The National Center for Access to Justice (NCAJ) at Fordham Law School today announced the release of the Consumer Debt Litigation Index, an on-line resource that demonstrates that every U.S. state and the District of Columbia lack essential legal standards to protect consumers from wrongful, abusive debt collection tactics that can lead to homelessness, family breakup, overwhelming stress and other devastating consequences for families and individuals. There are signs of progress and many states are trying to improve, but every state has a long way to go. 

Millions of Americans each year face lawsuits brought by debt collectors. These cases clog court systems, in some districts approaching or exceeding half the number of civil cases filed in some jurisdictions. Because of ineffective court rules, cases are often filed on bogus or stale debts, against the wrong people, and/or claiming inflated amounts. Moreover, because of ineffective rules, people often are not even informed they are being sued, are prevented from responding by overly complex legal requirements or can’t respond because they can’t afford a filing fee. Very, very few people sued by debt collectors can afford to hire a lawyer – though the debt collectors almost always have lawyers on their side. In some jurisdictions  the debt collector wins by default in more than 70% of cases because the consumer never responds or appears in court.

Good policies can make collection actions more fair for consumers and still provide a path for creditors with valid claims to get repaid. The findings in the new Consumer Debt Litigation Index—which looked at 24 policy benchmarks critical to making consumer debt litigation more just and fair—reveal a legal landscape with much room for improvement, including:

• 30 states still allow for debtor’s prisons relying on a loophole that allows their judges to send people to jail for failure to obey a court order to pay debt;
• 15 states still charge a fee to answer a consumer debt complaint; and
• 7 states still allow seizure of wages ("garnishment") and property ("attachment") without a court order.

These policy failures—and successes—transcend geography and politics. The District of Columbia, Delaware, New York and Alaska top the rankings for best policies, with Pennsylvania and Texas landing in a tie for fifth. The bottom five states are Hawaii, Louisiana and Montana tied for last with Rhode Island and Nevada next to the bottom. The Report that accompanies the release of the Index observes that although some states are making progress (indeed, only two of the recommended policies have not been adopted by any state), none are doing well (the highest score was only a 53 out of 100), showing room for significant improvement in every state. The Index also contains a set of State Reports outlining each state’s results with respect to each of the 24 policy benchmarks.

Lauren Jones, NCAJ's Director of Law & Policy, said:  “There are four basic principles underlying the Consumer Debt Litigation Index. First, in too many cases people never even get notice that they are being sued, and, if they do, they have no idea how to proceed. People should be notified of a lawsuit and where they can find help. Second, to prevent bogus lawsuits, creditors should be required to produce evidence that a debt claim is valid. Third, fees, interest, and garnishment amounts should be limited so that lawsuits do not render people destitute. And, finally, debtor’s prison must be eliminated once and for all.”

David Udell, NCAJ's Executive Director, said:  “We are seeing that simple changes in the law can produce a markedly fairer legal landscape. Legal reforms can reduce the number of unjust lawsuits filed, increase the opportunity for people to learn they have been sued and defend themselves effectively, and stem the flow of adverse judgments that lead to unjust wage garnishment, arrest and incarceration. We are heartened to see that almost every one of the 24 policy solutions we identified as critical is already in place in at least one state. This means that states seeking to improve need not reinvent the wheel. Rather, they can quickly and easily learn what adjacent states and comparable states are already doing to create a fairer, more just system.”

The new Index offers the equivalent of 24 national reports revealing which of the 50 states and the District of Columbia have in place each of 24 policies essential to fairness in consumer debt litigation (and which do not). Seventy attorneys serving pro bono from law firms that included DLA Piper LLP, Hughes Hubbard & Reed LLP, Morgan Lewis & Bockius LLP, Ropes & Gray LLP, Simpson Thacher & Bartlett LLP, White & Case LLP, and a team from UBS, participated in the comprehensive research initiative that produced the new Index. NCAJ consulted throughout the process with consumer debt scholars, officials and advocates, and also shared preliminary results with state officials for their input. The views advanced in the Index are entirely NCAJ’s and do not necessarily reflect the views of those who have contributed to the project. 

To rely on the new findings to support change in your state, we encourage you to visit the Consumer Debt Litigation Index and the website of the National Center for Access to Justice.