Judgment Day: How Debt Collection Agencies Are Abusing The Court System

Hundreds of thousands of consumers around the country are going about their daily lives

, unaware that a debt collection agency has gone to court and obtained a legal judgment against them. This judgment can lead to garnished wages, frozen bank accounts, and repossessed vehicles - all of which can catch consumers off guard. How and why is this happening?

It's happening because third-party debt collectors are increasingly bypassing traditional collection methods and going straight to the court system. Often these agencies have very little information about the consumer; indeed, they may only have a name and an alleged amount owed. Sometimes, they have an address or a phone number, but they many not even have the name of the original creditor to whom the money was owed. Instead of trying to contact people and validate the debt, debt collection agencies often transform their databases into court filings. According to the law, collectors have to attest that they've validated the debt; all too often though, someone signs the attestations without ever actually verifying the information.

When a debt collection agency files a case in court, they are required to notify the consumer that he or she is being sued. Many agencies, though, bypass this step, either because they have incorrect contact information for the consumer or because they just don't bother. Even when consumers receive notifications, they may not understand that they need to go to court in order to defend themselves. Indeed, that's what debt collectors count on. When a consumer doesn't show up in court, the judge automatically finds in favor of the debt collection agency, and issues a judgment against the consumer. Even when consumers do come to court, they're often corralled by debt collection attorneys and pressured into paying a debt that may or may not be theirs.

Although it may sound like these kinds of cases are few and far between, they're actually rampant. One prominent debt collection agency filed 245,000 lawsuits last year, and received judgments on about 94 percent of those suits. Some judges are reporting that they've had as many as 400 debt collection cases on their dockets in one day, while others have taken to setting limits on the numbers of cases debt collectors can file. Even the so-called limits are outrageous; one judge's limit was 500 cases every two weeks from a single debt collector.

This clearly has a tremendous impact on consumers who are sued and who don't have their day in court, either because they never received proper notification or because they didn't understand their options. However, this abuse of the legal system has an impact on everyone; after all, the taxpayer is footing the bill for all of the costs associated with the court. Debt collection agencies - like every other business in the U.S. - are trying to cut costs, and one of the best ways to do that is to shift collection costs to the court system.

by: Sergei Lemberg

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