As part of a settlement in a class-action lawsuit, a major network of debt-collecting businesses were shut down and ordered to pay $59 million dollars to victims. After nearly six years, tens of thousands of New Yorkers who had their wages garnished or bank accounts frozen in this surreptitious debt-collection scheme have received the justice they deserve.
This settlement deals a significant blow to an industry that has fed off a recessionary rise in consumer debt in recent years, as companies bought up charged-off debt at low rates, and then sought to recover the full amount for themselves.
The suit, filed in 2009, accused debt-collectors of using a practice known as “sewer service,” where debt collectors fail to serve a notice of complaint, but file a false affidavit claiming that the notice had been properly served. People with the debt in question, unaware of the complaint, did not show up in court, which set off a legal proceeding under which the collector almost always won a default judgment.
Despite states having laws intended to prevent debt collectors from this practice, sewer service continues. Many laws in place to protect consumers have been rendered ineffective by debt collectors who find ways to manipulate the court system.
The average U.S. household with debt carries $15,355 in credit card debt and $129,579 in total debt (NerdWallet). Do you know your rights?
Other Links: Bad Debt Collectors and Their Prey