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In the early weeks of the coronavirus pandemic, as Bay Area courts postponed hearings to stop the spread of a new and frightening disease, the banks and debt buyers that file the bulk of lawsuits against individuals in America’s courts did something unheard of: They all but stopped suing.

The reprieve partially erased a years-long boom in lawsuits over unpaid bills in Santa Clara and San Mateo counties, where a third of all Bay Area residents live. 

But the downturn was neither universal nor long-lasting.

Many debt collectors — mostly brand name banks and the debt buyers that purchased their old, delinquent accounts for a fraction of their face value — resumed suing people even as layoffs, business closures and a spike of COVID-19 infections in late 2020 made it harder for some borrowers to pay off debt. 

At least five of the companies that dominate collections court ended up filing more lawsuits in the first year of the pandemic than in the same period a year earlier. And throughout the coronavirus crisis, creditors of all kinds have continued to seize money from the paychecks of workers in a variety of fields, from the employees of local schools and hospitals to those working for supermarkets and hotel groups.

Debt collectors in Santa Clara County and San Mateo County courts have largely rebounded from their early pandemic slump. Meanwhile, COVID-19 infections are rising once again.

“It’s not so much that they didn’t want to sue people, it’s that they didn’t want to be seen as suing people in the early days of a pandemic,” said Noah Zinner, an attorney with Bay Area Legal Aid. “Even though the financial hardship has not ended in a lot of our communities and has been exacerbated by all the unpaid rent and other bills, medical bills, whatever it may be, these same companies are showing that they have no problem with going after people aggressively now.”

The resurgence of debt collection litigation came as the pandemic economy padded some pockets while emptying others. 

Forbes magazine found that America’s billionaires added about $1.2 trillion to their collective net worth during the pandemic. More typical households saved money by pausing payments on their mortgages and student loans or dialing back discretionary spending. 

But other Americans faced a pandemic-driven recession. Unemployment soared with the onset of stay-at-home orders, hitting workers in industries like restaurants, hotels and live events the hardest. Families lost breadwinners to the virus. 

Defendants sometimes answered lawsuits with notes, many handwritten, explaining how the pandemic had made it more difficult to pay debts. Source: San Mateo County and Santa Clara County court records. Records have been redacted to protect the privacy of the defendants. (Bay City News)

One result is clear: Debt litigation during the COVID-19 pandemic compounded the financial worries of those Californians who already found it difficult to afford the Bay Area’s high cost-of-living before the crisis. The stories of hardship are myriad. A single mom relocated out of the Bay Area  to avoid homelessness; an employee at a local care home for the elderly reported living paycheck to paycheck; a machinist out of work for three months due to stay-at-home orders said he didn’t know where to turn when he received his court summons in August 2020 for a debt lawsuit. 

“I didn’t sleep for two weeks,” said Jose Gijon, the machinist. “I was staying up until two or three in the morning. I’d never been through something like this.”

The story of debt in the Bay Area is also defined by one of America’s most stark divides: the wealth gap between white Americans and Americans of other races.

A recent Urban Institute analysis found the share of adults in Santa Clara County and San Mateo County who had debt in collections was twice as high in areas where a majority of the population is a race other than white or multiracial as in predominantly white areas.

A deeper dive into the court records shows how vigorous the collection efforts have been since the pandemic began. Big Local News, a program of Stanford University’s Journalism and Democracy Initiative, analyzed more than 45,000 lawsuits filed in Santa Clara and San Mateo counties between 2017 and the first quarter of 2021, and conducted more than a dozen interviews with people sued for debt during the pandemic.

The analysis is limited to debt collection lawsuits pitting the most-frequent litigants — those companies that have filed more than 30 lawsuits in the two counties since 2017 — against individuals. The lawsuits most commonly target borrowers with credit card debt, but companies also sued people over car loans, payday loans, student loans, medical debt and bail bonds. The records also do not include small claims court cases, lawsuits filed by insurance companies or litigation between individuals or businesses.

On one side of these debt collection disputes are individual borrowers, who say they face a choice between paying debt or paying for such basic necessities as food and rent. When the companies that own their debt sue, many of these borrowers don’t know how to navigate the court system and can’t afford legal representation. 

On the other side of the lawsuits are original lenders, debt buyers and debt collectors, who see themselves as safeguarding access to credit tomorrow by making sure borrowers repay their loans today. They say court action is a last resort, used rarely and only after other methods fail.

“While we see a lot of publicity and a lot of public discussion about the hardships that consumers have faced, we don’t see nearly as much of that related to creditors,” said Mark Neeb, the CEO of ACA International, the debt collection industry’s trade association. “It’s really natural for the creditors who have old default and accounts receivable sitting out there to want to get back to normal as soon as they can.”

About this project: The demographics of debt

By Amy DiPierro
Bay City News Foundation

Big Local News set out to understand how consumer debt lawsuits impacted people in the Bay Area during the COVID-19 pandemic as well as who was most likely to find themselves on the receiving end of debt litigation, which has dominated America’s civil court dockets for years. 

Understanding how debt lawsuits affected Bay Area residents was straightforward. Many borrowers feared their debt would cost them their jobs or homes at a time when they could least afford to do without them. Some pleaded with their creditors, explaining why they fell behind on their bills and asking for more time to catch up. Others became frustrated with the legal system itself, uncertain how to defend themselves in court.

Understanding who is most commonly sued in debt collection disputes proved more nuanced. The borrowers interviewed for this story ranged in age; the youngest was in their 20s, while the oldest was over 65. They covered a range of incomes; some reported making less than $10,000 in 2020 while others earned six figures. They were from a variety of racial and ethnic backgrounds and lived in zip codes scattered across both counties. Debt was a common experience among people that weren’t, on the surface, alike.

But the story of debt in the Bay Area is also defined by one of America’s most stark divides: the gap between white families’ wealth and the wealth held by Americans of other races.

An analysis of credit reporting agency data by the Urban Institute found that, as of December 2020, the share of adults with credit records who had any debt in collections was twice as high in Santa Clara County and San Mateo County zip codes where a majority of the population is a race other than white or multiracial as in the counties’ predominantly white zip codes.

People in majority non-white communities also tended to have more money in collections. The median person with money in collections in the two counties’ communities of color had more than twice as much — $1,859 in San Mateo County and $1,878 in Santa Clara County — compared to the median person in the counties’ majority white communities.

Urban Institute’s measure of debt in collections encompasses past-due credit lines and unpaid bills reported to credit bureaus, including those creditors have charged off their books. 

(Click to enlarge)

Signe-Mary McKernan, a co-author of the Urban Institute study, said with regard to the African American community the gap is the product of a long history of policies that have stopped Black families from getting the same opportunities to accumulate wealth as whites — from redlining maps that restricted where Black families could buy homes to highway construction that cut through Black communities.

“Our country is built on the premise that it provides economic opportunity, but there are entire groups of people who aren’t getting the same chances to move up,” McKernan said.

A legal machine, stalled

Lawsuits against individuals for debt have flooded U.S. courts in recent decades. A 2020 report by the Pew Charitable Trusts found the number of debt collection lawsuits filed nationwide more than doubled between 1993 and 2013, growing to account for roughly one in four civil lawsuits. 

Available data suggest the dramatic increase in case volume continued immediately prior to the pandemic. The number of lawsuits filed by the most-prolific collections court litigants in San Mateo and Santa Clara counties swelled 69% between 2017 and 2019.

The pandemic briefly threw sand in the gears of this well-oiled legal machine. 

Courts truncated their hours, furloughed their workers and postponed some hearings to avoid spreading the virus. In San Mateo County, citing shelter-in-place orders, courts effectively gave borrowers more time to respond to lawsuits and rejected motions for default judgment if borrowers did not answer in the usual 30-day window. 

The debt collection industry also reacted to the wave of coronavirus-related shutdowns in March 2020, promising to approach people with a light touch, as it might after a devastating hurricane. 

Industry trade group Receivables Management Association International advised members to pause collections efforts on anyone showing “significant financial hardship” and to suspend “new judgment executions, garnishments and other post-judgment activities.” Many original creditors and debt buyers touted policies allowing people to request more time to pay their bills as a result of COVID-19. 

Defendants sometimes answered lawsuits with notes, many handwritten, explaining how the pandemic had made it more difficult to pay debts. Source: San Mateo County and Santa Clara County court records. Records have been redacted to protect the privacy of the defendants. (Bay City News)

“States were trying to figure out their general regulations around whether there was going to be a pause in garnishment that was happening, whether there was going to be a stay on any new cases that were going to be filed, whether there were going to be stimulus checks that were going to be protected or not,” said Kiran Sidhu, policy counsel at the Center for Responsible Lending, a nonprofit research group. “All of these things resulted in collectors just not really knowing how to act, I would say, in the first three months of the pandemic.”

One outcome of the uncertainty: Across both San Mateo and Santa Clara counties, new consumer debt lawsuits plummeted 70% from the first to the second quarter of 2020.

And then they started increasing again.

The machinist and the debt

Silicon Valley earned its name thanks to the labor of people like Jose Gijon.

Gijon, 48, started sweeping the floors in semiconductor fabrication plants just after high school. Today, he makes the machinery used to produce the thin, silicon wafers used in computer chips, among other metal parts.

In March, Gijon’s boss abruptly sent workers home to prevent the spread of the virus, leaving the machinist without his usual income. He wasn’t called back to work for three months. Then, in August 2020, Citibank served him with a lawsuit over credit card debt.

Gijon is one of more than 9,000 people sued for consumer debt in San Mateo County and Santa Clara County since the onset of the pandemic. Like other people interviewed for this story, Gijon grappled with his collections lawsuit — the result of debt he tried to settle before COVID-19 — at a time when pandemic-related job loss already strained his budget. 

“I was worried about being garnished and not having enough money for rent or food,” he said. “I’d probably end up on the streets.”

As in Gijon’s case, many of the lawsuits filed since the start of the pandemic aim to recoup debts borrowers stopped paying months or years earlier. In a sample of 100 lawsuits filed in both counties, only three of the cases that specified when people stopped paying their bills allege default dates after the Covid-19 emergency began. (Thirty-five lawsuits did not make explicit claims regarding the last date a consumer paid their bill.) 

But for many people, the pandemic made an already unstable financial picture even more tenuous.

Elena, a single mother of two who recently moved her family to Stockton because she could no longer afford to live in the Bay Area, is among the people sued during the pandemic for debt that was delinquent before March 2020. She acquired the debt years earlier, she said, as she tried to get her financial bearings after separating from her husband. Bay City News Foundation is withholding her last name because she does not want her employer to know about her debt.

“When I left, I had no money to my name, I didn’t have a vehicle in my name, I didn’t have a roof over my head,” she said. “All I had was the credit cards.” 

When she realized debt collectors were suing to collect her old debts, Elena worried her family would become homeless.

“I didn’t know what I was going to do. Honestly, the thought of living on the street with two little girls was terrifying,” she added. “It was really, really bad.”

Everything from daily expenses to high-interest loans drives other consumers into debt and default.

“For our clients, there will be situations where they will have a medical emergency or a family member will have an emergency,” said Katrina Logan, an attorney at Community Legal Services in East Palo Alto. “You get to the point where you need to pay for rent, you need to pay for utilities, you have to pay for food and then, at the end of the month, you don’t have enough to pay for your five credit cards.”

Collection patterns changed as pandemic surged

By Amy DiPierro
Bay City News Foundation

The number of consumer debt collection lawsuits filed in Santa Clara County and San Mateo County dropped steeply with the onset of the coronavirus pandemic in March 2020.

But the year-over-year decline obscures a more complex dynamic. Some companies that filed the most debt lawsuits historically proceeded more cautiously in their legal collection efforts in 2020. A few were more aggressive than ever before.

Some litigants — original lenders as well as debt buyers — experienced a year-over-year increase in case volume during the COVID-19 crisis. The reason why is not entirely clear.

Absolute Resolutions Investments, a debt buyer headquartered in Minnesota, more than doubled its case volume in the first 12 months of the pandemic compared to the same period a year earlier, filing 300 lawsuits in the year beginning in April 2020. Fellow debt buyer Cavalry Portfolio Services and lenders Citibank, Ford Motor Credit Corp. and JPMorgan Chase Bank also filed more lawsuits in the first year of the pandemic than a year prior. (All five companies also experienced year-over-year increases in the 12 months beginning in March 2020.)

(Click to enlarge)

Meanwhile, several major credit card issuers — Bank of America, T.D. Bank, Capital One Bank and American Express, among others — virtually stopped filing new debt collection lawsuits from April until June of 2020. 

Small-dollar lender Oportun, which dominated small claims courts in both counties during the first four months of the pandemic, stopped filing lawsuits in Santa Clara and San Mateo counties after The Texas Tribune and ProPublica started reporting on the company’s litigation practices in Texas. As of late July of this year, the company had not yet resumed filing new lawsuits in either of the Bay Area courts. 

The cutbacks were less drastic among the nation’s largest debt buyers.

Affiliates of debt buyer Encore Capital Group filed 14% fewer lawsuits in the year started April 1, 2020 than a year earlier in the two courts. Portfolio Recovery Associates, another major debt buyer, saw case volume increase in Santa Clara County but decrease in San Mateo County, making it roughly flat for the two-county area.

Encore and PRA representatives said the companies sue people only after other debt collection methods are unsuccessful. They each said their companies continue working with borrowers to settle their debts after the start of litigation and will dismiss or suspend collection efforts if a consumer says they’re experiencing hardship. Both said their companies filed fewer lawsuits overall during the pandemic. 

Claire Raba, a clinical teaching fellow at the University of California, Irvine School of Law, said debt buyers typically face more time pressure to file lawsuits than original creditors because, by the time they purchase a debt, the statute of limitations for litigation is closer to expiring.

“By the time a debt gets sold to a third-party debt buyer like Portfolio or Midland (a subsidiary of Encore Capital), generally at least a year of that statute of limitations has already run,” Raba said. “So, for an original creditor that’s still in possession, that still owns the debt, the debt is more likely to be newer” giving the creditor more time to decide whether to sue.

You can read comments from some of the companies that file debt collection lawsuits in Santa Clara and San Mateo counties here.

Account statements included in court documents hint at the many reasons borrowers fell into debt in the years before the pandemic: a $1,000 balance on a credit card intended to cover out-of-pocket healthcare expenses; a small dollar loan with a 180% interest rate from a lender no longer licensed in California; a Kay Jewelers account used to purchase 14-karat bridal jewelry in 2016.

Defendants sometimes answered lawsuits with notes, many handwritten, explaining how the pandemic had made it more difficult to pay debts. Source: San Mateo County and Santa Clara County court records. Records have been redacted to protect the privacy of the defendants. (Bay City News)

People sued by debt collectors who were interviewed for this story said they have every intention of repaying what they owe, but find that factors like unexpected expenses, loss of income and high interest rates instead are leaving them ever-deeper in the hole.

“When there’s no money, and there’s no access to money, there’s going to be a lot of people in desperate situations who are going to sign up for really bad deals,” Logan said.

A gap in pandemic policy

Some Americans carrying debt fared better than others since March 2020. 

Mortgage relief allowed homeowners to avoid foreclosure. Federal eviction moratoriums helped renters to stay in their homes. The ability to pause some student loan payments eased the finances of student borrowers and their families. Others saved money they would have spent on extras like travel or dining, or pcitocketed the unexpected windfall of stimulus checks. 

Some of those savings flowed back to banks and debt buyers. The Federal Reserve Bank of New York found credit card balances nationally dipped by $49 billion in the first quarter of 2021, the second-biggest quarterly decline since researchers started tracking the figure. Mortgage, auto and student loan balances rose in the first quarter.

The trend was evident in the earning statements of debt buyers and lenders, too. Two of the nation’s largest debt buyers, Encore Capital Group and PRA Group, each separately collected more than $2 billion from consumers in 2020, a record for both companies driven largely by people paying debts without being sued. Discover Bank reported this spring that customers were paying their balances at the highest rate in more than 20 years. 

Still, many people navigating debt collection courts during COVID-19 landed in a blindspot of pandemic policy. No federal law blocked debt collectors from filing new lawsuits, or pursuing ongoing cases. 

In California, consumer advocates pushed for a stay in debt collection lawsuits similar to the state’s eviction moratorium, but policymakers soured on the idea after a federal judge blocked a similar attempt in Massachusetts, said Sidhu of the Center for Responsible Lending.

That policy stalemate reflects a more fundamental issue: Debt is often viewed as a moral as well as a financial covenant.  

Comments from Debt Collectors

Encore Capital Group

Lawsuits filed, 4/1/20 to 3/31/21: 1,386
Percent change: -14%
Response:
“Our legal filings dropped significantly during the pandemic. (…) We have consistently and proactively communicated to consumers the various relief options we’ve put in place in response to COVID-19, including temporarily stopping collections, skipping a payment or offering solutions tailored to changes in an individual’s financial situation. These relief options are available to any consumer we work with, including the very small percentage in legal proceedings. (…) We stopped all bank garnishments in mid-March 2020.”

— Faryar Borhani, spokesperson for Encore Capital


Portfolio Recovery Associates

Lawsuits filed, 4/1/20 to 3/31/21: 759
Percent change: 0%
Response:
A PRA Group representative said the company suspended collection efforts in areas “particularly impacted by Covid-19,” stopped new involuntary collections such as bank and wage garnishments and instructed attorneys not to garnish stimulus funds. 

“Nevertheless, in March of 2020, PRA instructed all process servers to suspend any activity on behalf of PRA, and also delayed moving accounts into a legal eligible status for several months, resulting in a dramatic reduction in the number of collection lawsuits filed in 2020.”  

— Elizabeth A. Kersey, PRA Group spokesperson

You can read comments from more of the companies that file debt collection lawsuits in Santa Clara and San Mateo counties here.

Many borrowers, even those driven into debt by circumstances outside of their control, regard their inability to repay a loan as a source of shame, a lapse in personal responsibility.

“People in the United States tend to perceive people who don’t pay their credit card bills, and don’t pay the money that they spent previously that they owe, as deadbeats,” said Claire Raba, a clinical teaching fellow at the University of California, Irvine School of Law. “It’s hard to get public policy behind a reprieve for individual credit card debt, and I think that really comes from this psychological, personal responsibility narrative.”

‘I never thought I’d be in that situation’

The day Gijon was sent home from his metal parts manufacturing job, he found himself on the skinny side of the pandemic’s funhouse mirror economy. 

He applied for unemployment, worked part-time at a 7-Eleven and, once or twice, reluctantly asked his mom to spot him for a few days. He began to dread using his debit card to pay for basic necessities.

“You swipe it once, you swipe it twice and there’s nothing there,” he said. “I never thought I’d be in that situation.”

Like Gijon, other borrowers sued for debt since the pandemic reported earning less money during the COVID-19 emergency than before. A woman with a cleaning business saw her family income evaporate as restaurants and home owners canceled their contracts. A gig worker delivering groceries through Instacart said he barely earned enough money to cover rent. A department store employee laid off early in the pandemic said he’s now working overtime to make up for the income he lost.

Even people with a steady job in the past year said they struggled.

“As much as I want to pay my debt, I have nothing left on me every pay day,” a consumer who said he works at a residential care facility for the elderly wrote in court documents in July 2020. “So, I am asking for your benevolent consideration to give me enough time to pay off this debt.”

In Santa Clara and San Mateo counties, where living costs are among the highest in the country, families earning as much as six figures may still find themselves with little money left after basic expenses. 

“Especially being in the Bay Area, things are far more expensive than in a lot of other parts of the country, and even making a good amount of money here doesn’t really mean you have the means to survive,” said Mara J., a single mother of two whose salary ranges between $90,000 and $100,000 a year. Bay City News Foundation is agreeing to withhold Mara’s last name because she does not want her employer to know about her debt.

Wells Fargo sued Mara for thousands of dollars in credit card debt in July 2020.

“I’m born and raised here, and I don’t feel we have the same opportunities as people who are coming in from these tech companies, or even my parents’ generation, as far as being set up to be financially sound,” she added. 

For many consumer defendants, the worst-case scenario is that the company that owns their debt will garnish their paychecks or bank accounts. 

Big Local News analyzed earnings withholding order judgments collected by the San Mateo Sheriff’s Office during the pandemic, excluding judgments related to elder and dependent financial abuse, domestic disputes and criminal restitution. The Sheriff Office’s accounting records do not identify the type of litigation that precipitated each judgment, so the records include judgments entered in all other types of lawsuits, not just consumer debt lawsuits.   

The records show that wage garnishment cuts across economic sectors. 

In San Mateo County, employees at healthcare institutions like Seton Medical Center in Daly City and Lucile Packard Children’s Hospital at Stanford were among the workers who had their wages garnished, according to records from the San Mateo Sheriff’s Office. 

Workers employed by educational institutions like the Ravenswood City School District and the South San Francisco Unified School District also had dollars trimmed from their paychecks, as did people working for local supermarkets like Draeger’s and Sprouts and candy makers like Burlingame’s Guittard Chocolate Company and South San Francisco’s See’s Candies.

Gijon feared that if Citibank garnished his wages, his employer might lose trust in him and come up with an excuse to fire him rather than deal with the hassle of sending the Sheriff’s Office a check every pay period. 

“They’re probably going to think that I don’t pay my debts,” Gijon said. “They’re probably going to think that I’m somebody that I’m not.”

The machine, rebooted 

In January 2021, the deadliest month of the coronavirus pandemic in Santa Clara County, debt collectors sued more people for unpaid bills than in any other month of the pandemic until that point.

Companies filed more than 1,000 lawsuits that month, the most since February 2020.

Meanwhile, hospitalizations in Bay Area intensive care units peaked in early January, the beds filled with patients from a surge of coronavirus infections in December. Later in January, the region’s average daily coronavirus deaths reached an all-time high.

The pandemic was not over. Debt collection court was revving into a higher gear.

The number of debt collection lawsuits filed by the courts’ most-frequent plaintiffs in the first quarter of 2021 exceeded case volume in the first quarters of 2019 and 2020.

Altogether, in San Mateo and Santa Clara counties, courts entered more than 300 judgments against borrowers in the nine months that started in April 2020, a number that only counts judgments in lawsuits filed by major debt collection plaintiffs.

The new year also heralded the return of some sleeping giants.

T.D. Bank, one of a few lenders that suspended new debt collection litigation in the two counties early in the pandemic, resumed filing new cases in both counties in February 2021. The company filed 228 lawsuits in the first quarter of 2021, about as many as a year earlier. T.D. Bank did not answer questions seeking comment.

An even more dramatic reversal came for Bank of America, another lender that stopped filing debt collection lawsuits around the time that stay-at-home orders took effect. B of A filed 744 lawsuits in March 2021, more cases than peers like Citibank and American Express filed in all of 2020. Bank of America declined to answer questions for this story.

There’s also an economic incentive for creditors to get back in court. 

“The unspoken thing about the pandemic is the impact it’s had on corporate America,” said Neeb of debt collection industry group ACA. “Every creditor who sends accounts in default to a collection agency is in need of that cash flow as much as anybody else.” 

But not everyone shares Neeb’s assessment.

“Who needs the money: Bank of America, or somebody who’s unemployed and can’t make their rent?” said Fred Schwinn of Consumer Law Center Inc., a consumer defense attorney in San Jose. “Who needs the money more?”  

The machinist in court

Gijon felt blindsided by the Citibank lawsuit.

He wanted to be proactive about paying his credit card debt. Before the pandemic, Gijon had enrolled his credit card accounts with a debt settlement company, a for-profit business that said it could renegotiate his debts and save him money. He made monthly payments to the debt settlement company, which started using the money to pay off one of his accounts.

What Gijon didn’t realize was that if he paid the debt settlement company instead of paying the credit card companies directly, original lenders like Citibank could still choose to sue rather than settle. 

Gijon decided to respond to the Citibank lawsuit himself. He paid a legal services office a few hundred dollars to help him to answer the complaint. He took time off from work to file it in person, only to find the courthouse closed. He returned to court another day. By Gijon’s recollection, he paid at least $200 in court fees to file his response, opting not to apply for a fee waiver because filling out the paperwork seemed too daunting.

Gijon is among the small minority of borrowers who formally respond to debt collection lawsuits. Many researchers observe that people may not engage with the legal process because their work and childcare schedules prevent them from going to court, because they don’t understand how to defend themselves or because they can’t afford to hire an attorney.

What Gijon didn’t realize was that if he paid the debt settlement company instead of paying the credit card companies directly, original lenders like Citibank could still choose to sue rather than settle. 

Comments from Debt Collectors

Citibank

Lawsuits filed, 4/1/20 to 3/31/21: 684
Percent change: 16%*
Response:
“During the pandemic, we have provided support to millions of customers financially impacted by COVID-19, paused debt sales and collection litigation for up to four months and suspended litigation for customers enrolled in our COVID-19 assistance program and those who had an inability to obtain representation due to COVID-19.”

“While we saw a modest increase in collections litigation, it is largely the result of cases that pre-date the pandemic by months, and in some cases years, due to a pause in debt sales and processing delays.”

— Elana Rueven, Citi spokesperson

*Includes cases filed by Citibank subsidiary Department Stores National Bank. Not counting its Department Stores subsidiary, Citibank filings rose 16% in the year started April 2020 and 25% in the year started March 2020.

You can read comments from more of the companies that file debt collection lawsuits in Santa Clara and San Mateo counties here.

Gijon decided to respond to the Citibank lawsuit himself. He paid a legal services office a few hundred dollars to help him to answer the complaint. He took time off from work to file it in person, only to find the courthouse closed. He returned to court another day. By Gijon’s recollection, he paid at least $200 in court fees to file his response, opting not to apply for a fee waiver because filling out the paperwork seemed too daunting.

Gijon is among the small minority of borrowers who formally respond to debt collection lawsuits. Many researchers observe that people may not engage with the legal process because their work and childcare schedules prevent them from going to court, because they don’t understand how to defend themselves or because they can’t afford to hire an attorney.

Inconsistencies in online court records make it difficult to measure the impact of legal counsel on the outcomes of debt cases in Santa Clara and San Mateo County. Studies in other states by the National Center for  State Courts and the Legal Services Corporation suggest that as few as 3% of defendants in debt collection lawsuits are represented by an attorney, but that those with legal representation won or had their cases dismissed more often. Research in courts outside of California also finds that most lawsuits over debt end in default judgments, judgments entered by a court when a defendant does not respond.

Raba of UC Irvine said the high incidence of default judgments, as well as dismissals contingent on the borrower agreeing to a payment plan, reflects the reasons companies sue over debt.

“They don’t use the court system to go to trial and adjudicate the cases on the merits,” she said. “They use the court system to either get a default judgment when the person doesn’t respond or to get the consumer on the phone with them” and steer them into a payment plan.

Another reason that debt collection lawsuits rarely go to trial: Defendants without legal counsel may struggle to understand the evidence code or byzantine court procedures, making it difficult for them to mount a strong defense by challenging the other side’s case against them.

“What does justice even look like in a collection case where a defendant doesn’t have a lawyer?” said Schwinn, the consumer defense attorney. “When one of the parties is unrepresented and doesn’t understand the rules of evidence, I just don’t know that there’s any justice in that.”


Since Citibank sued him more than a year ago, Gijon has started using his lunch breaks at the fabrication plant to check his case file online. He has trouble reading court documents from his cell phone, but he scrolls through the website anyway, skimming for any updates. 

In the spring, he saw that Citibank dismissed his case “without prejudice.” Gijon was relieved, but he knew the company could reopen the case in the future. 

He continued his lunchtime ritual. Checking. Scrolling. 

For weeks, there was nothing. Then, on a lunch break in early July, Gijon noticed the court had canceled the dismissal. At Citibank’s request, a judge ordered Gijon to pay more than $7,000. 

Gijon didn’t have enough money to pay the judgment in one lump sum, but he was determined not to let Citibank garnish his paycheck or his bank account, wary of additional interest and fees. 

He dug into his savings. He went to his mom, his sister and a cousin for help with the difference. Together, pooling their money, they had enough to pay.


You can read comments from some of the companies that file debt collection lawsuits in Santa Clara and San Mateo counties here:


Citibank

Lawsuits filed, 4/1/20 to 3/31/21: 684
Percent change: 16%*
Response:
“During the pandemic, we have provided support to millions of customers financially impacted by COVID-19, paused debt sales and collection litigation for up to four months and suspended litigation for customers enrolled in our COVID-19 assistance program and those who had an inability to obtain representation due to COVID-19.”

“While we saw a modest increase in collections litigation, it is largely the result of cases that pre-date the pandemic by months, and in some cases years, due to a pause in debt sales and processing delays.”

— Elana Rueven, Citi spokesperson

*Includes cases filed by Citibank subsidiary Department Stores National Bank. Not counting its Department Stores subsidiary, Citibank filings rose 16% in the year started April 2020 and 25% in the year started March 2020.

JPMorgan Chase Bank

Lawsuits filed, 4/1/20 to 3/31/21: 632
Percent change: 1,049%**
Response:
“We focus on working with our customers to resolve delinquent balances, offering them multiple options. As a last resort, we may then turn to litigation. We began our litigation process in July 2019, focusing on credit card loans that were significantly past due. We paused litigation in March 2020 due to COVID-19, and resumed in July 2020 as courts reopened and permitted litigation.”

— Paul Lussier, vice president for external communications at Chase

** In San Mateo and Santa Clara County, JPMorgan did not file any consumer debt collection lawsuits in 2017 and only filed one in 2018 and one in 2019. The company resumed filing debt collection lawsuits on a regular basis in 2020.

Ford Motor Credit Company

Lawsuits filed, 4/1/20 to 3/31/21: 177
Percent change: 58%
Response:

“With respect to ‘forbearance programs,’ during the pandemic, in order to assist customers, we issued payment deferrals and other remedies to thousands upon thousands of customers who were affected. For example, between March and May 2020, we provided 361,000 pandemic payment deferrals. By October 2020, 99% of customers had made at least one payment following their deferral period. Debt collection lawsuits are a last resort after all other efforts to work with customers have failed. These efforts go on for months, even years in some cases.”

— Margaret Mellott, spokesperson for Ford Motor Credit Company


Encore Capital Group

Lawsuits filed, 4/1/20 to 3/31/21: 1,386
Percent change: -14%
Response:
“Our legal filings dropped significantly during the pandemic. (…) We have consistently and proactively communicated to consumers the various relief options we’ve put in place in response to COVID-19, including temporarily stopping collections, skipping a payment or offering solutions tailored to changes in an individual’s financial situation. These relief options are available to any consumer we work with, including the very small percentage in legal proceedings. (…) We stopped all bank garnishments in mid-March 2020.”

— Faryar Borhani, spokesperson for Encore Capital

Portfolio Recovery Associates

Lawsuits filed, 4/1/20 to 3/31/21: 759
Percent change: 0%
Response:
A PRA Group representative said the company suspended collection efforts in areas “particularly impacted by Covid-19,” stopped new involuntary collections such as bank and wage garnishments and instructed attorneys not to garnish stimulus funds. 

“Nevertheless, in March of 2020, PRA instructed all process servers to suspend any activity on behalf of PRA, and also delayed moving accounts into a legal eligible status for several months, resulting in a dramatic reduction in the number of collection lawsuits filed in 2020.”  

— Elizabeth A. Kersey, PRA Group spokesperson

Absolute Resolutions Investments

Lawsuits filed, 4/1/20 to 3/31/21: 300
Percent change: 191%
Response:
Absolute Resolutions Investments did not return requests for comment.


Cavalry Portfolio Services

Lawsuits filed, 4/1/20 to 3/31/21: 1,032
Percent change: 19%
Response:
Cavalry Portfolio Services did not return requests for comment.


Amy DiPierro is a California-based journalist and recent graduate of Stanford University’s master’s journalism program. This story is the result of a partnership between Stanford’s Big Local News and Bay City News Foundation.