When money owed are usually not paid — as is the case for the one-in-three U.S. adults who’ve a debt that has been turned over to a debt assortment company — the results could be extreme and should embrace garnishment of wages, checking account seizure, and even felony punishment. Regardless of the severity of those potential outcomes, debt assortment lawsuits are overwhelmingly skewed in favor of plaintiffs suing to get better the debt.

Legal guidelines governing the debt assortment lawsuit course of fluctuate extensively throughout the US, and even inside a single state rely on the kind of debt, courtroom venue, or quantity in controversy.

To that finish, the Heart for Public Well being Regulation Analysis at Temple College Beasley Faculty of Regulation has teamed up with The Pew Charitable Trusts to start monitoring state legal guidelines that regulate debt assortment lawsuits. The information, launched on February 14, 2024, present a complete overview of statutes, laws, and courtroom guidelines governing debt assortment lawsuits that have been in impact as of January 1, 2023, in all 50 states and the District of Columbia.

By way of this analysis, we’ve recognized legal guidelines in 41 states and the District of Columbia that particularly govern debt assortment lawsuits. However these legal guidelines fluctuate vastly: some states have debt lawsuit-specific legal guidelines that govern only one or two explicit features of the method (akin to statutes of limitation, or venue), and debt assortment lawsuits in these states are in any other case ruled by usually relevant civil process legal guidelines. Alternatively, a couple of jurisdictions have extra complete units of legal guidelines that intention to particularly deal with points distinctive to the debt assortment lawsuit course of and canopy a number of levels of the courtroom proceedings.

Simply greater than half of jurisdictions have legal guidelines that would probably deal with the imbalance of energy and outcomes in debt assortment lawsuits by requiring sure plaintiffs (typically simply debt consumers or plaintiffs bringing shopper debt claims) to supply particular documentation to help the accuracy and validity of debt claims.

Even past these documentation necessities, the legal guidelines and guidelines that apply to a debt assortment lawsuit can fluctuate considerably relying on the courtroom through which the declare is introduced. Lawsuits introduced as small claims actions are sometimes topic to much less formal and extra relaxed guidelines, which can be simpler for unrepresented defendants to navigate — however can also make it simpler for debt collectors to acquire default judgments. A number of states deter shopper debt collectors from submitting in small claims courtroom by means of varied restrictions: 16 states prohibit third events (akin to debt consumers or assignees) from submitting in small claims courtroom, 12 states prohibit plaintiffs from being represented by a lawyer in small claims courtroom, and eight states impose a restrict on the variety of small claims actions a single plaintiff can file per week, month, or 12 months. Alternatively, seven states and the District of Columbia require all civil claims (together with debt claims) below a specified quantity to be filed as small claims.

The information, that are free and open entry, provide an important take a look at the panorama of debt assortment litigation legal guidelines and may information policymakers, advocates, and others as they work to form a extra responsive and affordable atmosphere for customers.

Specifically, proof means that sure reforms might enhance outcomes for customers and mitigate the imbalance of energy in debt assortment lawsuits. Authorized specialists and shopper advocates have beneficial a number of coverage reforms, together with necessities akin to these within the Uniform Regulation Fee’s mannequin Uniform Client Debt Default Judgments Act. As soon as these reforms are applied it’s as much as the courts and different officers to implement and implement them. After which we have to research them to see in the event that they’re working!

Given the broad variation of those legal guidelines throughout jurisdictions and even throughout completely different courtroom techniques inside a single jurisdiction, a full-scale authorized epidemiological research utilizing coverage surveillance knowledge may end in strong comparative evaluations of the legislation’s impact throughout jurisdictions and over time.

Discover the analysis at LawAtlas.org and learn our coverage transient, which presents an in-depth evaluation of the panorama.

DeAnna Baumle, JD, MSW is a Senior Regulation and Coverage Analyst on the Heart for Public Well being Regulation Analysis at Temple College Beasley Faculty of Regulation. 

Katie Moran-McCabe, JD is a Lead Regulation and Coverage Analyst with the Heart for Public Well being Regulation Analysis at Temple College Beasley Faculty of Regulation.



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