In recent decades, an increase in consumer debt has led to substantial growth in the debt collection industry as Americans struggled to pay down their debts. A subset of the debt collection industry, debt buyers, emerged in the wake of this growth in consumer debt. Debt buyers purchase debts from lenders and other creditors at a steep discount and then attempt to collect the debt themselves, often without the underlying documentation of the debt. With the advent and growth of debt buyers has come an increase in the use of litigation to collect debts. Because of their use of the court system to collect old debts, debt buyers frequently are able to win a court judgment against a person even if that person does not actually owe the debt.
The impacts of a court judgment can be severe—the person’s wages are frequently garnished, forcing them to pay a debt they may not owe. This report confirms that debt buyers in Oregon are misusing the court system to pursue likely undocumented debts, and Oregon borrowers are at risk of a default judgment to repay a debt they may not owe.
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.