After Notice and a Hearing -- One Out of Two Ain't Bad?

Wow. I missed this one last week. New York Attorney General Andrew Cuomo has brought civil and criminal charges against lawyers and process servers who were abusing the debt collection system. From the New York Times article:

According to a lawsuit filed on Tuesday in New York Supreme Court in Buffalo, lawyers and debt collectors obtained more than 101,000 court orders that were improperly issued, allowing them to seize, on average, $5,474 from each consumer.

The lawsuit asserts that consumers were never properly notified and were not given a chance to defend themselves in court; creditors won default judgments. The total amount of money seized exceeded $500 million, according to the attorney general’s office.

The cornerstones of due process are notice and a hearing. It sounds like these consumers were only getting half of that, and without notice that it is going to occur, the hearing does not do much good. From the press release, it sounds like the problem was with the process servers who are alleged to have knowingly failed to serve process. After serving process, the process server files an affidavit swearing that it was done. A false affidavit is akin to perjury, hence the criminal charges against some participants.

Hat tip to Brian Wolfman and Jeff Sovern over at the Consumer Law & Policy Blog for pointing the way to the story.

Comments

[David Fuller]

I've run across countless sewer service cases in less than a year of debtor practice. What is paradoxical about these debt collectors is that they will hound my clients to death, call them at night, show up at work, talk to the neighbors, and even track down relatives in two cases; but when that same debt collector decides to sue, somehow the client doesn't get the complaint. They will even threaten to sue over the phone, but then sewer serve the complaint.

In one case I was able to use their lack of service and perjured affidavit of service to get the attorney-debt collector to back off of an adversary proceeding. Other than that, it's like pulling teeth to get a client to pursue these cases - which is part of the problem - because they are so broke and worn out that all they want is the 7 discharge.

[Patches]

I have seen a lawsuit all drawn up, sent to the client but never filed! Not to "one-up" but just to say there is all kinds of funk out there. More than I have seen in 15 years.. I don't know whats worse? Not being served a lawsuit when one is filed or being served a lawsuit when one hasn't been filed? I suspect the former by a nose (here in Texas anyway, as credit card judgments mean very little).

[David Fuller]

Yeah, I've had the same thing. Those seem to be the creditors that try to cause the most trouble once you file, send nasty letters about 523, try to violate the stay, etc.

[Linden]

They sewer serve the complaint, but somehow always manage to find the debtor for the wage garnishment, don't they?

I do both debt defense work and bankruptcy, and I'm finding there's not a lot of overlap between the two groups of clients. Debt defense is for people who don't need BK -- they might be sued on one debt, but otherwise are in decent financial shape. BK people are too far in the hole to make debt defense practical. When I see a client who has more than one judgment pending, with other outstanding debts just waiting to be sued on lined up behind, may as well do a Ch 7. Cheaper, too.

[Patches]

Had a 523 complaint from a cc creditor in a 13 not too long ago. I had never seen one in a 13 before. Instead of wasting time and money fighting it we agreed to pay it without interest as an unsecured claim. It was a 100% plan anyway, hello! I was all "what the heck?". I mean we could have won it with a fight but it would have cost the debtor more with no real expectation to extract attorneys fees from the filing creditor, the way our judge rules anyway. I asked if he actually knew it was a 13 he was filing a complaint in. Apparently he did. Their Attorneys fees were stipulated out of the claim and the parties bore their own costs.

[Patches]

I like it when they violate the stay, I then get to work up contempt actions if its bad enough.... Can you say Bonus check? More if we have to execute and send a the Marshals, although I hate going to the Marshals office with stuff like that (they tend to be a little cranky). I have since made a few connections in that everyone locally anyway know at least one of my family members(in a good way).