By Kate Bryan and Heather Morton
In the podcast, “The Pandemic’s Impact on Civil Courts,” The Pew Charitable Trusts explores the large amount of debt collection cases that end in default judgments favoring creditors.
According to state court data, approximately 20 million civil lawsuits are filed each year. Debt collection represents 1 in 4 of these cases and 70% of debt collection hearings result in default judgments in favor of the plaintiffs filing these lawsuits.
Erika Rickard, Pew’s Civil Legal System Modernization Project director, explains that default judgments in debt collection cases are often because consumers are not aware that they are being sued.
In a 2017 study conducted by the Consumer Financial Protection Bureau, 1 in 7 consumers surveyed who were contacted about a debt in collection had been sued by a creditor or debt collector and 74% of those sued, did not attend the court hearing. Additionally, the amount at issue in debt collection claims is frequently less than $5,000.
One of the goals of the Civil Legal System Modernization Project is to conduct research to identify policies that can improve outcomes for people involved in the civil legal system. One research challenge the project faces is that there is not a lot of information about debt collection cases. Although courts do collect and report on data related to civil litigation, many states do not include detail of the number of debt cases heard each year.
Texas is the only state that reports on all types of cases, including outcomes, across all courts. In the podcast, Chief Justice Nathan Hecht from the Supreme Court of Texas reported that debt collection cases in the state’s general jurisdiction courts have increased 55% over the past five years. In 2020, while the total number of civil filings dropped by 40%, debt collection claims only decreased by 12.5%. Texas courts saw 371,000 debt collection cases last year.
The large amount of pro-creditor judgments along with the growing number of debt collection cases have courts and policymakers re-examining equitability and efficiency in the civil legal system.
Unlike criminal court, defendants in civil matters are not guaranteed the right legal to counsel.
“In criminal cases, you’re probably familiar with the idea that you have the right to an attorney. And if you can’t afford an attorney, one will be provided for you. But in the civil context, that’s not the case. So we actually see that in about three out of every four civil court cases, at least one side is not represented by a lawyer,” said Rickard. “[If] someone can’t settle a $5,000 student loan debt or medical debt, then they’re probably not going to be able to afford an attorney to be able to litigate the case.”
Some advocates suggest there should be a civil right to counsel which means legal representation should be provided free of charge to those who cannot afford an attorney in matters involving basic human needs.
The right to counsel in civil court has gained traction in some jurisdictions, but it does not apply to all cases and no state has codified the right to an attorney in matters concerning debt collection. To learn more the civil legal system, click here.
Recognizing that maintaining public trust and confidence in the justice system is very important, Chief Justice Hecht acknowledges the duty to protect the rights of all litigants involved: “Well, I think we’re at a time where we’ve got to look at the operation of the system and reconsider what’s fair because we want to be sure that debtors are fairly protected, but creditors have rights, too. You signed up. You owe the money. You should pay it. It’s just trying to readjust on the lawyer side.”
Heather Morton covers debt collection policy for NCSL. Kate Bryan is an intern in the Criminal Justice Program.