Can the American Law Institute Cure the Collection Claim Crisis for Courts, Creditors, and Consumers?

Every year, state courts process millions of low-dollar but highly consequential cases that shape the lives of Americans. Debt collection, eviction, foreclosure, and child support actions have long dominated civil court dockets and case volume is on the rise. Debt collection claims have more than doubled over the past twenty years as unsecured consumer credit became more widely available. What’s troubling is that these claims are frequently uncontested, resulting in a high rate of default judgments, seizures of property, wage garnishments, and other modes of enforcement.

The American Law Institute (ALI) recently launched an ambitious project to find a cure for this crippling crisis and they seem to have the perfect “doctor” (the JD/Ph.D. kind) for the job: Stanford Law School Professor David Freeman Engstrom whose impressive CV overflows with all the right credentials and an undeniable devotion to equal access to justice. These are his goals:

The project will define the issues raised by these claims and attend to the fundamental, and often competing, process values ​​of efficiency, accuracy, and fairness that are implicated in their adjudication. It will articulate principles for procedure and case management, court administration, the use of technology, the supply of and demand for legal assistance, institutional design, and dispute prevention to help courts and policy makers charting a wise path forward.

Like any good doctor, he will need to start by reviewing the symptoms to diagnose the underlying problem, then come up with a workable cure that isn’t worse than the disease. To succeed, he will need to take a holistic approach and assemble a team with diverse perspectives to avoid a myopic point of view. For example, those who believe debt collection is a problem (it’s not) often proposes restrictions so burdensome and laden with risk that they actually push creditors to file lawsuits sooner and more often. The industry is rife with examples of well-intentioned rules (and rulings) having the unintended consequence of hurting the very people they’re meant to protect. Nobody wants this.

Debt and debt collection is not a problem. There is nothing inherently wrong about any of the debt-related claims this project plans to focus on. In fact, each of these claims arose from the most basic (and natural) element of human civilization: a promise. If society grows out of the promises we make, then its ultimate survival depends on the promises we keep. It is healthy for the law to prioritize the enforcement of promises between people as long as the law keeps the promises it makes to the people as well. The problem is not that debt-related claims dominate the dockets, for this has always been the case; the problem is that the law is no longer accessible to the people.

ALI is actively seeking Associate Reporters and Advisers to provide input on the legal and practical considerations to develop a fair and balanced set of best practices to guide institutional reform.

Author: Eliza