Tuesday, July 13, 2010

FTC Seeks Reform of Consumer Debt Lawsuits

Automated litigation software that allows law firms to file thousands of consumer debt cases annually is coming under court and FTC scrutiny, according to an article titled "Automated Debt-Collection Lawsuits Engulf Courts," published in The New York Times on July 12, 2010.

The article cites a Woodbury, N.Y., law firm, that files about 80,000 debt collection lawsuits annually with only 14 staff attorneys.

According to a July 12, 2010 FTC press release, the Commission’s principal recommendations in regard to consumer debt litigation are:

1. States should consider adopting measures to make it more likely that consumers will defend themselves in litigation, decreasing the prevalence of default judgments.

2. States should require collectors to include more information about the alleged debt in their complaints.

3. States should take steps to make it less likely that collectors will sue on debt on which the statute of limitations has run.

4. Federal and state laws should be changed to prevent the freezing of a specified amount in a bank account including funds exempt from garnishment.

The National Association of Consumer Advocates, a nationwide organization of more than 1500 law firm and debt counseling members who represent consumers, has been working to educate consumers on their many rights when facing bankruptcy or mortgage foreclosures.

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