Seeking Legal Counsel for Predatory Debt Collection
Most Americans sued over debt do not have the financial means necessary to retain a lawyer. They often lose cases by default by failing to respond to the suit (NYTimes). Since the unauthorized practice of law is prohibited across the United States, only lawyers are allowed to provide counsel for debtors seeking legal advice (Northeast Journal of Legal Studies). This leaves financially insecure debtors with few options besides incurring costly legal fees. When Bronx Pentecostal minister John Udo-Okon recognized that many of his congregants who struggle with debt are unsure of what legal action to take, he felt compelled to help them.
On January 25, Rev. Udo-Okon filed a lawsuit alongside the American Justice Movement, a campaign launched by financial education nonprofit Upsolve and supported by the National Association for the Advancement of Colored People and the National Center for Access to Justice. Their mission is to create opportunities for lay professionals like social workers and community organizers to provide low-income individuals with free legal advice (Reuters).
• Donate to Upsolve, an organization that helps low-income Americans file for bankruptcy.
• Sign up to join the American Justice Movement, launched by Upsolve “to empower low-income families to get free, safe, and accountable legal advice from trained frontline professionals” (American Justice Movement).
• Support Debt Collective – a debtor’s union working to cancel debt – by donating, becoming a member, joining the mailing list to stay informed, and/or volunteering.
Debt collectors are notorious for using unlawful tactics for intimidation, and people unaware of their rights may fall victim to them. Many people are unaware of how to successfully dispute or negotiate with debt collectors without legal counsel because of unfamiliar terms and loopholes. For example, states have differing statutes of limitations for debt, or “the maximum amount of time that parties involved in a dispute have to initiate legal proceedings from the date of an alleged offense”(Investopedia). Without sufficient knowledge or legal counsel, debtors may make unnecessary payments to debt collectors (Credit).
Many debt lawsuits end in default judgments due to a lack of responses from debtors. From 2010 to 2019, less than 10% of defendants had counsel for debt collection lawsuits (Pew Charitable Trusts). Default judgments impose hefty costs on consumers because courts often order them to pay accrued interest in addition to significant court fees. Available data suggests that in the past decade, courts have resolved more than 70% of debt collection lawsuits with default judgments (Pew Charitable Trusts). Additional consequences could range from seizure of personal property to incarceration. Debt endangers long-term financial security, especially for people of color who face additional barriers. “Black, Latinx households and households of Other or multiple races are more likely than White households to owe payday loans, credit card debt and installment credits, mainly car and student loans, according to Federal Reserve data on household finances” (Forbes). While white households who acquire student loan debt may achieve financial security post-graduation by earning a high-paying job, people of color may face workplace discrimination that bars them from earning as much as their white counterparts with similar credentials.
It is vitally important that low-income individuals get the help they need when trying to respond to debt collection actions. Black Americans are more likely to face these actions, and they’re more likely to have to do so without being able to call on a lawyer. The rules surrounding the practice of law should make it easier, not harder, to redress this problem by ensuring access to high quality legal help for those who need it.”
Janette Wallace, NAACP General Counsel
After experiencing more severe financial struggles, low-income people are faced with yet another expense: paying for a lawyer. Laws barring people from offering free legal advice serve as another barrier for low-income communities of color to avoid further financial turmoil.
Last month, Judge Crotty published a 33-page opinion ruling in favor of Upsolve in the Southern District of New York. This ruling allows Reverend John Udo-Okon and Upsolve to implement a justice advocacy program in accordance with New York’s laws regarding practicing law without a license. They’re now recruiting justice advocates to provide “free legal advice to members of your community who have been sued for their debt (AJM). The program is the initial step toward low-income people building financial security.
While the American Justice Movement fights for debtors to have access to legal knowledge, others are working to abolish existing debts entirely. They’re pushing for a debt jubilee “when a country cancels debt and clears it from the public record” (Lexington Law).
The Debt Collective, the nation’s first debtor union and a product of the Occupy Wall Street movement, created the Rolling Jubilee Project. The activists behind the project abolished $32 million in debt from borrowers in the United States (Debt Collective). Rolling Jubilee takes advantage of the secondary debt market, which allows buyers (typically outside companies) to buy debt in anonymous bundles at little cost (Nolo). Unlike predatory financial institutions, Rolling Jubilee abolishes the debt they purchase instead of attempting to collect payment from the debtor to make a profit. Supporting movements like the Rolling Jubilee Project gets to the root of the debt collection issue.
KEY TAKEAWAYS • An inability to access free legal advice disproportionately affects communities of color.
• Communities of color suffer from greater consumer debt than white households, preventing them from building generational wealth.
• The ruling in favor of Upsolve in the Southern District of New York is a momentous step toward making the justice system more equitable.