Minnesota Attorney General Lori Swanson called for legislation Monday that would force companies that buy bad debts to prove in court that they use reliable information when they target debtors for repayment.
Swanson contended that companies that purchase old, unpaid debts from banks and credit card companies — usually for pennies on the dollar — often obtain default court judgments against the debtors by using information that's incorrect or incomplete. She said debtors frequently don't get timely notice of court proceedings against them or don't have the resources to represent themselves in court, so judges sometimes grant the default judgments based only on summary data provided by the debt buyers.
"A debt buyer should have admissible evidence," Swanson said. "In our American court system, to win in court, you should have to prove your case in court."
Swanson is backing a bill, sponsored by the DFL chairs of the House and Senate judiciary committees, that would force all debt buyers to establish evidence of the validity and amount of the debt; that the correct debtor is being targeted; and that they properly own the debt in question.
Debt buyers can usually afford better legal representation than debtors, Swanson said. And she said many debtors don't find out about legal proceedings until it's too late — debt buyers fail to properly notify them because of old addresses, misspelled names or other unforeseen circumstances.
Sen. Ron Latz, the St. Louis Park Democrat who chairs the Senate Judiciary Committee, said while many judges already hold debt buyers to acceptable proof standards, an overburdened court system has allowed cases to fall through the cracks. Debt buyers are filing lawsuits at a heavy rate, Swanson said: One company alone, Midland Funding LLC, filed over 15,000 lawsuits against individuals in Minnesota courts since 2008.
In December, Midland settled a lawsuit with the state by agreeing to change its collection practices after Swanson's office accused it of filing unreliable court papers and carelessly targeting people for debts they didn't owe. Company employees admitted in sworn testimony that they signed up to 400 mass-produced affidavits a day — often without reading them, knowing what they contained or verifying whether they contained accurate information.
The company ultimately agreed to conform to a set of procedures in its debt collection practices that are now echoed in Swanson's legislative proposal.
Better state funding of Minnesota's court system will be a part of making sure Swanson's proposed change is thoroughly enforced, Latz said.