CONSUMER DEBTOR RIGHTS

Transcription

1 CONSUMER DEBTOR RIGHTS Shay M. Farley, JD Legal Director, Alabama Appleseed Huntsville Bar Association - Last Chance CLE December 12, 2014 Alabama Appleseed Reformed lawyers dedicated to reshaping policy to protect marginalized and vulnerable Alabamians. Seeds of hope Branches of opportunity Cooling shade of justice Majestic arc toward equality Sustain our mission. Ensure our future. 1

2 Barriers to Justice in Debt Litigation 1) Lack of representation 2) Evidentiary requirements for default 3) Low exemption limits 4) Ambiguity in SOL for credit card actions 5) Pre- and post-judgment interest awards 6) Jailing for inability to pay LACK OF REPRESENTATION & Its Impact 2

3 High Percentage of Pro Se Defendants Statewide ( ) District Court Small Claims Pro Se 77% Attorney 23% Pro Se 86% Attorney 14% Source: AL Access to Justice Commission, based on AOC data Impact 3

4 WHERE S THE PROOF? 4

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6 DEFAULT JUDGMENTS Evidentiary Requirements & Judicial Authority Appleseed s Research (Summer 2013) Venue: Jeff. Co. Small Claims & District Courts Scope: 1) Debt buyers (e.g. Midland, Portfolio, LVNV) 2) Filed in 2012 & disposed of by July 16, 2013 Sample Size: 1482 cases 6

7 Jeff. Co. Debt Buyer DC & SM cases n=1482 Pro Se 91.7% (1344) Attorney 8.3% (138) 600 Counsel Affects Outcome Default Consent Trial for P Trial for D Dism w/ P Pro Se Rep. 7

8 Inherent Authority Fear: Courts will be perceived as mere extensions of the collection agencies. De facto reversal of the burden of proof particularly inequitable given pro se volume Solution: Require creditors/debt collectors to prove they are entitled to default judgments Starts with ARCP Rule 55(b): court may conduct evidentiary hearings as it deems necessary and proper to enter judgment. Best Practices: Checklist Was service proper? Authentication of debt & Proof of ownership 1) copy of most recent account statement; 2) name of the original creditor; 3) last four digits of the original creditor s account number; 4) the date of last payment by the consumer; 5) documents evidencing the consumer s obligation to pay all damages sought; and 6) if the plaintiff is not the original creditor, evidence of ownership of the debt. 8

9 Shelby County Example ARCP rule changes (with AL Access to Justice Comm) Shelby County: Assignment cases - Proof of original account - Copies of all assignments - Affidavit of current account balance Mirrored by: Jefferson, Mobile, Montgomery and Talladega (others?) EXEMPTION LIMITS Homestead, Personal & Wage 9

10 Embarrassingly Low & Obsolete Foundation: Article X, AL Constitution Homestead = $5,000 ($10k, if married) Personal = $3,000 Last updated: 1982 Southeastern States AR, FL & TX Homestead Exemption Unlimited SC $56,150 NC & LA $35,000 TN $25,000 Federal* $21,625 GA $21,500 AL $5,000 10

11 Legislative remedy Agreement: Creditor & debtor attorneys support increase (but to what amount?) 2014 Sponsor: Sen. Cam Ward (R-Alabaster) Increase homestead to $30k ($60k, if married), without COLA Personal and wage exemptions:?? Wages: The Pruett Effect In 2013, the Civil Court of Appeals reversed a lower court ruling, finding that the defendant can claim exempt either $1,000 in wages or $3,000 in personal property. Worldwide Asset Purchasing v. Pruett, So. 3d, 2013 WL (Ala. Civ. App. 2013) 11

12 STATUTE OF LIMITATIONS Ambiguity in Credit Card Actions Open Account vs. Account Stated 12

13 3 Year Statute of Limitations Credit Cards are Open Accounts ( ) - No concrete payment schedule, only minimum payments - Variable interest rates & balance change at anytime = part of the account remains open and undetermined Not Account Stated: (3 prong test) 1) Balanced and rendered to debtor 2) Meeting of the minds as to correctness of statement 3) Must be admission of liability by the debtor Ayers v. Cavalry SVP 1, LLC, 876 So.2d 474 (Ala. Civ. App. 2003). See also Mobile Rug & Shade Co., Inc. v. Daniel, 424 So. 2d 1332 (Ala. Civ. App., 1983) PRE- AND POST- JUDGMENT INTEREST Relationship to Payday Loans 13

14 Contractual Fees, Not Interest : post-judgment interest accrues at same rate of interest as stated in contract, otherwise 12%. 5-18A-1, et seq: may charge & collect a maximum fee not to exceed 17.5 percent of the amount advanced. The word interest never appears in DPSA. JAILING FOR INABILITY TO PAY Contempt Orders 14

15 Supreme Court s Restrictions Prohibited by Due Process Clause unless willful failure to pay despite the ability to do so. Bearden v. Georgia, 461 U.S. 660 (1983) Requirements: 1) Notice that ability to pay is a critical issue in proceeding; 2) A form used to elicit relevant financial information; 3) Opportunity to respond to questions re: financial status; & 4) The court to make an express finding that the person has the ability to pay. Turner v. Rogers, 131 S. Ct (2011) Cleveland v. City of Montgomery SPLC & Equal Justice Under Law (2014) Mgmy Municipal Court will provide an attorney to all Ds Use Affidavit of Substantial Hardship, a form already used in state court, to determine whether a person is indigent Indigent = 125% of the federal poverty level less than $25,000 a year for a family of three Indigent defendants: choice of paying $25 a month or performing community service until the debt is paid People performing community service will receive at least a $10 credit for each hour of community service performed 15

16 Questions? Shay M. Farley, JD Legal Director, Alabama Appleseed o) c)