Pay to Plead: Finding Unfairness and Abusive Practices in California Debt Collection Cases

Abstract

In this Article, we report on one of the largest studies of debt collection lawsuits ever attempted. We collect, normalize, and analyze a data set of 2.2 million court records from 16 California counties, spanning eleven years (2009-2020) and representing 80 percent of the state’s population. An overwhelming majority of these cases (90 percent) conclude without the defendant’s participation, even in cases where a defendant is allegedly served with notice of the case, leading to automatic wins for creditor plaintiffs. Unsurprisingly, defendants who participate in the case experience better outcomes than those who do not. What is unusual in California, however, is that the state charges defendants a minimum of $225 to participate in the case (file an answer or general denial) regardless of the amount the plaintiff is seeking to recover in the case. For most debt collection cases, California’s answer fee represents 8 percent or more of the cost of the case. The state does have a procedure to seek a waiver of this fee, but it is complex, unfriendly, and only available to the most indigent.

Our investigation unveils the stark reality that while original creditors and debt buyers exploit state court procedures for debt recovery, defendants, often trapped by procedural complexities and exorbitant fees, remain voiceless. Filing fees act as a deterrent, discouraging active participation by defendants, which, in turn, perpetuates the vicious cycle of wealth transfer from consumers to corporate entities. This article posits that the current system not only impedes justice but allows debt collectors to engage in the commission of unfair and abusive acts and practices. Moreover, adequate protection of consumer due process and equal protection rights necessitates reform of the fee structure in place for California debt collection proceedings. We argue that state debt collection processes should be reformed to ensure that consumers can assert their rights and increase access to justice for defendants, starting with the elimination of answer fees for defendants in debt collection cases.

Keywords: acess to justice; debt collection; consumer law; due process; excessive fines; stategraft; consumer protection; predatory lending; fines and fees; empirical legal studies; courts; civil procedure