Massachusetts Toughens Rules for Small Claims Collection Lawsuits
The state's rule-making body for legal proceedings finalized changes targeted at collection lawyers that use small claims courts. The rule changes were more than three years in the making.
The Massachusetts Supreme Judicial Court announced last week that it has changed some of the rules governing the use of small claims courts. The Court said that the changes were made specifically to address the volume of debt collection cases that are filed in small claims courts.
The rules changes come on the recommendation of the Small Claims Working Group, a panel of legal experts that was convened in 2006 to “examine and improve current small claims practices.” The Working Group was created, in large part, in response to a series of articles that appeared in the Boston Globe chronicling the perceived imbalance of debtors and collection law firms in small claims courts, which allow cases with remedies of up to $2,000.
Interactive Data - Who Are You Searching For?
Social Security Search. Bankruptcy Information. Directory Assistance (EDA). Real Estate Listings. Death Index.
In a press release detailing the changes, the Supreme Judicial Court (SJC) noted that “While the rules [changes] apply to all small claims matters, there will be a major impact on debt collection cases.” The changes address many of the issues identified by the Working Group in collection cases, and four in particular: increased certainty of service, insufficiently detailed claims, increased scrutiny of default judgments, and notice to the court when a judgment is paid.
Adam Olshan, an attorney with Law Offices, Howard Lee Schiff, P.C. in Worcester, Mass., agrees that collection law firms will be affected, some more than others. “This will impact the high-volume collection law firms,” he told insideARM.
According to the new rules, creditors filing a small claim arising out of their trade or commerce or who are collecting an assigned debt must certify that they have verified the defendant’s current address in one of several specified ways. If the plaintiff fails to verify the address, the court may not enter a default judgment if the defendant later fails to appear for trial.
The changes also add increased scrutiny to default judgments that are entered. They introduce a checklist for magistrates and judges of the specific factors that the law requires to be satisfied before entering a default judgment.
Care to Comment?
(Please read our comments policy first.)
Tell us what topics you're interested in and we'll keep you posted. Enter your email address below.
Topics:
Companies:
Related Resources
News
Analysis
Publications
Research
Comments
Comment from Anonymous on August 12, 2009 at 1:58PM EST
I think that our government has lost the focus on who is in the wrong. Most of the debtors being sued are just refusing to pay and the only way to get paid is to file a judgement. Everyone is making the debt collector out to be the bad guy when the FACT is that the debtor used the money that was loaned to them and when it comes time to pay it back, they suddenly become the victim of the "big bad banks". But the banks were great when they were flaunting that Visa in a store or bar.
Comment from JN on August 13, 2009 at 9:31AM EST
I work in collections and the REAL problems in our business today is the fact that these debt buyers are allowed to keep adding interest to accounts that have already been charged off as a loss and then sold to the debt buyer. I just don't agree with this. It makes our daily jobs harder because the people who are paying, can't have the interest stopped. This is where our government needs to step in. I understand why they changed the way small claims courts are used, but the debt buying industry as a whole needs to be regulated.
Comment from DB-Admin on August 13, 2009 at 3:09PM EST
What the Globe's Spotlight articles uncovered was the less-than-arms-length relationship between the Court and the collection attorney. Another example of this conflict of interest was the relationship between NAF an one of the nation's largest debt collection law firms.
The courts should never be less than a neutral arbiter.
It is time for the collections industry to stop whining and start conducting in a legal and business-like fashion.
Any changes to the collections laws to continue to address the industry's abuses have been earn by years of unacceptable practice.
Comment from Spud on August 13, 2009 at 6:29PM EST
I couldn't agree with JN more!! We service one of the largest Debt Buyers in the nation and they REFUSE to stop the interest when a customer is paying!! This practice should be illegal. And I understand the customers frustration. Why keep paying when the balance is only going up? Then they stop paying altogether and we get the ole, "sue me then" response. This is an area that the lawmakers need to focus on. Not small claims court.
Comment from DB-Admin on August 13, 2009 at 9:29PM EST
Spud, you may have misread Mr. Lunsford's article.
The changes he relates are in the rules and guidelines of the Court in the civil proceedings within their jurisdiction.
The laws have not changed.
Many states, including Massachusetts, have statutes in place that prohibit the the charging of interest and fees that are not allowed by contract, and permit additional fees/interest/etc. ONLY by permission of the Court.
Many collectors and collection attorneys ignore these statutes and to continue to attempt to collect fees and interest to which they are not entitled.
It seems that the very laws you recommend are already being ignored by the industry.
How would YOU characterize that?
Comment from AA on October 16, 2009 at 5:05PM EST
I have over 35 years in the legal collection business. The interest regarding the third party debt can be used as a tool or incentive to help in getting the debtor to pay by stopping it if they would pay. It is all about collecting and those in the business work extremly hard to make their contingent fee. The small claims court has always been a debtor's court and only the debtor has the right to remove a default judgment and is allowed to do so as late as a year or more with little or no grounds. Since the small claims rules have always been debtor friendly I think it's outrageous that there be additional demands put on collection law firms who are already stuggling in this economy. Let's not forget who borrowed the money and spent it with little regard for repayment and the lender. This is not an easy business and the government should remember who the hell the good guys are.