Monday, July 25, 2011

The Debt Collection system is not broken, it just needs lawyerly attention.

A July 24th article in the Baltimore Sun  decries the glut of debt collection cases in Maryland’s District Court, where far too many claims are passed through the system with little scrutiny. Judge Clyburn is quoted as saying that 200,000 judgments by default are granted each year, and that two-thirds of that sum involve debt collection. The actual statistics for the District Court are available, here, , but they are not broken down so precisely that defaults granted in certain types of civil cases can be identified.

It is no surprise to active bar members that many, many cases result in default judgment simply because a defendant failed to plead or appear at the affidavit trial. This is an entirely appropriate result when a defendant is properly served, and then fails to engage in the process. The author, however, points to the many evils resulting from this process: judgments based on scant or absent documentation of debt ownership; judgments based on mistaken or wrongly stated accounts; judgments on claims falling outside the statute of limitations; and judgments on debts discharged in bankruptcy.

But who is signing off on each default affidavit? A judge. As counsel for a creditor, I don’t get a judgment against the defendant unless the court signs my proposed order. And if I give the court flimsy evidence, then the court should withhold that signature.

The system does not require much to address these perceived or real harms. Try these on for size:
  • Amend the rules of pleading to require an affirmative statement that the claim is within the statute of limitations. I have seen many, many complaints on time-barred debt claims. But since the statute of limitations is an affirmative defense, there is nothing patently wrong about suing on a stale claim, and there is nothing that requires a judge to advocate for application of limitations. Putting this requirement in place for claims in the District Courts, where the vast majority of collection work is conducted, would be a potent gate-keeper. This would prevent a large number of bogus claims from reaching the courthouse.
  • Enforce the existing rules of evidence in connection with the affidavits being submitted. Nobody is directing the judiciary to rubber stamp anything. The current salary for the 112 District Court judges is $127,252. That is more than adequate recompense to read the complaints and affidavits! None of the harms complained of can occur if a judge does not sign an order. So, upon reading the affidavits, they simply need to apply the existing rules of evidence. And if the affidavit is defective, set that matter in for a disposition hearing. Let the Plaintiff bring its witnesses and evidence to the courthouse. Is that too old-fashioned?

    The facts set forth in an affidavit must be admissible, no less than if a live witness is sitting before the judge. The live witness must demonstrate a basis for personal knowledge, or a familiarity with the business records. Also, the documents would have to be shown by the live witness to be properly within the business records of the suing entity. Presentation by affidavit is no different. I lay responsibility for reading the submitted affidavits on the bench. It is not an excuse for Judge Clyburn or others to explain that most affidavit judgments are automatic, based on the submitted affidavit. They are paid to vette the document, not to rubber stamp the claim. And if any lawyer or firm is consistently submitting bogus affidavits, they should not be acquiring judgments. Period. I don’t ask judges to plug holes in my pleadings, nor should they.
  • Require an affidavit concerning non-discharge in bankruptcy as a threshold matter of pleading. The Bar is already required to affirm that a defendant is not in active military service. To do this, we check a public database, or hire private investigator’s to check that same public database. With the federal PACER system, it is just as easy for the Bar to check whether a debtor/defendant has been adjudged bankrupt, and whether a discharge has been granted (currently a "for fee" system, but my feelings about whether public access to the federal docket system should be free is for another day). There is also the ability of the debtor, or even the court, to report clear violations of the Automatic Stay, to the bankruptcy trustee’s office for further sanction.

And for a nickel more, I’ll tell you a story about a bridge….