Debt Collection Lawsuits Are Growing

The number of lawsuits over unpaid loans and credit card bills is growing in the U.S., a rent that could get worse as the coronavirus pandemic damages the economy.

Debt claims were the most common type of civil case in nine out of 12 states where 2018 data were available, according to a report released Wednesday by Pew Charitable Trusts. That’s in line with national data, where debt claims doubled over a 20-year period and made up a quarter of all civil cases as of 2013, the most recent year available.

Consumers rarely have legal help in such cases, and most of the lawsuits end without any consideration of the facts in the complaints, researchers found.

The report sheds light on an issue that has gotten more attention amid the coronavirus crisis, as debt collectors are technically free to seize federal stimulus payments meant to help Americans pay rent and buy groceries during the pandemic. With millions of Americans losing their jobs, the growth of debt collection cases is likely to continue.

Pew reviewed annual statistical reports in 50 states and found that 38 of them, including Pennsylvania, don’t track and publicly report their debt collection caseload, Rickard said. Of the 12 states that did, nine identified debt collection cases as the most common type of civil case. That was consistent with national data from 2013, the most recent year available, showing debt collection cases were the most common and made up 24% of all civil cases. Debt claims were more than 12% of civil cases in 1993.

Research on debt collection lawsuits from 2010 to 2019 showed that less than 10% of defendants had lawyers in such cases, compared with almost all plaintiffs. Over the last decade, courts have resolved more than 70% of debt collection lawsuits with “default judgments,” in which judgments are issued when defendants don’t show up to court or respond to the suit.