Cour Reforms Debt Collection Litigation; Target Default Judgments

New York Chief Judge Jonathan Lippen announced new reforms for the credit and collection industry’s legal process. The reforms are just part of broader strokes to reform consumer debt cases. Any change to the legal processes in debt collection have major impacts on the day to day business of the courts as tens of thousands of debt collection cases are brought every year.

The New York courts are targeting default judgments against debtors. The goal is to trim back the number of default judgments that occur without the debtor’s knowledge. Default judgments are sometimes used by unscrupulous collectors to exploit the system to target debtors. In some instances, these cases will bring cases before the courts that have been not been given due time or are in violation of the debtor’s rights.

Two collection agencies, Portfolio Recovery Associates, LLC, and Sherman Financial Group, LLC, were recently slapped with heavy penalties for two cases where they received a default judgment because an individual who failed to respond their lawsuits. Yet, the cases were deemed untimely after the fact and the two organizations paid heavy penalties, were forced to drop the debt, and cease all collection activities.

The reforms will bring greater oversight to default judgments, thus protecting debtors and preventing collection agencies from untimely lawsuits.

Collection industry insiders express concern that these reforms are too targeted; they only target collection agencies. Representatives from organizations interested in protecting legitimate collection agencies accept the change but worry that it is not a universal stroke in the legal system. They hope for a fair, and level playing field for all when it comes to collection lawsuits.

Other states are already putting similar reforms into motion. Maryland, Connecticut, California, and North Carolina already have reforms that provide greater oversight for collection lawsuits.

The reforms in New York are scheduled to come into effect this coming June 15, 2014.

About the Author:

Blair Thomas is an electronic payment expert, who loves all things finance and planning. He is also the co-founder of, the #1 chargeback insurance company that offers chargeback shield. If you would like to see what he’s up to, add him to your Google+ circle.