Debt Collector Doings

The American Banker recently published a story, Courthouse 'Rocket Dockets' Give Debt Collectors Edge Over Debtors, about how consumers feel pressured to settle debt cases after receiving summonses to courthouse settlement conferences with debt collectors. An excerpt:

At first glance these sessions resemble legally mandated mediation: they take place in courtrooms and are administered by clerks and uniformed bailiffs. Attorneys from the Pro Bono Resource Center of Maryland, a local legal aid service, monitor the proceedings and offer some defendants assistance. A court interpreter is often on hand to help non-English-speaking debtors.

What's missing is a judge or other neutral moderator. Whether debtors realize that — and that they have no legal obligation to sit down with their debt collectors — is a hotly debated topic.

Many of the defendants are "just really not prepared at all. Most of them do think they're at trial," says Nicole McConlogue, the Pro Bono Resource Center of Maryland's consumer protection project manager, who regularly advises people summoned to the resolution conferences.

Meanwhile, the ACLU of Washington and Columbia Legal Services have issued a report, Modern-Day Debtors’ Prisons: The Ways Court-Imposed Debts Punish People for Being Poor.  From the key findings:

  • Courts impose discretionary LFOs [Legal Financial Obligations] without considering a person’s present or future ability to pay.
  • Courts incarcerate people for failure to pay even when they are destitute.
  • Courts require individuals to transfer public payments for subsistence to pay off court debts, to the detriment of personal and family welfare.
  • While state law says restitution payments to victims should take precedence, county clerks’ offices garner collection fees prior to paying restitution.
  • Courts fail to notify debtors of their legal right to be represented by counsel.

(HT: Peter Holland)