Minnesota is a friendly state—especially if you are a debt collector

In almost every other state, a debt collector must file a lawsuit either immediately or within a short time after serving the summons and complaint. This means the court has an eye on the lawsuit, and the debt collectors must pay the “entry fee” if they want to use the considerable power of the court system to collect on a judgment.

Not so in Minnesota. In Minnesota, debt collectors get to use the power of the court system without telling the court. This includes the power to take money away from a consumer by garnishing their wages or bank accounts. It is kind of like taking the gavel for a joyride.

Minnesota has a pocket filing rule (also called hip pocket service), that allows debt collectors to start lawsuits without notifying the courts. All they have to do is pay a process server $20 or so to drop off the summons and complaint at—cross your fingers—a defendant’s last-known residence.

Twenty days later, if the defendant did not answer, she has lost the case, which means she owes the money (whether or not she actually owes the money, whether or not the debt collector could have proved its case, and whether or not the debt collector added fees it does not have the right to collect).

Forty days later, the debt collector can start garnishing the debtor’s bank accounts or wages, still without filing the lawsuit.

And here is the kicker: because the debt collector can start garnishment without filing the lawsuit to get a judgment from the court, the debt collector will continue to calculate interest at the original credit card rate—probably 20-30%.

Debt collectors will only file the lawsuit if they find money, because then they already know they will get paid.

It is a little like fishing for cash. Toss out a line—sue a consumer—and see if they bite—fail to respond. If they bite, it’s money for dinner!

In Minnesota, all you need to go fishing for cash is a fill-in-the-blank set of court pleadings and a lack of scruples.

Because it is so cheap and easy, there is a lot of suing going on. Debt collectors filed 36,000 default judgments last year. Only the collectors know how many other lawsuits they started but did not file because they came up empty when they went looking for bank accounts.

It is so cheap and easy, it makes sense for debt collectors to sue every consumer they can, add on all the fees they can, figure out if the consumer has any money to take, and file the lawsuit only if they do.

Who put these rules in place? The Minnesota Supreme Court is responsible for some, the legislature for others. Both have—intentionally or not—made the debt collection industry feel very welcome here.

If you are a debt collector, Minnesota is a pretty nice place to be.