By Alexa Rosenbloom, Matt Brooks, Ariel Clemmer, and Ericka Lezcano
Via Massachusetts Lawyers Weekly
In their commentary in the Jan. 30 issue, “Time to bring Small Claims Court into 21st century,” debt collection attorneys Jeffrey Schreiber and David Howard argue for making it easier to enter default judgments in small claims proceedings. They urge consumer lawyers, among others, to “implore” the Trial Court to make this change.
We, consumer lawyers, shall do no such thing. Schreiber and Howard base their arguments on a series of faulty premises and misguided assumptions. Their proposed reforms would further line their pockets at the expense of poor, vulnerable consumers who already are disadvantaged by their lack of meaningful access to counsel and knowledge of the legal process.
We implore the Trial Court, instead of adopting their proposals, to adopt currently proposed amendments to the small claims rules that would help ensure that no person in Massachusetts is ordered to pay a debt without a judicial determination of their ability to pay from non-exempt sources of income.
First, it is worth examining why Howard and Schreiber likely chose to write their article. They assert that “valuable time is wasted by requiring all parties to appear at a small claims trial.” It seems likely that they specifically mean that their valuable time, resources and profits are wasted by requiring that they appear in court.
Collection firms generate income by filing cases in volume. They generally work on a contingency fee basis and absorb all costs associated with court appearances. Firms representing large national creditors are hired to collect debts on a statewide basis.
The setback for collection firms is that they don’t have enough attorneys to cover all the hearings they may have on the docket. In order to alleviate this issue, firms must hire coverage counsel to attend hearings for them throughout the state.
The cost to collection firms in scheduling coverage is two-fold. For one, the firm has to pay someone to manage the court calendar and coordinate coverage for every hearing. Second, the firm must pay for each appearance; coverage fees typically range from $35 to $75 per case.
Collection firms are required to quickly turn placement accounts into judgments. In small claims, that means that arranging for coverage is a necessity to stay in business. You can’t secure a judgment if you are not there.
Howard and Schreiber estimate that 90 percent of defendants do not appear at their scheduled hearings. Is it a coincidence that their proposed rule changes will eliminate significant costs on 90 percent of their case filings? Perhaps the more likely motivation than to “simplify the administration of justice” is to make it easier for collection firms to add to their profit margins.
In defense of their misguided proposals, Schreiber and Howard call the basic purpose of our justice system — affording every individual their day in court — obsolete, again citing the failure of some defendants in small claims actions to appear. They seem to assume that the defendants who do not appear make intentional, informed decisions not to show up in court. This assumption is incorrect.
Service in Small Claims Court is only by first-class mail at an address supplied by the creditor. Often these addresses are woefully out of date, yet no proof of receipt is required, and courts will enter default judgments unless the letter is returned.
In 2006, The Boston Globe put this system to the test and discovered just how many misaddressed letters are never returned: Of 100 letters sent to the same person at incorrect addresses across the state, just 52 came back marked “return to sender” by the post office; the other 48 simply went missing.
Moreover, the other New England states that Schreiber and Howard tout as models for a better small claims process have more robust service requirements. For example, in Vermont, if a defendant does not file an answer within 30 days from service by first-class mail, the plaintiff must have the summons and complaint served personally by sheriff or other authorized person.
Even setting aside the service issues in small claims, we should not be so casual in calling the concept of the “day in court” obsolete for even one individual, let alone tens of thousands of them. According to the 2019 Annual Report on the State of the Massachusetts Court System, small claims make up over 80,000 of the cases filed in the Massachusetts court system. That is 30 percent of what the court system classifies as civil matters.
There are more small claims cases filed every year by far than there are “regular” civil cases. Indeed, small claims make up the largest single civil case category in our court system. The small claims docket is bigger than the probate and domestic relations dockets combined. It is about twice the size of the summary process or restraining order dockets.
When individuals — and in particular, low-income individuals — experience the Massachusetts court system, they are very likely to experience it via a small claims case. We should make sure that what they experience is a process aimed at justice, not simply efficiency.
When consumers do get their day in Small Claims Court, the numbers show that justice is on their side. For example, Greater Boston Legal Services has handled more than 1,000 debt collection matters since 2019, the vast majority of them in Small Claims Court. Of those cases, only 10 percent resulted in a judgment for a creditor, often in a reduced amount. In contrast, 59 percent resulted in judgments for small claims defendants or dismissals with prejudice where plaintiffs were found to be entitled to recover nothing.
Other legal aid and clinical programs that represent defendants in these debt collection cases have very similar, favorable outcomes.
Schreiber and Howard do get one thing right: Small Claims Courts have indeed completely transformed in the last few decades, and they need reform. However, reform should be focused on getting more consumers to come and have their day in court.
Small claims sessions were established, as one law review author put it in 1952, “primarily for the litigant with modest means who is inexperienced with legal matters.” Yet, in recent years, they have transformed into what the Massachusetts Appleseed Center for Law & Justice recently called “debt collection machines,” with nine debt buyers — often represented by Schreiber and Howard’s firm — dominating the docket.
In these lopsided sessions, the plaintiffs (creditors) always have attorneys while the defendants (consumers) have legal representation in less than 10 percent of cases. Further exacerbating this resource and access to justice gap, the defendants are, as noted by former Trial Court Chief Justice Paula Carey, disproportionately “vulnerable members of marginalized communities, including the poor, disabled, people of color, and persons with limited English proficiency.”
Moreover, widespread abuses by debt buyers’ attorneys are well-documented in small claims sessions. In 2006, a Boston Globe Spotlight Team series aptly named “Debtors Hell” concluded that “debt collectors have a lopsided advantage, debtors are often treated shabbily by collectors and the courts, and consumers can quickly find themselves in a life-upending financial crisis.”
We wish we could say that things have changed dramatically in the last 17 years, and while we certainly encounter some very good clerks and upstanding creditors’ counsel, individual court users are overall not treated well in Small Claims Court.
Despite some efforts from the Trial Court and even a superintendence action brought by Northeast Legal Aid in 2017 against district courts in the northeast part of the state for rubber-stamping agreements for judgment without assessing debtors’ ability to pay, we have witnessed a lack of consistency in compliance with the existing small claims rules and have yet to see significant systemic reform of the rules to address problems inherent in such a lopsided system.
In response to the issues raised in the superintendence action and a result of a working group of consumer and creditor advocates alike, in February 2021, the Trial Court sent out notice seeking comments on a proposal to amend certain provisions of the Uniform Small Claims Rules in “an effort to make the Rules clearer and more readily navigable[.]” Members of our respective organizations submitted comments. While we applauded the major provisions of the proposed rules, including doing away with automatic payment orders and firming up payment review procedures, we also requested additional reforms, such as requiring service via more than just first-class mail. We also asked what efforts the court would undertake to ensure that any changes to the current rules will be followed.
We know the Trial Court has been pressed with other matters during the pandemic, but it is critical that it act expeditiously to implement the proposed new rules, which are long overdue, and also move away from service by first-class mail. By implementing the proposed rule amendments, developing related training for clerks who oversee small claims sessions, and improving service of process, the Trial Court can ensure that consumers actually get to make a choice about whether to appear in court and that there is uniform access to justice in small claims sessions across the commonwealth.
This should be the Trial Court’s goal rather than making things cheaper and easier.
Matt Brooks is a consumer attorney at Greater Boston Legal Services. Alexa Rosenbloom is an attorney and clinical instructor in the Consumer Protection Clinic of the Legal Services Center of Harvard Law School. Ariel Clemmer is the director of the Center for Social Justice at Western New England University School of Law. Ericka Lezcano is a consumer attorney at South Coastal Counties Legal Services.