Why the Courts are Currently an ARM Battleground

There was an interesting article published a couple of weeks ago in The New York Times detailing the rising trend of lawsuits filed by creditors and collection law firms looking to recover debt from consumers.

According to the article, “an estimated 96,000 consumer debt-collection cases were filed in 2009 in Alameda, Contra Costa and San Francisco Counties alone, up from about 53,665 in 2007.” The article focuses on a coordinated response growing in the Bay Area to combat the rise of debt collection cases.

But what gets lost in the discussion is the particular legislative and regulatory environment that has led ARM companies to rely on the courts to collect debt.

With consumer complaints against debt collectors rising – for various reasons – traditional consumer contact has become a dicey proposition. Add some high-profile paradoxes embedded in the ARM regulatory structure – debt collectors can’t leave a message on an answering machine without fear of violating either the third party disclosure provision of the FDCPA or the mini-Miranda disclosure, for example – and you’ve got a recipe for a shift in collection tactics.

If a debt buyer has proof of the debt, is in a position to file suit against a consumer, and is otherwise legally allowed to do so, why shouldn’t they?

After being dodged and otherwise misled by a consumer with a valid debt, a company that has the right to sue should absolutely be allowed to do so. I think that many consumer rights advocates ignore or are unaware of some of the unintended consequences of heavily regulating the contact between debt collectors and consumers.

It’s still legal to sue for a debt owed, and when the criteria are right, that lawsuit will be filed.

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