A class action challenging illegal debt collection practices that prevent people from defending themselves in court should be affirmed.
A court judgment for a debt can be devastating to the financial security of older and low income people. A judgment appears on credit reports (affecting everything from job seeking to housing). When debt collectors obtain judgments in cases that they did not serve on the alleged debtor and by lying to the court, the integrity of the court is at risk as well.
A group of New York City residents who had judgments entered against them by default sued a debt buyer, a law firm, and process service company. Plaintiffs alleged the debt collectors sued even though they knew or should have known the debts could not be verified and that the debtors were routinely not being served with notice of the lawsuits. The lawsuit also alleges that the debt collectors falsely swore to court that they had personal knowledge of the validity of the debts and notice to the alleged debtors, in robo-signed affidavits they churned out by the hundreds without even reading.
Courts are inundated with debt buyer lawsuits supported only by false affidavits that claim to be based on valid information, but which no one can verify because the documents establishing a debt is owed simply no longer exist, even from the original creditor. In some states, the attorneys general have challenged widespread use of fraudulent affidavits; but, the lawsuit alleges, the financial incentives in the debt collection industry outweigh the small chance of being caught by regulators. The plaintiffs in this case brought suit as a class action – a single proceeding that seeks to vindicate rights and provide remedies to many people who are injured by the same illegal practices. Defendants argue that a class action should not have been certified by the trial court and that the plaintiffs should have been required to sue one-by-one. Since many people do not know their rights or cannot afford to hire a lawyer, a rule requiring that lawsuits cannot be pursued as a class action allows a wrongdoer to keep ill-gotten gains from all the individuals who do not pursue separate lawsuits.
AARP Foundation Litigation Attorneys filed AARP’s friend-of-the-court brief along with the National Association of Consumer Advocates and the National Consumer Law Center in support of the plaintiffs. The brief reviews the numerous studies and investigations detailing industry-wide debt collection practices that reward shoddy record keeping about debts, and that inevitably leads to the wrong person being sued or for the wrong amount. Banks sell information about debts that even the bank cannot verify. Despite buying the information subject to warnings that it is not accurate, debt buyers file lawsuits claiming that it is. Such fraud on the courts results in millions of judgments entered each year. People are regularly sued for the wrong amount, as a result of identity theft, or for debts they have already paid off, disputed, or discharged.
What’s at Stake
Litigation abuses by debt collectors cause tremendous harm to vulnerable people, who may be forced to pay invalid or erroneous debts in order to avoid a judgment. If a judgment is entered, it can wreak havoc on people’s lives when seeking employment, housing, or consumer credit. Debt collectors who engage in illegal or abusive practices should answer to the people they injure.
Sykes v. Harris is before the U.S. District Court for the Southern District of New York.