Jefferson City, Mo. – Attorney General Chris Koster, Legal Services of Eastern Missouri, Legal Aid of Western Missouri, Legal Services of Southern Missouri and Mid Missouri Legal Services today join together to propose reforms aimed at curbing abusive debt collection lawsuits in Missouri. In a letter addressed to the Missouri Supreme Court’s recently formed Commission on Racial and Ethnic Fairness, Koster called for common-sense changes to two court rules in an effort to prevent unscrupulous collection practices. These changes, wrote Koster, would advance the Court Commission’s efforts as well as the Calls to Action recommended by the Governor’s Ferguson Commission.
Consistent with a nationwide trend over the past decade, Missouri has seen a dramatic increase in debt-collection litigation. Many companies purchase charged-off debt, or debt that has been deemed uncollectable by a creditor, at a steep discount and then attempt to collect that debt through any means possible. Frequently, that no-holds-barred approach manifests itself in the serial filing of debt-collection lawsuits in state court.
Prior to filing suit, many of these debt buyers fail to substantiate whether a debt is owed or in what amount, instead proceeding with faulty and incomplete information. Oftentimes, the same companies sue for debts more than five or 10 years old even though the statute of limitation would normally preclude recovering on such a suit.
Even more disconcerting, research demonstrates that these litigation abuses disproportionately target racial minorities, creating devastating long-term impacts for those who already struggle economically, particularly in the urban core. Recent studies from ProPublica and other sources have shown that debt-collection lawsuits in Missouri have been filed, and therefore judgments obtained, disproportionately in communities with high proportions of people of color.
In his letter to the Commission, Koster outlined three proposed amendments to Missouri’s rules of civil court procedure aimed at curbing abusive litigation practices:
- Require debt collectors to produce documentary proof at the outset of litigation establishing their right to pursue collection of the debt in question. This would help prevent invalid lawsuits.
- Preclude debt buyers from manipulating court procedures with stalling tactics in which they repeatedly request consumers to appear in court hoping to obtain a default judgment the first time the consumer misses a court date. This tactic permits debt collectors to recover on debt without presenting evidence to the court or allowing the targeted consumer to challenge that evidence. The proposed change would protect consumers by limiting the circumstances in which a default judgment could be granted.
- Strengthen the proof needed before creditors can recover for attorneys’ fees and litigation costs by requiring that creditors’ attorneys attest that the fees sought were contractually authorized, necessary, and actually performed to recover on the debt, and that costs claimed were legitimate. This would temper unjustified and excessive awards of attorneys’ fees and litigation costs.
“These proposed changes would provide important protections for consumers from the Wild West world of debt-collection by forestalling abusive litigation practices, including frivolous litigation. I believe these reforms would also serve as an important step toward eliminating the disparate impact of debt-collection litigation on minorities who become targets of such litigation,” Koster said.
Beyond the calls for reform of the court rules, Koster also announced that his office had filed new proposed consumer protection regulations to target similar types of abuse in the industry. Specifically, those regulations would deem it unlawful to file suits on time-barred debt or to try and trick a consumer into unwittingly reaffirming a debt. Enforcement actions for violating the rules could include criminal lawsuits or civil suits brought by the Attorney General’s Office or private counsel.
“These proposed regulations would expose these types of debt-collection practices for what they truly are—unfair and deceptive,” said Koster.
Dan Glazier, Executive Director of Legal Services of Eastern Missouri, said:
“We at Legal Services of Eastern Missouri applaud the Attorney General’s recommendations to institute badly needed accountability to the practice of debt collection in the court system. For far too long, consumers, particularly low-income persons of color, have been victims of abusive and unfair debt collection practices designed to maximize debt collectors’ profits and keep those in need trapped in a cycle of poverty. These long overdue and critical court rule changes will benefit all consumers and will bring greater fairness to the practice of debt collection.”
Gregg Lombardi, Executive Director of Legal Aid of Western Missouri said:
“Zombie Debt collection agencies file thousands of cases in Missouri every year, and in virtually every one our attorneys see, they cannot prove their case in court. They get default judgment after default judgment that they don’t deserve by targeting low-income consumers who they know cannot afford to defend themselves. Then they are ruthless in collecting on those judgments.
“Legal Aid of Western Missouri applauds the actions that Attorney General Koster is announcing today. They will simply require debt buying, collection agencies to show that they have a legal right to bring their case in court before proceeding and will prevent them from getting default judgments that they don’t deserve. They are a major step forward for Missouri’s consumers.”
Missourians who believe they have been subjected to unfair debt-collection practices should contact the Attorney General’s Consumer Protection Hotline at 800-392-8222 or file a complaint online.
To view the letter and recommendations in their entirety, visit the Attorney General’s website online.