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Small Claims Courts: The New Debt Collectors

posted by Angie Littwin

One point from the Boston Globe story that’s particularly interesting is the role of small claims courts.  These courts are supposed to be about small-time justice, about providing a informal forum for ordinary people who can’t usually afford lawyers, about ensuring some degree of law and order for plaintiffs whose claims are of less value than the lawyers’ fees it would otherwise cost to prosecute them.  In my personal experience, I’ve seen a freelance computer programmer sue for payment for completed work and tenants sue sub-letters for non-payment of rent.  But according to the Globe, “an estimated two-thirds of small claims lawsuits are now filed by debt collectors.”  Undoubtedly, part of the attraction for debt collectors is the low filing fees.  It costs just $40 to sue someone for up to $2,000 in Massachusetts small claims court.  These companies couldn’t afford to bring so many suits for $500 or $1,000 if they had to go to district court.  But that was supposed to be the beauty of small claims system in the first place; ordinary citizens couldn’t sue each other for $500 or $1,000 either if they had to use a more expensive forum.

This raises some questions about what we want our small claims system to look like. We tend to think of small claims cases as being ordinary citizens suing other ordinary citizens about mundane, ordinary matters, like minor property damage or fender-bender auto accidents.  And in the best case scenario, they can be a forum for ordinary citizens to take on more powerful interests, as when freelance workers sue for unpaid wages.

But the Globe story shows what happens when the system is turned inside out.  Now powerful repeat players have found a cheap way to sue on debts.  These big-time players--not ordinary citizens--are using two-thirds of this judicial resource in Massachusetts.  No longer are these courts a level playing field for the ordinary citizen to seek justice.  Perhaps it is time to limit institutional players’ access to this forum before our small claims system simply becomes an arm of the collection agencies.

Comments

MGL ch. 218, § 21, currently reads:

"There shall be within the district court department and the Boston municipal court department a simple, informal and inexpensive procedure, hereinafter called the procedure, for the determination, according to the rules of substantive law, of claims in the nature of contract or tort, other than slander and libel, in which the plaintiff does not claim as debt or damages more than two thousand dollars ..."

Add the following language:

"and in which the plaintiff is either: (a) a natural person; or (b) a business (i) that is not a member of an affiliated group and that employs fewer than 10 persons or (ii) that is a member of an affiliated group and that together with all affiliates employs fewer than 10 persons"

This assumes you want to leave small claims court available for truly small business.

I don't understand. Businesses, just like ordinary citizens, couldn't afford $1000 in lawyers' fees to sue on a $500 debt. So they can go into small claims court. They use 2/3 of this judicial resource, yes, but they also pay 2/3 of the fees. It might make sense to charge them (modestly) more than individuals to get into small claims court, and it would certainly make sense to train the court's employees to be a little more helpful to defendants. Some of the anecdotes in the Globe article are horrifying -- clerks not telling severely inconvenienced debtors that they could object to a continuance proposed by an unprepared collection agency lawyer.

But "keep businesses [or debt collectors] out of small claims court" seems irrational to me. They have claims. They're small. Where else would they enforce them?

Love the blog, love the story, but I'm going to play the old-guy card. Professional domination of "amateur" small claims was an issue when I first dipped a toe into these troubled waters, back around 1968. Ask Mr. Consumer Debt, David Landers, bet he can regale you with war stories on this sort of thing from his Legal Aid days.

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