Consumers face long odds battling debt collectors in local courts

But the day he showed up, the debt collection attorney, without his input, persuaded the judge to delay his case. “I’m in a spiral right now,’’ Keys said moments later. “I don’t know what’s going on.”

Keys is among the tens of thousands of metro Atlanta residents who get dragged into small-claims courts over debts. But the system, set up to help neighbors resolve disputes, essentially stacks the deck against consumers like Keys, an Atlanta Journal-Constitution examination found.

Debt collectors buy up thousands of cases and inundate the courts with lawsuits for any debt of $15,000 or less, turning the courts into debt collection mills. They face off with consumers who can’t afford to hire attorneys and are often overwhelmed by the process.

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Swamped by the caseloads, the courts cycle through what attorneys refer to as “rocket dockets.” The presiding magistrates handle case after case in a matter of minutes.

Were consumers properly served with court papers? Is there evidence tying them to the debt? Do they recognize the name of the creditor they supposedly owe money to? Is the debt too old to collect? Have illegal fees been tacked on?

Pinched for time and constrained by court rules, even the most well-meaning magistrates may not explore these questions.

Consumers, by law, can raise objections about the evidence against them, and a technical error or missing or misplaced document could lead to a dismissal of their case. But most debtors don’t understand their rights, consumer advocates say. Some have made mistakes before they even get to court that limit any objection they might raise.

Pay up, the magistrate usually orders. Miss a payment, and your bank account or wages can be garnished.

“Mass-produced justice is not justice. Mass produced justice is injustice, as far as I’m concerned,” said David F. Addleton, a consumer law attorney in Macon-Bibb County.

The problem isn't unique to Georgia. By and large, courts across the nation are bogged down in debt collection cases, said April Kuehnhoff, a staff attorney for the National Consumer Law Center.

Even debt collectors are aware of the astounding caseloads.

“If you look at the (number of) suits out there, there’s an incredible amount of volume,’’ said Jack W. Brown III, an attorney who owns Gulf Coast Collection Bureau in Sarasota, Fla.

Both say the result is a system that can leave consumers feeling exploited.

“This isn’t any longer a mom and pop shop trying to resolve a dispute,’’ said Kuehnhoff, who analyzes consumer complaints against debt collection firms. “These are mega corporations that have sued an unrepresented consumer.”

Brown, who is also president of the board of directors for ACA International, a Washington, D.C.-based trade group for creditors and third-party debt collection agencies, said the adversarial system in the courts doesn't help anyone.

“Most consumers want to get things worked out, so you want to provide that avenue and work with the consumer to find the best resolution,” he said.

For their part, local magistrates say they take very seriously the concern that consumers – particularly the large number without an attorney — are at a great disadvantage. But magistrates say they are also bound by specific rules and procedures set by law.

"The issue I still have is I have to be impartial between the two sides," said Quenton G. Washington, who was appointed to the Fulton bench in 2016 as a part-time magistrate but stepped down in February to resume a private practice.

“And so, I can’t, though you may want to help, I can’t say this is what you need to do, ask about the chain of custody on this debt, because then, I’m their lawyer.”

And if the consumer doesn't file an answer when served with a debt claim — and often, consumers fail to answer within the time provided by law — the only evidence the court is allowed to hear is about the amount of damages, said Gwinnett Chief Magistrate Kristina Hammer Blum.

Cassandra Kirk said she saw the problems that the caseloads were posing when she was appointed chief magistrate of Fulton County in December 2014. Two years ago, Fulton started a grant-funded program that explores ways to ensure an equitable process for defendants. The program is part of the court's concentration on how to address "procedural fairness," she said.

Among the measures, the court now sends text messages to remind consumers of court dates, to try to cut down on default judgments when consumers fail to appear.

“We strive to ensure that people have the opportunity to tell their side of the story and have their stories told to a judge who listens carefully,’’ Kirk wrote in response to questions from the AJC.

‘Cattle call’

It's a Thursday night at the Gwinnett Justice and Administrative Center, the time that small claims court designates for debt disputes.

Crowds of people sit in a cafeteria that doubles as a waiting room full of tables and chairs, in anticipation of what attorneys say is “the cattle call” – when a bailiff shouts that it’s time to walk over to the individual courtrooms.

Some are there because they have a debt dispute with a neighbor or a plumber. But most of the dozens of claims scheduled to be heard this night are based on suits by third-party debt collectors.

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Finally, a shouting sheriff’s official appears: “So … go at it!” At that point, the crowd shoves through the automated glass doors that lead to the narrow hallways that lead to courtrooms.

The court session begins with a video, where the Gwinnett chief magistrate gives what is essentially a crash course on how consumers can present a defense. One point: In front of the judge, affidavits won’t be accepted as evidence. Instead, any witness, such a person who signed an affidavit, must be in court to testify.

A Gwinnett County drafting student stands in front of a magistrate with questions about an affidavit stating that he owed a debt. It had no letterhead and the signature was illegible. “That affidavit is just scribbled on a piece of paper,’’ he tells the magistrate judge.

The judge does not address the student’s questions about the affidavit.

“There is enough at this stage to issue the judgment,” the judge tells him.

The student then raises multiple objections while the attorney for the debt collector stands in silence. But the judge quickly moves to shut the student down. “I heard what you said, sir, and I have ruled.”

Just a few moments before, a mother of four walked out of the courtroom close to tears. The magistrate had told her that the debt collector would have the power to garnish her wages or pull money out of her bank account if she missed a single payment on her debt.

“They just let the attorneys go in and make a deal,’’ she told the AJC, speaking on condition she not be named. “They’re really not hearing our cases. The attorneys come talk to us and just scare us.

“We’re all just scared.”

Jamal Rosario, from Snellville, stood before the same judge and agreed to a payment plan on a 2011 GameStop debt. He had been sued by a debt buyer who later bought the debt. While in Georgia debts dating back more than six years would typically be too old to collect, the student said he did not question the legal basis of the debt. Nor did he know he could.

In Fulton, despite the efforts to have fair procedures, confusion abounds.

John William Nelson, a consumer law attorney in Duluth, describes the Fulton small claims courts as “Kafkaesque” because “nobody knows what’s going on.”

Washington, the former Fulton magistrate, said he knows the proceedings and paperwork can be confusing.

But he said he couldn’t consider responses from consumers in default for failing to respond to a claim in time, and it would be considered judicial overreach to halt a case in which the defendant informs the court they missed the deadline to respond because they were sick.

“I can’t do anything,’’ Washington said. “We cannot go forward.”

Similarly, state law dictates what a magistrate can do in Gwinnett County, Blum wrote in response to questions from the AJC. Inability to pay, she noted, is not a legal defense.

Flimsy evidence

Companies that flood the courts with cases are in the business of buying uncollected receivables — or debt — for pennies on the dollar.

Encore Capital Group – one of the nation's largest debt buyers – reported in 2018 that it paid just over $1 billion for $8 billion worth of debt deemed uncollectible. That's 13 cents for every dollar of debt.

Those firms don’t expect to collect on all the debts. If they receive judgments on a small number, profits can be considerable. They rely on the economies of scale to minimize their costs of trying to collect, said Cliff Dorsen, a consumer law attorney in Tucker.

“What’s good for their business model is to file as many lawsuits as they possibly can and extend as little resources as possible on each individual case,” he said. “Because not all cases are ultimately collectible, it is more profitable to put out as many as they can.”

The firms file in small claims court because it is the cheapest and fastest way to secure court judgments. It’s also no secret that even debts based on flimsy affidavits or faulty evidence might slide through.

“The judges will look at this affidavit and they will not read it in detail,’’ said Addleton, the Macon-Bibb County attorney. “They do not have time to read them. They will rubber stamp their judgments based on these affidavits.”

Some affidavits and lawsuits have been churned out by those with little knowledge of the underlying debts. At an Atlanta law firm that represented debt buyers, one attorney would sign off on about 1,300 cases a week, including ones where the debts were too old, had already been paid or that named the wrong person, the Consumer Financial Protection Bureau alleged in a 2014 lawsuit. The firm, Fred J. Hanna & Associates, agreed in 2015 to pay $3.1 million to settle and to stop filing suits without proof, though it admitted no wrongdoing.

Late last year, one of the nation's largest debt buyers, Encore Capital and its subsidiaries agreed to pay more than $6 million in a settlement with the attorneys general of 42 states, including Georgia, after it was accused of robo-signing affidavits of debt. The settlement also required that affidavits be hand-signed and based on the signer's personal knowledge of account records. In 2015, Encore had agreed to a $52 million settlement after the CFPB said the company filed hundreds of thousands of lawsuits against consumers, often with no account-level documentation of the debt.

The debt buyer later said that issues raised in the settlements had not been “in the company’s practice for nearly 10 years.”

Such egregious behavior may not be as common now as a few years ago, said Nelson, the Duluth attorney who has represented consumers in lawsuits involving such practices, "but I wouldn't say it's solved. I'd be dubious to say that (collections attorneys) are really reviewing the files and the records."

Sabrina Parker, who defends more than two dozen Georgia consumers in small-claims courts each month, said she sees widespread examples of faulty evidence.

“A lot are hit or miss,” said Parker, who has offices in Peachtree Corners. “In most cases, they just send the last statement, which may not show any offset of payments that have been made by the debtor, but there’s no history on the account, just a blank sheet.”

Defendants who don’t have attorneys to challenge affidavits and demand underlying documents can find their cases cut off before they even get in the courtroom.

The courts have a standing rule that defendants meet up with the opposition in the hallway before a hearing. The goal is to spur a resolution. But consumer advocates say these “unsupervised negotiations” don’t ensure buy-in. Instead, they can be an avenue to pressure consumers confused and intimidated by the court process.

Key’s appearance in Fulton is a good example.

Court documents the collection agency submitted showed Keys owed $4,110. However, when he met with the representative of the collection agency outside the courtroom, Keys said he was shown no documents to prove that he owed the money. And he said he had records showing he was being charged an excessive amount of interest, fees and penalties.

“If you give me a reasonable amount of money, I’ll settle,” Keys said.

The creditor’s representative told Keys he was not authorized to agree to a lesser amount.

“I don’t think that’s correct,” Keys later told the AJC. “We’re still in dispute here.”

“That’s when I knew I needed to see a judge,” he said. “I just need somebody to hear what it is I can pay.”

He never got to see her on that day.

Moments after the judge walked into the courtroom, the representative for the debt collector leaned over the hand rail of her courtroom to catch her attention. With a cell phone in hand, he hollered to the magistrate that the two parties were close to reaching an agreement and that she needed to reset the hearing for next month.

She signed papers to reset it, and Keys lost has his chance to make his case for an amount not too far from the amount his creditor said he owed. Instead, he’d have to return to court May 1.

“He wasn’t being a straight shooter with me,” Keys said.

Atlanta-based debt collections law firm Aldridge Pite Haan, which represents the creditor, did not respond to AJC requests for comment.

In the dark about data

In hopes of examining activity at small-claims courts, The Atlanta Journal-Constitution asked magistrate courts in several Metro Atlanta counties for caseload data, including the number of cases, how many resulted in default judgments, and the names of the top 10 filers. But none of the courts could provide details — not even the number of cases filed over the last three years.

Georgia courts are not subject to the state’s Open Records Act.

The Judicial Council of Georgia/Administrative Offices of the Courts did provide a count of the categories of cases for magistrate courts in the metro area, based on caseload data magistrate courts report to the council. That data showed that the courts handled 270,000 civil cases in 2017, the latest year for which data was available. Debt collection cases make up a substantial portion of the civil cases, court officials told the AJC.