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New Report: Sketchy Lawsuits Give Debt Buyers Easy Wins in Oregon With No Documentation Required

Thursday, April 12, 2018
Ezekiel Gorrocino
Lisa Stifler

Oregonians Suffer Liens and Wage Garnishment for Unproven Debts

DURHAM, N.C. – Debt buyers are clogging Oregon’s court system with lawsuits often based on sworn statements that the debts are owed, and with no requirement for backup documentation. A new research report by the Center for Responsible Lending (CRL) analyzes court records and complaints to the Consumer Financial Protection Bureau (CFPB) and finds that a system tilted in favor of debt buyers puts Oregonians on the hook for $18 million per year in judgments for likely unproven debts. Oregon law makes it easy for debt buyers to obtain property liens and garnish wages by up to 25% of a person’s paycheck.

The new report, Undue Burden: The Impact of Abusive Debt Collection Practices in Oregon, finds that Oregonians file more complaints about debt collection practices to the CFPB than any other category but mortgages. The most common complaint was “debt was not mine,” and complaints that the amount was wrong or the debt was already paid were also common. Debt collection was the most frequent complaint category among military servicemembers.

“These complaints are not surprising considering that the debt buyers have their lawsuit factory assembly lines refined and ratcheted up to high speeds,” said CRL Policy Associate Ezekiel Gorrocino. “It is unconscionable that blameless Oregonians could be forced to pay debts they may not owe to the point of frequently having their wages garnished. Obviously, debt buyers should have to show that the debts they are suing for are real and that they’ve named the right person in the lawsuit. Anything less you really can’t call justice.”

Key report findings:

  • Oregonians were likely saddled with $54 million in judgments between 2014 and 2016 for debts that likely lack sufficient documentation to prove their case in court. The Federal Trade Commission found that at least 88% of accounts purchased by debt buyers lack necessary documentation. Based on the FTC’s data and CRL’s estimates of the number of cases the end in a judgment in favor of the debt buyer, CRL estimates that Oregonians owe as much as $54 million or roughly $18 million per year.
  • In the past five years, more than 75,000 cases were filed in Oregon by just six debt buyers, representing close to 25% of all the civil suits filed in the state’s circuit courts.
  • In the cases reviewed, no consumer won a case against a debt buyer, and only one consumer even had an attorney. Debt buyers won almost half of the lawsuits without having to prove their cases.

While Oregon recently passed legislation requiring debt buyers to include additional information in the initial court filing and to possess business records that establish the nature and amount of the debt, the new law does not require debt buyers to provide those "proof of debt" documents to the court.

“Oregon and other states that don’t adequately protect consumers from the severe financial harm caused by wrongful debt buyer lawsuits should pass ‘proof of debt’ statutes,” said CRL Deputy Director for State Policy Lisa Stifler. “As it is, the system is rigged in favor of big firms who have perfected a money-making machine that relies on buying spreadsheets on the cheap with inaccurate or missing information and spinning them into easy wins in court. Requiring proof is an easy fix, and it is only fair. People are significantly harmed when this large-scale abuse is allowed to go on.”

Multiple reports in other states have found that most debt buyer lawsuits are also uncontested there, resulting in default judgments for people who don’t have the resources to defend themselves. A New York study found that none of the default judgments filed in the report’s sample complied with state law, but that judgments were still awarded, indicating wide leeway in court for debt buyers. A previous CRL study in Colorado found that 70% of debt buyer cases resulted in default judgments, and 38% resulted in wage garnishments.

For more information, or to arrange an interview with a CRL spokesperson, please contact Carol Hammerstein, carol.hammerstein@responsiblelending.org.