Hampden County has the highest percentage of people in Massachusetts with debt in collections — 28%, rising to a shocking 46% in communities of color. Falling incomes in the western part of the state mean our communities are being hit harder by the economic pressures facing working people.
At the Center for Social Justice at Western New England University School of Law, we see this crisis play out every day in small claims court, where families have been pushed into a financial precipice due to a single emergency, such as a medical bill or a car repair, or everyday financial realities, like high housing costs or 8% inflation. There are so many debt collection cases in our area that the Springfield Small Claims Court recently increased the number of days per week it hears debt collection cases from one to two, and just last month, from two to five.
When consumers are represented by a lawyer, like those in our Consumer Debt Initiative Lawyer for the Day program, their interests are protected. Often we are able to negotiate a reduction in the amount owed to 50% or less so consumers can get into a payment plan they can afford, or it turns out they don’t owe the alleged debt due to difficult circumstances or a favorable result at trial. .
However, more than 70% of debt collection suits end in a default judgment in favor of the debt collector without the defendant ever being present. This means that in most debt cases, consumers never have the opportunity to defend themselves, often because they did not receive notice of a court date or were unable to take time off work or child care responsibilities to go to court. When this happens, the court then automatically grants the debt collector what he is asking for. This can lead to serious consequences for individuals, including a lower credit score, reduced access to credit, and loss of rental housing or jobs.
Equally disturbing is that on any given day you may find people who were able to make it to court but don’t know their rights or don’t understand the system lined up by a debt collection attorney in the halls of the courthouses (or being virtually locked in Zoom breakout rooms) and, without the help of a lawyer, “negotiate” payment plans for the full amount claimed or simply accept judgment. The end result can exceed what one person is required to pay and can push already struggling families over the edge financially.
The long-term solutions to this debt crisis are complex and include raising the wages of working families, intentionally eradicating oppressive white supremacist systems, and funding more lawyers who can defend for free. working families.
An immediate remedy to help working families is now before the Massachusetts legislature. The Equity in Debt Collections Act (House Bill 4749 and Senate Bill 2858) would, among other things:
- Reduce the amount of interest paid on old debts from a national high of 12% to 6%;
- Increase the amount of unseizable wages per week to $926.25; and
- Make it clear that no one in the Commonwealth will be imprisoned for non-payment of consumer debt.
The debt crisis does not always receive the attention it deserves despite its astronomical impact on our community. Many working families are often ashamed of being in debt and reluctant to talk about it. The debt crisis, however, is not driven by overspending. It comes from hard-working families who borrow for necessities because wages have not risen with inflation and unforeseen medical bills and high education costs can have unmanageable financial consequences.
Massachusetts lawmakers should act now to pass the Debt Collection Fairness Act (to give working families relief and protection from the debt crisis.
Ariel Clemmer is director of the Center for Social Justice at Western New England University School of Law, which operates the Consumer Debt Initiative Lawyer for the Day program, funded by Massachusetts Mutual Life Insurance Co., and Sudha Setty is dean and professor of law at Western New England University School of Law. To learn more about the Center for Social Justice or to register as a volunteer advocate, visit https://bit.ly/WNE_CSJ.