Recently, I represented a bankruptcy client in a case brought against her by Capital One Bank in small claims court in Washington D.C. for about $1,500 credit card debt. I reluctantly went and I couldn’t help but wonder why a major bank such as Capital One would even go through the trouble of retaining counsel and suing in small claims court on a $1,500.00 debt. It certainly didn’t seem cost-effective or part of a financially prudent business model. In any event, I went. What I witnessed that morning was shocking. As a lawyer, I have always at least in theory believed that justice and due process will prevail. The fundamental elements of due process are rooted in the United States Constitution and to the common man or woman, “due process” means a basic right to be treated fairly and to be able to truly defend yourself in a legal action. I believe that most people involved in court proceedings go into that proceeding with the basic expectation of legitimacy and fairness. Due process, legitimacy, and fairness were the furthest concepts that I witnessed that dreary morning in D.C. in small claims court.
My client and I walked into a communal room with about 100 other people being sued on credit card debt. Of the 100 debtors in the room, including my client, approximately 3 or 4 of them were being represented by attorneys. The other 96 or 97 debtors were on their own. There were about ten lawyers representing major original creditors, such as Capital One Bank, or third party debt collectors, referred to as junk-debt buyers.
Junk-debt is essentially debt that is bought and sold, and re-sold numerous times to investors for pennies on the dollar. An original creditor such as Capital One had a direct business relationship with the debtor. Junk-debt buyers, on the other hand, are tantamount to some, as “vultures”. They never had a direct business relationship with the debtor and instead, once original creditors, for whatever reason abandoned collection efforts on the debt, they sell this debt for small amounts of money to these junk-debt buyers. These junk-debt buyers then attempt to collect and eventually sue on the debt for amounts of money far above what they paid for the debt. In addition, they tack on all types additional fees, including late fees, attorney fees, and any other type of bogus fee that they can add with a straight face.
In the vast majority of cases, the junk-debt buyers do not have the requisite documentation to show that they have the legal right to even sue on the debt much less the required paperwork to show that this debt is actually the debt of the person being sued, and the claimed amount is accurate. Despite all of the legal hurdles that these junk-debt buyers have to overcome to legitimately prove in a court of law that they should prevail against the debtor, guess what, they win in most cases. This doesn’t seem fair? How is this possible? It happens all of the time and the reason is because the 96 or 97 debtors in the communal room that day came in without a lawyer. What immediately happened as soon as the debtors walked into that room without counsel was those 10 lawyers representing banks or junk-buyers immediately swarmed on them. They were doomed at that point.
I overheard snippets of one-sided conversations from those 10 lawyers all doing their best to be both congenial and persuasive at the same time; giving the hard-sell but not really wanting to appear as if they were giving the hard-sell. In essence, the conversations went something like this. “You know you bought things that either you couldn’t or didn’t pay for; I am now giving you the opportunity to do the right thing and pay for what you bought; If you sign this agreement confirming that you owe this debt, and enter into this payment plan, paying the money that you owe plus some fees, we will remove some fees. We can stop this situation from going any further. You won’t have to go before a judge today and explain why you haven’t been paying your debts; this matter will go away. Oh, and one other thing, if you don’t stick to this agreement and renege on this monthly promise to pay, then we will be able to get a default judgment against you.”
What was very disheartening that day was that if those 96 or 97 people had an attorney or at least talked to someone knowledgeable about credit debt collection lawsuits, they would have most likely walked away without paying anything. The 3 or 4 debtors who came to court with their lawyers, including my client walked away without an agreement to pay or a judgment against them.
Now I know that there some of you out there who have no sympathy for these people and believe that if it was their debt, they should have to pay. I agree with you if these debtors have an equal playing field, these debt collectors are playing fair, suing on debt that they legitimately own, against people who really owe them the amount claimed, the statute of limitations to collect hasn’t expired, and the debt collectors can prove their case in court, then they should prevail. They shouldn’t win, however, just because due process didn’t happen to be a part of small claims court that day.