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“I pay my debts, why can’t they?”

After a long morning at Staten Island’s Civil Courthouse, the attorney for the defense, my mentor, approached the plaintiff’s lawyer with a glint in her eye. It was my first day. “How can you keep doing this?” she demanded, How can you represent these scumbags?” The plaintiff’s attorney shrugged.

“I pay my debts. Why can’t they?”

His attitude is echoed everyday in every civil court across New York City, probably across the country. Over the last 30 years, our civil courts have transformed from trying a wide range of cases to an almost singular focus on debt settlement. On any given day, walk into a civil courthouse and check the cases to be tried. No matter when or where you look, I guarantee you’ll find every case is Bank of America, or Discover Card, or JP Morgan Chase or a third party debt buyer suing to collect on a debt owed by an individual—generally an immigrant, a person of color, someone who is very old or very young, or very sick. American civil court today is, essentially, a collection agency.

“American civil court today is, essentially, a collection agency,” writes Perrin, who interned in New York in 2017.

When we think about the justice system today, our focus is always on criminal court. Scholars, writers, and community organizers have worked tirelessly to create a national awareness that criminal cases are more complicated than they have traditionally been represented. There is a growing national conversation about mass-incarceration, about the war on drugs and its unequal impact on communities, and about sentencing disparities. A deluge of books and documentaries, particularly “13th” have called attention to the moral dilemma of imprisonment and the flaws of our criminal justice system. But there is, apparently, no moral ambivalence for civil court and debt.

To really understand the situation defendants face in civil court today, we have to understand the history of Americans’ individual debts. Economic historians Phillip Coggan and Charles R. Geisst have noted that credit became increasingly relevant to American life during the industrial revolution, as urbanization, industrialization, and the mechanization of agriculture fundamentally transformed every aspect of society and created a greater demand for loans. This trend was further entrenched in the 1920s, as mass-production in turn led to mass-consumption, which (after a dip in the 1930s) reached its peak in the post-war boom. Although access to credit in its modern form (mortgages, consumer credit, auto loans, etc.) had become essential to participate in society, Americans were not afforded equal chances.

Racial credit discrimination after World War II meant that white families could afford to own homes, while non-white Americans were shut out of the housing market. As the second half of the 20th century unfolded, this policy promoted intergenerational wealth disparity. Women, too, were viewed as a credit risk. In the postwar world, a woman looking for support from a bank instead of a husband was suspect. Single women were much less likely to be approved for a loan than single men, and married women could only secure a loan under their husband’s name. Divorced women were seen as too economically unstable and morally unsound to be a reasonable credit risk. These policies meant that women and people of color were barred from participating in the modern economy as independent agents, and deterred women from leaving abusive husbands.

This was all supposed to change in 1974, after the Equal Credit Opportunity Act was passed. A result primarily of the women’s movement, the ECOA barred credit discrimination on the grounds of sex, race, ethnicity, country of origin, language, and religion. However, it left discrimination based on zip code open, and for years creditors avoided lending to immigrant and non-white neighborhoods. This policy, like housing discrimination, is a form of redlining, or the act of denying a loan because the applicant’s neighborhood automatically (due to prejudice) makes them a credit risk.

But In the last 15 years, redlining has reversed. The problem facing communities today isn’t a lack of loans, it’s super-saturation. Lenders have realized that it is extremely profitable to find borrowers with low credit scores and bank accounts, because the higher risk means they can charge higher interest. Unfortunately, this “reverse redlining” targets vulnerable people and communities—generally immigrants, people of color, individuals who are very old or very young, or very sick—the same demographic that is overwhelmingly represented in civil court.

The first thing you notice when you ask a defendant for details is the shame. Debt is an incredibly difficult topic for Americans. Statistically speaking, debt of all kinds—student, medical, credit card, mortgage, etc.—has ballooned over the last three decades. The average American household owes more than $7,000 in credit card debt; the average student debt is around $40,000; and at a cost of $26,000 a year for a family of four, healthcare can easily add a great deal more on top of that. At the same time, a study shows that 63% of Americans don’t have enough in the bank to cover a $500 emergency. There’s a popular headline floating around that “Americans are one paycheck away from the street.” On a societal level, debt is both everpresent and an absolute taboo. The plaintiff attorney’s question was no doubt rhetorical, but after working for the New York Legal Assistance Group (NYLAG)’s Consumer Protection branch, it’s not particularly difficult to answer.

“Why can’t defendants in civil court pay their debts? Because long-standing systems are in place to put them in debt, and keep them there. To top it all off, the civil court debt system is riddled with, if not propped up by, fraud,” writes Perrin, who interned with New York Legal Assistance Group.

Low-income New Yorkers are caught in a bind. To get a good job or access healthcare services, they often need to travel across the city. But New York wasn’t set up with them in mind. A monthly metro payment of $150 might seem like a good deal to middle class customers, but it’s a huge sacrifice for low-income New Yorkers. And anyway, transportation in their neighborhoods has historically been underdeveloped. The trains and buses run late, and there are fewer lines. The solution most people adopt is buying a car, because it’s more reliable and the money they spend turns into an asset. Unfortunately for them, their neighborhoods and low income give them bad credit. Thirty years ago, a company known as Credit Acceptance sprung up to fill the gap. Labeling themselves a “social enterprise,” Credit Acceptance made it possible for low-income Americans to afford cars for the first time. But there is a very significant catch. Credit Acceptance sells used cars, typically with over 165,000 miles and several maintenance issues (all the customer’s problem). Because their clients are a credit risk, Credit Acceptance tends to charge the state maximum for a loan—in New York’s case, 25%. Fraud and questionable practices are common. They typically lie about their customer’s job and income to make the sale legal. I worked with three clients who had purchased cars during manic episodes, and another who confessed he’d been on narcotics. In all four cases, the dealership must have been aware of their mental state but made the sale anyway. But the most important part of the contract is the stipulation that if the customer is late on one payment—just one—Credit Acceptance can repossess and resell the car. When the next customer misses their payment the car is sold again, and again, and again, and so on down the line. After a while, there can be 9 or more people paying for one car. As one of my attorney mentors put it “Credit Acceptance doesn’t sell cars. They sell debt.” Auto lenders intentionally target low-income New York neighborhoods, and they make a killing.

Credit card debt is a particularly shame-inducing way to wind up in civil court. Defendants and plaintiff’s attorneys alike seem to be under the impression that all credit card debt is avoidable, and that most people get into it because they’re greedy or bad with money. In my own experience, this is anything but true. The majority of NYLAG’s clients who wound up in court for credit card debt had done so only as a last resort, when no other option was available. A particularly difficult case I worked on involved a man who had immigrated from Pakistan to work for, of all things, a credit card company. Unfortunately, there was a delay when he needed to renew his visa, and he lost his job. Left with no assets, he began to rely on his credit card, hoping his papers would be approved soon so he could go back to work. It took 3 years for him to get his life back together, but by then his debts were high and getting higher. Unable to pay the debts, he ended up in court, where his wages could be garnished and his bank account frozen— enough to put him back on the streets. The first thing you learn about debt in civil court is that it’s a system, and no sooner do individuals and families get back on their feet than they are once again sued and lose everything. Why can’t defendants in civil court pay their debts? Because long-standing systems are in place to put them in debt, and keep them there. To top it all off, the civil court debt system is riddled with, if not propped up by, fraud.

If you dig into any case, you’re bound to find something shady. A service officer intentionally failed to notify a defendant about his case, so he never showed up to court and lost. A dealership lied about the interest rate on a car, and gave a defendant falsified documents. Multiple plaintiff’s claimed to own one defendant’s debts. A debt settlement company embezzled a defendant’s money. A “friend” convinced a recent immigrant to sign for his car, then ran off with it. The list goes on and on. With the exception of free legal services like NYLAG’s, most defendants in civil court are left defenseless, and with a limited understanding of their rights in court. Lenders and third party debt buyers want to keep the system this way, because defenseless defendants make them a lot of money. When they have defenses, the tables turn—in the Bronx alone, NYLAG saved low-income clients a total of $280,000 this summer. Unfortunately, free legal services aren’t typically available.

That being said, there are several ways to empower defendants. I was particularly impressed with the idea I helped NYLAG start. I worked with defendants in New York Civil Court to write complaints and send cases to the Department of Consumer Affairs (DCA), which keeps records of cases and has the power to investigate and force a settlement if companies or plaintiffs committed fraud or behaved illegally. This involved interviewing clients about the details of their cases, and, if anything seemed amiss, helping them submit their case to the DCA. It seems like an insurmountable task (and I had a hell of a commute) but it was high-impact work and finally gave defendants a sense of control in an otherwise frustrating, frightening experience. I worked on and submitted over 55 cases to the DCA in three months, and by the end of the summer, 5 of NYLAG’s clients had already heard back.

What happens in our civil courts matters. The systemic exploitation in civil court mirrors criminal court, and the two are intrinsically linked. Although the deck is undeniably stacked in favor of lenders and third party debt buyers, providing legal services and empowering defendants to speak out about their experience is the first step to fighting an exploitative system. It’s time to move beyond blaming the victims.


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