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Automated Debt-Collection Lawsuits Engulf Courts - Us

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http://www.nytimes.com/2010/07/13/business/13collection.html?ref=business

As millions of Americans have fallen behind on paying their bills, debt collection law firms have been clogging courtrooms with lawsuits seeking repayment.

Few have been as prolific as Cohen & Slamowitz, a Woodbury, N.Y., firm that has specialized in debt collection for nearly two decades. The firm has been filing roughly 80,000 lawsuits a year.

With just 14 lawyers on staff, that works out to more than 5,700 cases per lawyer.

How is that possible?

The answer to that question is at the heart of a growing debate over the increasing use of the nation’s legal system to collect on bad debts.

Like many other firms, Cohen & Slamowitz relies on computer software to help prepare its cases. While many of the cases represent legitimate claims, critics say the lawsuits are too often based on inaccurate or incomplete information about the debtor or the amount owed.

Already, some state legislators and judges have tried to crack down on collection lawsuits, and on Monday, the Federal Trade Commission weighed in, saying the system for resolving disputes over consumer debts was broken and in need of “significant reforms.”

The commission, which says debt collection is its top consumer complaint, proposed that states require collectors to include more information about debts in their lawsuits, including a breakdown of the current balance by principal, interest and fees, and the relevant terms of the original credit contract, if not the contract itself.

The agency also urged states to adopt measures to make it more likely that consumers would show up in court to defend themselves; currently, most do not, resulting in default judgments.

“We are pushing very hard to make certain that debt collectors have sufficient substantiation, particularly when a consumer challenges the debt,” said David Vladeck, director of the commission’s Bureau of Consumer Protection.

The commission, which has limited authority to write debt collection rules, urged states to take action because most collection cases are filed in state courts.

The litigation boom has been propelled by fundamental changes in the way debts are collected, particularly for credit cards. In recent years, credit card companies have increasingly sold off debt they have considered uncollectible to debt buyers, usually for 5 cents or less on the dollar.

The debt buyers, in turn, may try to collect the debt themselves using traditional practices like sending letters or making phone calls to a consumer to try to arrange a payment plan. Increasingly, they are choosing to sue instead.

Collection law firms are able to handle such large volumes of cases because computer software automates much of their work. Typically, a debt buyer sends a law firm an electronic database that contains various data about consumers, including name, home address, the outstanding balance, the date of default and whether interest is still accruing on the account.

Once the data is obtained by a law firm, software like Collection-Master from a company called Commercial Legal Software can “take a file and run it through the entire legal system automatically,” including sending out collection letters, summonses and lawsuits, said Nicholas D. Arcaro, vice president for sales and marketing at the company.

No group has definitive statistics on debt collection lawsuits, but federal regulators, collection lawyers and judges say the numbers have increased and are straining the court system.

Most consumers fail to show up in court, and those who do rarely have a lawyer. A court judgment gives debt buyers the ability to collect on the debt through actions like wage or property garnishment.

“What they are hoping to recover is the full dollar on some of it,” said Robert J. Hobbs, deputy director of the National Consumer Law Center, an advocacy group. “On most of it, they are hoping to recover 40 or 50 cents on the dollar. And they are hoping to do it with as little work as they can.”

Critics say the business model for some debt buyers and law firms relies on such huge volumes of legal actions that mistakes and abuses are inevitable, in part because the lawsuits are often based on little more than a defendant’s name, address and alleged balance.

Is this the sort of productivity improvement we could look forward too in the UK?

Seems an interesting business model.

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Is this the sort of productivity improvement we could look forward too in the UK?

Seems an interesting business model.

I would imagine it's the only way 'the system' will be able to handle the likely storm of defaults we have ahead of us.

The questions is, with the rise of sites like (whisper it) Moneysavingexpert.com will there be a new, clued-up, type of debtor who will challenge this automated system all the way? In the UK this could quite easily bring the whole sytem down.

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I would imagine it's the only way 'the system' will be able to handle the likely storm of defaults we have ahead of us.

The questions is, with the rise of sites like (whisper it) Moneysavingexpert.com will there be a new, clued-up, type of debtor who will challenge this automated system all the way? In the UK this could quite easily bring the whole sytem down.

I think some 'clued up' debtors have tried to challenge the system, and get out of debts using legal loopholes. From what I read, very few have succeeded.

There are even companies that offer services to help you get rid of your debts in this fashion (as opposed to companies that negotiate what you can repay with your creditors). I think judges are finding against those who are pretending that the debts arent legal, too right too, after all they were lent the money in the first place.

Of course, if we do get huge numbers of defaults, especially with mortgages because they give the borrower more protection (especially if there is a family in the home, irrespective of the fact it may have been obtained with a liar loan), then our courts could get blocked up. Such a blockage will inevitably mean that any house price correction will take longer than it should.

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There are even companies that offer services to help you get rid of your debts in this fashion (as opposed to companies that negotiate what you can repay with your creditors).

The existance of these companies would suggest that there is a demand for their services, yes? Also, the debtors don't need to be successful, just throwing up the obstacles suggested on many websites will be enough to wreck any automated legal system.

The simple act of returning the first letter with "not known at this address" would mean that a reasonable amount of manual intervention would be required.

Unfortunately, a high proportion of these debtors will be those with a high sense of entitlement, "I work 35 hours a week, so I'm entitled to a 4-bed detached and an X5". That sense of entitlement won't stop just because the credit has! They will fight (capped) tooth and (manicured) nail for their trappings.....

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If the courts do get blocked up, there'll be a lot of lobbying on the part of the creditors, especially the large ones, for the court system to be expanded to cope.

In common with a lot of people/organisations, they will take the view that the part of the public sector which affects them directly should emphatically not be cut and should, if necessary, be enlarged.

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Can we expect automated countermeasures in the form of 'Debtmate' a software package designed to generate a retaliatory stream of letters asking for clarification or confirmation of the debt collectors identity for 'security' purposes and other such obfuscation. :lol:

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This already exists here, the northampton bulk processing centre handles all this crap for the uk.

Debts are sold on multiple times until they reach the real junk status, eg the ones where the 6 year limit has passed, and the last companies buy them for pennies in the pound hoping to find people they can con into paying when they have no legal way to force them.

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The government will be forced to change the laws to speed up the processing of cases in some way.

If they don't they will simply force banks to start court proceedings EARLIER.

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  • 259 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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