By Morgan Sperry, J.D. ’24
Step into West Roxbury District Court on any Monday morning, and you will find the following scene: a lawyer sits at a table at the front of a courtroom, identifies himself as the attorney for most of that day’s plaintiffs, and mechanically signs settlement agreements and collects default judgments for companies who have bought debt for pennies on the dollar. Welcome to the world of small claims court. In the city of Boston today, cases brought by third-party debt buyers make up the vast majority of the small claims docket.
I arrived at law school interested in consumer protection issues, and was thrilled to get into the Consumer Protection Clinic in the fall of my 2L year. I enrolled eager to help clients defend themselves against debt collection actions and bring suits against predatory actors; in addition to both of those experiences, I have also received an eye-opening education regarding how debt buyers dominate today’s civil court dockets. My clinical instructors, Roger Bertling and Alexa Rosenbloom, estimate that in Boston debt buying cases today make up sixty percent of the civil district court docket, and as much as eighty percent of the small claims docket.
On most days, every debt buyer plaintiff is represented by the same temporary attorney. Consequently, the debt buyers’ lawyer maintains an air of authority that leads many defendants to believe he is actually an agent of the court. The attorney leverages this cloak to engage defendants before the start of the session, asking if they’d like to settle the case—on the debt buyer’s terms—before they even need to go before the clerk magistrate. This presumption of legitimacy maintained by the debt buyers’ lawyers is one of the major hurdles that I have confronted as a student attorney.
My supervisors, Roger and Alexa, strive to ensure that if there are debt buying cases being heard, there is a clinical student and supervising attorney present to offer representation to defendants. Given the volume of these cases, this means that I had the opportunity to go to court a lot. During my time in court through the clinic, I aimed to speak to every defendant (before the debt buyers’ attorney did) to inform them of the legal options they were entitled to. On trial days, I would conduct intake, assess the documents that debt buyers provided as evidence, discuss legal options with our clients, and represent individuals at trial and in settlement negotiations.
The clients I represented as a student attorney tended to share several features: most had some student loan debt but no college degree, earned about or below 200 percent of the federal poverty line, and had gone into four figures of credit card debt in order to pay for food and rent. The majority had fallen behind on payments due to an unforeseen medical or family emergency. After our clients defaulted on their debts, their credit card companies would sell the principal debt and the interest to a third-party debt buyer—like Midland Funding, LVNV Funding, or Cavalry Portfolio Services—for cents on the dollar to remove it from their balance sheets. The third-party debt buyers would then aggressively pursue our clients over the phone (in extreme cases, calling and threatening them and their family members multiple times a week) and in court by filing lawsuits. Most of our clients were sued for a number that was three to four times as much as the principal debt they had originally incurred.
Getting sued is scary, no matter who you are. For the Consumer Protection Clinic’s clients—all of whom are indigent, many of whom don’t speak English as their first language, and some of whom lack legal status in the United States—the court system is particularly disorienting. As a student attorney, I counseled clients on their legal defenses and potential options for resolution. Many debt buyers, for instance, bring suits outside the statute of limitations, or lack solid evidence regarding what (and whose) debt they have actually purchased. In court, I was frequently presented with blurry, poorly-cropped screenshots of Excel spreadsheets as evidence that a debt buyer owned our client’s credit card debt. (For more on the debt buying crisis, see this John Oliver segment.)
Despite having available affirmative defenses, almost all of the Consumer Protection Clinic’s clients stress that they “just want this to be over.” A settlement agreement—by which a defendant agrees to pay some or all of the contested amount (principal and interest) to the debt buyer—means forgoing the possibility of winning on the merits or obtaining a hardship dismissal and paying nothing at all, but it also enables defendants to leave court and get back to work or to their children. As a student advocate, I strived to ensure that our clients were educated on all of their legal options, and committed to follow their preferred course of action. Inevitably, that meant that I negotiated many settlements—even in cases that our clients likely could have won.
The most significant problem that I confronted as a student attorney was the issue of information asymmetry in settlement agreement negotiations. Most of the settlements I negotiated were on behalf of clients who qualified for a hardship dismissal: because they had limited income or disability status, or both, these defendants could not (absent a change in circumstances or income) under Massachusetts law be legally mandated to repay their debt, and a creditor would therefore usually be willing dismiss their cases without prejudice. Yet few, if any, defendants know that a hardship dismissal is available. I never encountered a client who independently requested a hardship dismissal—let alone had the requisite legal knowledge to invoke any affirmative defenses at trial. Predictably, debt buyers do not apprise defendants of their legal options when they engage them in settlement negotiations. Few clerk magistrates proactively inform defendants of hardship dismissal opportunities or affirmative defenses, either. As a result, I watched many individuals who declined our legal counsel go on to sign settlement agreements requiring them to pay principal and interest that they did not have to. As one of my clients emailed me after we negotiated a settlement whose terms required him to pay a quarter of what he’d been sued for: “I can’t imagine having to go at it alone. It’s a stressful process even with professionals at your side.”
My clinical experience made clear that policy interventions in the consumer protection—and more specifically, the debt buying—space remain urgent and critical. Having grown up in Massachusetts, I was honored to help local clients navigate and resolve the debts that keep them up at night. I was, equally, horrified to discover that the debt buying machine has taken over our state’s civil docket. Debt buyers should not be commandeering our courthouses to do their bidding. I am grateful to the Consumer Protection Clinic for the incredible opportunity and education to chip away at the systemic control that debt buyers currently leverage over defendants in civil cases, and for Roger and Alexa’s efforts to translate their expertise in this legal space into policy advocacy and meaningful change.