Individuals line up one by one to check in with the small claims courtroom clerk Wednesday morning, every one with a different load. Some are carrying their babies, one is carrying a white cane. More than 70 D.C. residents are being sued over debt and had to appear in court to deal with it. When it is time to start, the six benches are filled so some sit in vinyl chairs or stand. Each hearing lasts a few minutes. The scene is dizzying.
D.C. is experiencing such an uptick in debt collection lawsuits that in October 2018, the small claims branch of D.C. Superior Court added an extra day for these cases to be heard. They are now heard on Thursdays in addition to Wednesdays.
Last Thursday, 13 of the 17 cases on the calendar were collection lawsuits. A debt buyer filed the first two cases the magistrate judge heard. The court ultimately entered a default judgement in both cases because the individuals being sued did not show up. Altogether, the debt buyer claimed a judgement balance of $3,625.99. Now that summary judgements have been issued, the debt buyer can garnish the individuals’ wages or bank accounts. Their credit, employment, and possibly housing are at risk.
Roughly 30 percent of D.C. residents have debt in collection, and the residents with debt are disproportionately people of color, according to the Urban Institute’s analysis of 2017 credit reports, putting them at financial risk. Sometimes when this debt is seriously delinquent, individuals start getting collector calls or mail and when they don’t pay up, they can get sued. Increasingly, individuals are getting served by a company they don’t even recognize that bought the debt in bulk for pennies and decided to collect.
Small claims court is designed to be a people’s court, where parties can go without lawyers. But collectors are being represented by counsel in these hearings. The individuals getting sued typically walk into the courtroom alone. Free lawyers are available, identifiable by the blue clipboards they carry in the courthouse.
Sometimes, as was the case last Thursday, individuals do not show up at all. The defendant’s seat is left vacant while the plaintiff’s is occupied by a few rotating lawyers in suits responsible for multiple cases per day. One woman who missed her original court date said she couldn’t make it because she had a sick kid at home. She did appear in court on Jan. 30 and reached an agreement with the credit lawyer for her case. The woman, who asked not to be named, represented herself.
There’s an explanation behind the chaos in court. The number of debt collection lawsuits is increasing, according to D.C. lawyers who represent individuals getting sued over debt. The reason for the uptick is manifold. Sometimes these lawsuits aren’t even legitimate; companies have been known to buy excel spreadsheets of debt and not verify the information before suing.
Given the rise of collection lawsuits and reports of questionable behavior from collectors, consumer advocates have called for reform. A proposed D.C. Council bill would update the District’s decades-old debt collection law, codifying protections for the growing number of residents being sued over unpaid bills. But it’s been stalled for years.
In 2016, there were 5,580 new filings in small claims court, according to D.C. Superior Court statistical reports. That number jumped to 7,096 in 2017 and 9,261 in 2018. There is no report for 2019 yet. City Paper requested detailed data from D.C. Superior Court, who could not provide this information in time for publication. Ground experts, however, contribute the uptick in filings to collection cases.
“The court does not differentiate within the small claims report between debt collection and other cases, but the vast majority of those cases are debt collection, and we know that from docket reviews and and from our being in the court every day and/or week,” says Ariel Levinson-Waldman, founding president and director-counsel of Tzedek DC, an organization based at the University of the District of Columbia’s law school that provides free legal services to debtors of modest means. “We also know that the spike is from the debt collection filings—those are the only plaintiffs that use mass filings as a strategy in the superior court.”
Jennifer Ngai Lavallee, the supervising attorney at Legal Aid Society of the District of Columbia’s Consumer Law Unit, and Benjamin Wiseman, the director of the D.C. attorney general’s consumer protection office, agree with Levinson-Waldman’s analysis.
“We have seen a sustained and even increasing volume of filings by debt buyers,” says Lavallee. “We are seeing a rise in incidents with debt collection companies,” notes Wiseman. In 2018, Attorney General Karl Racine joined a $6 million nationwide settlement with prominent debt buyer Encore Capital Group for using illegal tactics to collect spurious debt. “Through some of our investigations and litigation, we’ve uncovered debt buyers that are aggressively seeking to collect on consumer debts without at first substantiating those debts—knowing that debt is in fact owned by consumers that they are contacting, knowing for certain the amount of the debt itself.”
D.C. ranked first nationwide in collection complaints per capita in 2018, with 1,199 complaints per 100,000 people, according to a report from the Consumer Financial Protection Bureau. The report also says 8,319 collection cases were filed in D.C. between January 2018 and March 2018.
A bill signed into law in December 2016 only partly explains the increase. The District of Columbia Judicial Financial Transparency Act changed the jurisdictional limits for small claims court by increasing the maximum amount in controversy from $5,000 to $10,000. It’s likely cases that were filed in civil court were moved to small claims in the aftermath. It’s also possible that collectors are filing cases now that they wouldn’t have before because small claims court, comparatively, has looser procedures, faster timelines, and cheaper filing fees.
The increase isn’t isolated to D.C. “Leading up to the Great Recession, there was a spike in cases and then following, a reduction,” says Lisa Stifler, the state policy director for the Center for Responsible Lending. “In the past couple of years, based on some of the research we have done in other states, there does seem to be somewhat of a pattern of increase in debt collection cases again.”
It’s hard to definitely say why there’s a proliferation. “There is some macroeconomic data indicating that people are taking on more debt,” says Stifler. “Are collectors or others more aggressively using the courts now compared to previously? I’m not quite sure there’s any indication related to that.”
Levinson-Waldman, however, believes there’s a logical inference: Debt buyers are emboldened by the Trump administration’s appointments to the CFPB.
“The quantity of enforcement has gone down. The message to large scale debt buyers has been it’s open season,” says Levinson-Waldman. Case in point: In 2018, two debt buyers, Encore Capital Group and PRA Group, purchased and collected record amounts of debt.
Debt collectors call Halle four to five times a day.
“It makes you depressed because you don’t have money to pay them. They are harassing you for money you do not have,” she tells City Paper.
Social security is Halle’s only source of income because she is unable to work after being diagnosed with multiple sclerosis and spinal stenosis, medical conditions that make it hard for her to move. Her father used to help her out financially, but he died in 2016. That’s when Halle’s money troubles started. In 2017, she was sued over unpaid credit. While she reached an agreement with the company in 2019, she says she is still getting collector calls. She doesn’t know all the companies calling her. Recently, one collector told her to start collecting bottles and cans to make money.
“The system needs to be kinder,” says Martha. “It could be you at any time.”
Martha was also sued over debt. She was laid off from her D.C. government job in 2016 after working in social services for more than 30 years. “I should have probably been a better manager of savings,” she says. “Anything I had extra, I would give to other people.” When it came time to decide whether to pay her mortgage, groceries, or credit card bill, she prioritized keeping a roof over her head and eating.
The collection calls began after she couldn’t pay her credit card bill. “It’s a sick feeling. You wanna do right, you wanna pay but you can’t,” she says. “Them getting money is more important than you being a human being.” In 2019, Bank of America sued her for roughly $3,000 dollars. She reached an agreement with the company in January.
City Paper agreed to use pseudonyms for Halle and Martha because of the stigma associated with debt. Martha, for example, worried if a potential employer Googled her and saw this article, she wouldn’t get the job. “People who go through the claims court are not bad people. People go through things. People make mistakes,” Martha says.
Debt is becoming a widespread worry in D.C. Based on a DC Consortium of Legal Services Providers survey of more than 500 low-income residents published in 2016, nearly half reported problems with debt. The most common problem those with debt cited was receiving calls from collectors. To address the problem, approximately 5 percent sold their own property or took out a payday loan.
“People are suffering as a result of [collection lawsuits],” says Levinson-Waldman. “It also reflects a lot of suffering and reflects the massive problems of being poor in an expensive place. And it reflects the fact that we live in a jurisdiction with extraordinary differentials by race when it comes to wealth.”
According to national data the Urban Institute published, “white family wealth was seven times greater than black family wealth and five times greater than Hispanic family wealth in 2016.” The racial wealth gap, Levinson-Waldman says, is reflected in D.C.’s debt collection calendar. Black and brown residents are more likely to be sued over debt because they have fewer financial resources to fall back on when hardships arise.
A ProPublica investigation of three cities—St. Louis, Chicago, and Newark, New Jersey—found collection suits actually cluster in black neighborhoods. The rate of judgements were twice as high in predominantly black neighborhoods than in predominantly white ones, even when accounting for income.
Numerous experts say D.C.’s current debt collection law has not kept up with a growing problem, calling it “antiquated.” For example, it contains no mention of debt buyers, even though they’ve been filing lawsuits in large numbers since the early 2000s. They don’t even have to register with a D.C. agency.
“The only way they announce themselves is with the filing,” says Levinson-Waldman.
Wiseman says “We think that it would be appropriate to update the law, to provide better notice and better protections for consumers.”
Advocates have thrown their support behind the Debt Buying Limitation Amendment Act. The bill strengthens the existing law in numerous ways, like placing requirements on debt buyers; requiring companies to have specific information before collecting money from debtors; and eliminating the issue of “zombie debt” (old debt that companies try to revive).
“It adds these kinds of pleading requirements and documentation requirements and verification requirements and says you can’t file something that’s outside the statute of limitations. It would require more of the plaintiff before they get to the point of suing someone in court,” says Lavallee. “I think that that alone would probably have a pretty substantial impact on filings.”
“Our hope is that if this bill or some version of this bill were enacted, the level of required scrutiny that would come with all of these cases would also impact the default judgment rate for collections cases,” she adds. An informal analysis of small claims filings, she says, puts the rate at 30 percent.
The bill would also help consumers who have problems with debt buyers. “We get people contacting us about debt—that they don’t know where this came from. That’s a common concern. People are like ‘I don’t even know what this came from or who this company is that is contacting me.’ People don’t know they have the right to ask for specific information about the debt,” says Wiseman. “That’s something that this law addresses.”
Ward 3 Councilmember Mary Cheh has introduced the bill four times since 2014, most recently in 2019. But it’s been stalled in the Committee on Business & Economic Development and Committee of the Whole, despite collective efforts to at least schedule a hearing.
“This bill is not about helping consumers avoid the debts they actually owe—it is about providing for a fair debt collection system in which District residents are not harassed or intimidated into paying debts or subjected to wrongful legal action,” says a 2017 letter signed by nine advocacy groups.
It’s unclear why the bill hasn’t moved, particularly when other states like Maryland have taken up reform.
“It’s very very frustrating for me because I know that there is a great need for it. I know a lot of this misbehavior is going on, and here I presented a tool for helping to deal with it and it languishes in a committee because it’s not my committee and the chair of that committee is not moving it,” says Cheh. “For what reason? I don’t know.”
Council Chairman Phil Mendelson and Ward 5 Councilmember Kenyan McDuffie, who chair committees with jurisdiction, have been known to side with debt collectors—just see their 2018 vote on an amendment to a wage garnishment bill. Additionally, Cheh and McDuffie have been known to clash.
When asked about a hearing, Mendelson’s spokesperson says: “It is on the Chairman’s radar for some time after performance and budget.” The spokesperson adds that Mendelson is “not familiar with the legislation in-depth and usually reserves judgement until after a hearing is held.”
“The legislation is under review within the Committee on Business,” according to McDuffie’s spokesperson, who declined to explain why the bill’s been snubbed for so long. “With over 150 measures referred to the Committee for action this Council period, it is unfortunately not possible for the Committee to take action on all of them.”