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Townsend v. Midland Funding

AARP Asks Maryland Court to Uphold Debtor Protections


A case before Maryland’s highest court asks whether judgment can be entered in small claims court without a witness who has personal knowledge of the debt.  


Abusive debt collection practices affect one in 15 people nationwide, approximately half of whom are 50+. The problem starts with banks selling defaulted debt on the secondary market for only pennies on the dollar because it is known to be inaccurate and includes amounts that arose from identity theft, were paid off, or never owed by the person sued.  Despite explicit disclaimers in the sale of those debts, debt buyers falsely represent in sworn affidavits that the information is reliable in order to obtain millions of court judgments worth billions of dollars.

Unfortunately, many people do not know how to defend themselves against bogus lawsuits or are unable to go to court.  They often do not have any records to disprove that they owe the amount sought. Many pay debts they do not owe to avoid a judgment or allow a default judgment to be entered against them.

Noting the increase in abusive judicial debt collection, Maryland courts adopted new rules that went into effect in 2012 requiring debt buyers seeking judgment to produce documents proving that the debt was validly assigned to them, that they are suing the right person, for the right amount, and they are legally entitled to judgment. As a result, 50,000 pending lawsuits were dismissed. The new rules increase the evidence needed to obtain a judgment but do not make debt buyer business records automatically admissible.

This case arose from a judgment entered in a small claims court trial, in which business records were admitted without a witness to establish the records were trustworthy. The small claims court held that the normal rules of evidence do not apply in small claims court. That ruling was appealed and is now before Maryland’s highest court.

AARP Foundation Litigation attorneys filed a friend-of-the-court brief by AARP and seven other consumer protection organizations urging the Court to protect alleged debtors by holding debt buyers to the letter of the law, especially in light of the growing evidence of fraud on the courts by banks and debt buyers collecting stale debt. The brief details evidence that debt buyer lawsuits are based on inherently unreliable information, which should not form the basis for judgment in most cases. The brief also points out that debtors have a constitutional right to cross examine witnesses, which the court deprives them of exercising if a debt buyer can obtain a judgment without a witness.

What’s at Stake

Debt buyers often cannot prove they are entitled to judgment.  They obtain millions of default judgments worth billions of dollars, however, because people no longer have any proof they do not owe all or any of the debt sued upon. If sued on a debt, people sued have the right to force a debt buyer to prove the validity of the debt and the accuracy of the amount. If a debt buyer purchased the debt from a bank, it may be impossible for them to prove the debt because there may be no witness who can testify truthfully based on personal knowledge about the recordkeeping practices of the banks.   

Case Status

Townsend v. Midland Funding is before the Court of Appeals of Maryland.

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Our legal advocacy initiatives  - conducted by AARP Foundation Litigation (AFL) - reflect more than 15 years of work in federal and state courts across the country. Through our efforts, we support the Foundation’s four priority areas: Hunger, Income, Housing and Isolation, and ensure that those 50 and older have a voice in the laws and policies that affect their daily lives.