IAALS and NCSC Release White Paper on Debt Collection Reform

March 2, 2020

It is no secret that Americans are drowning in debt. In fact, Americans’ collective debt surpassed $4 trillion in 2019. And because more and more people are finding it difficult to pay them off, lawsuits by creditors seeking payment on consumer debts account for more than two-thirds of all civil cases filed in state courts. Given the high volume of these cases, it is worrisome to see the correspondingly high rates of self-represented litigants and default judgments that accompany them. State courts have identified some promising solutions to these challenges over the past decade, but their benefits so far have been limited—both in the number of courts that have made the reforms and the breadth of the reforms themselves.

To address these challenges, IAALS and the National Center for State Courts (NCSC) have released a new white paper, Preventing Whack-a-Mole Management of Consumer Debt Cases: A Proposal for a Coherent and Comprehensive Approach for State Courts, which presents a model approach to reform in these cases. This approach builds off the 2016 Call to Action and national recommendations for broad civil justice reform, adopted by the Conference of Chief Justices and the Conference of State Court Administrators.

The white paper also builds off of debt collection research conducted by IAALS and the NCSC and our experience studying the process on the ground. New York has been a leader in this area, and, as part of the Civil Justice Initiative (CJI) Implementation Plan, IAALS and the NCSC conducted a site visit to New York City’s courts in January 2019 to learn more about their debt collection reforms. Over the past decade, New York has worked to combat the issues surrounding debt collection lawsuits. In 2009, New York City implemented a number of progressive changes which were then adopted statewide five years later. Those changes include: 1) a safeguard against sewer service where the plaintiff is required to submit to the clerk a stamped, unsealed envelope addressed to the defendant alerting them to the lawsuit, and not entering a default judgment if that letter comes back to the court as undeliverable; 2) a requirement that when a plaintiff seeks a default judgment, s/he must submit affidavits supported by exhibits that prove the plaintiff has the right to collect on the debt owed by the defendant; 3) a requirement that the attorney for the plaintiff submit a signed affidavit affirming that the statute of limitations has not lapsed; and 4) a standardized answer form on New York Court’s website that helps the defendant understand what possible defenses they could assert.

During the site visit, we reviewed case file data and interviewed the policymakers, judges, court administrators, and advocates on both sides who were instrumental in implementing their reforms. In addition to learning about how successful these reforms have been, we also learned about the collaborative process the state undertook by holding meetings with both creditor and consumer advocates in order to fully understand the problems with the current system—as well as the concerns surrounding potential solutions. Importantly, we also spent time in the courtroom, observing the challenges facing litigants and the court, along with some of the solutions that New York has implemented.

Based on this site visit, as well as a review of other reforms around the country, our white paper describes contemporary challenges associated with managing consumer debt collection cases and some promising solutions to address them. Building off the national CJI recommendations, this report highlights the importance of aligning court rules, procedures, staffing, technology, and information for litigants with the needs of these cases.

The Call to Action report noted the critical importance of civil justice reform. “These trends have severe implications for the future of the civil justice system and for public trust and confidence in state courts. The cost and delays of civil litigation effectively deny access to justice for many members of our society, undermining the legitimacy of the courts as a fair and effective forum to resolve disputes.” The Conference of Chief Justices has recently recognized this imperative for debt collection cases specifically, passing a Resolution urging states to support debt collection reform. With millions of Americans facing debt and the majority of civil cases involving the collection of those debts, we urge states to undertake comprehensive reform in these cases.

Dive Deeper