Automated Debt Collection Lawsuits Overwhelm Courts

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At least one debt collection law firm, Cohen & Slamowitz, files about 80,000 lawsuits per year. That is an average of over 300 lawsuits per day.

Wow.

It seems impossible for a lawyer to actually examine each lawsuit, make sure it has merit and there is evidence to support it, and sign off on it. This means that the courts end up trying to sift through the cases the law firm has not really bothered to look at, so the courts become the debt collectors’ back room.

As usual, the collectors fall back on trite statements like “The reality is, if people owe the money, they should pay it.” But that comment by Fred Blitt, president of the National Association of Retail Collection Attorneys, misses the point. The point is that Mr. Blitt’s constituents are abusing the court system with unsupported, undocumented lawsuits, and they don’t particularly care whether the person sued actually owes the debt.

We should not need more regulations to prevent this sort of behavior. For example, bringing a lawsuit on a contract or account stated theory where the plaintiff has never seen the contract or itemized account statement would seem to violate Rule 11(b)(3) of the Federal Rules of Civil Procedure. Most states have a similar or identical rule to Rule 11(b)(3), which requires attorneys to certify that “after an inquiry reasonable under the circumstances . . . the factual contentions have evidentiary support or, if specifically so identified, will likely have evidentiary support after a reasonable opportunity for further investigation or discovery.”

It seems like Rule 11 would not allow attorneys to file lawsuits based on a mere guess that the claims will be supported based on a name in a spreadsheet. The reason debt collectors get away with doing so is that so few consumers challenge those claims, and even fewer judges are willing to enforce Rule 11 and similar laws even whey they are invoked.

And so while more regulations should not be necessary, they may be, if the industry or the courts do not curtail the abuses of the system.