Junk Debt Buyers in the City

“Our study reveals that in 99.0% of applicable cases reviewed, debt buyers submitted facially invalid evidence in support of applications for default judgments. 

As a result, it is impossible to tell how many of the 320,000 debt collection lawsuits filed annually have merit. We can only speculate as to the extent to which debt buyers are using the courts as an avenue to engage in unscrupulous, and unlawful, debt collection practices.

Nevertheless, the debt buyers’ consistent failure to provide relevant evidence in support of their claims suggests that they do not possess such evidence.

Furthermore, anecdotal evidence suggests that where defendants appear and, using the discovery process, demand that plaintiffs produce evidence of their claims, plaintiffs often voluntarily discontinue an action. In essence, debt buyers initiate litigation on the presumption that they will prevail as a result of the defendant’s default.

Given the incredibly high default rate, such an assessment is, far more often than not, correct. Where the defendant appears and the plaintiff is forced to prove its case, it often chooses not to and instead discontinues the action.

If it is assumed that plaintiffs could not, if forced to do so, substantiate their claims in just 50% of the cases where a plaintiff failed to proffer admissible evidence in support of an application for a default judgment, it would call into serious question the underlying legitimacy of a significant percentage of all consumer credit cases filed in the Civil Court.”

“Debt Weight: The Consumer Credit Crisis in New York City and its Impact on the Working Poor” a report by the Community Development Project, November 2007