Since the recession began, increasing numbers of Americans are becoming unable to pay their debts. As a result, debt collection lawsuits are now overwhelming the court system.
As the New York Times reported, many debt collection law firms are now using software programs to help prepare the cases with little or no oversight by an attorney. One law firm in New York has been filing around 80,000 lawsuits a year, although it has only 14 attorneys on staff.
The way the debt collection process typically begins in this situation is debt buyers purchase overdue debts from credit card companies, often for pennies on the dollar. In past years, the debt buyers would then try to collect the debt with phone calls or letters. However, now many of them are choosing to sue. Debt buyers will send a debt collection law firm a database that contains information about delinquent borrowers. The law firm will run the database through a software program, which will generate collection letters and lawsuits automatically. Many of the consumers who are sued do not show up in court or have an attorney and a default judgment is entered against the consumer.
Critics of the system claim that the lawsuits are sometimes based solely on a debtor’s name, address and balance of money owed. Sometimes the lawsuits are filed against the wrong people, or the debt collector has no proof of the debt that is owed. In fact, some judges are beginning to challenge debt collection attorneys who do not have documentation proving that the debt is owed.