[NOTE that comments reported in this section may have originally been made under another subtopic. Similarly, comments originally made on this subtopic may be reported in another, more relevant section. Information in parentheses comes from commenter response to interest survey; the “servicemember” designation may apply to the commenter or someone in their family. Numbers in parentheses for industry-perspective commenters refer to number of people involved in debt collection in the firm.]
Several industry-perspective (or other experienced) commenters responded to CFPB’s request for information about venue of collection actions:
“Depending on the nature of the suit the closest court location to the debtor's home address.” (debt collector; <20)
“The court location should be in the city where the account was opened.” (creditor collecting own debts)
“County in which it was opened or the county in which the debtor/Defendant resides. If filed in the improper court a change of venue can be requested and in most cases granted by the court in which the suit was filed.” (commenter who works for a consumer protection organization)
“The state in which I practice does not allow jurisdiction based solely on where the contract was signed. As such, we limit our filings to the venues where we reasonably believe the consumer resides. The states typically define what is the proper court thereafter, whether it’s based on amount, location, etc. so even if there is a large judicial districts we do not have the choice to file elsewhere by local rules.” (debt collection law firm; number of persons unknown)
“As a Director for Collections now for Kennedy Space Center Federal Credit Union, which is over $500 Million in asset size, I try (as I have for [a] prior [credit] union) to file suit closest to the Consumer’s current address. One method is to assign over to an attorney within the current residence-venue of the Consumer. In legal terms we attempt to get service when filing a suit out of state, its method is called obtaining if possible an Alien Judgment outside from the County and or State the contract/note was originally signed. There are states in the Union that do not accept foreign judgments. So recording a judgment obtained for example in Florida and rerecorded in another State may not be possible.” (creditor collecting own debts; <20)
“This question is most interesting with respect to student loans. Unlike most other debts, student loans have the potential to be greater than $75k, which means a consumer can be sued in Federal Court under supplemental jurisdiction provisions. Additionally, should the current creditor be able to achieve complete diversity, the consumer can be sued in an entirely different state.” (consumer) When asked by the moderator whether anything should be done to protect consumers in this situation, this commenter responded: “I think the cost of education needs to be reduced to a more reasonable amount or repayment plans need to be income based. As far as consumer protection, legal aid needs to be made available, affordable and effective, and consumers need to take time to really know their rights and stop complaining about harassment because that's a completely different cause of action than restitution.”
On whether current venue rules should be changed, both industry- and consumer-perspective commenters who addressed this issue favored a rule that suit be brought where the consumer resides:
“I recommend that the option to bring a suit in the jurisdiction where the consumer signed the contract should be removed. In many situations, consumers may not actually sign a contract (e.g. credit cards), they may sign an agreement in a distant location (for medical payment at a hospital on vacation), or they may have moved in the years since opening the account. I believe the most consumer-friendly option is to file suit where the consumer resides at time of commencement (unless it concerns real property and then it should be where the property is located). With respect to geographic size concerns, it is important to note that many states are facing budget crises that affect the civil divisions of state courts. In one of our largest districts, our options for filing suit [were] reduced from 32 courts down to 2. If there is a concern for protecting consumers in this particular area, I recommend a section of the rule that prohibits collections from choosing a court venue with the intention of interfering with the consumer's ability to participate in the action. To prove a violation, the consumer (or regulatory agency) would need to demonstrate that the collector had had no reason to file suit in that court other than burdening the consumer (thus demonstrating intent).” (debt collection law firm; 20-50)
“I believe lawsuits should be initiated in the jurisdiction in which the consumer resides, and that the case should be subject to the laws of that jurisdiction, especially concerning the statute of limitations. (Yes, I realize that a SOL defense is an affirmative one).” (consumer)
“Filing suit in the state that the consumer lives in is the most practical. If a state has a large district there is nothing that can be done unless judges want to allow tele-conferencing,, or phone conferencing. However, if that is allowed it should be allowed for both sides provided the evidence of the debt is supplied to the court in advance.” (debt collector; >50) (For more on allowing technology-assisted appearances, see below).
Another commenter noted that arbitration clauses can subvert venue designation rules: “Recently, courts have held that debt collectors can escape 1692i's venue provisions entirely by pursuing debt collection through arbitration instead. As the NAF studies reflect, arbitration has not proven a satisfactory alternative. I urge the CFPB to include in a rule language interpreting 1692i as requiring debt collectors to proceed in court, not through largely unregulated arbitral forums.” (law student; former intern at consumer law organization)
A consumer commenter made a suggestion that addressed the difficulty that consumers have successfully navigating court processes: “The documentation sent to the defendant should include a link or instructions on how to proceed according to the rules of the [court] if the venue is incorrect.” (adverse action taken against commenter for another person’s debts) [For comments on consumer difficulty understanding court procedures, see “Litigation in state and local courts.”]
Other comments:
“I am not a lawyer, but I have noticed that credit card agreements often contain statements advising consumers that if suit is brought, it will occur in a specified jurisdiction or ‘as provided for by law.’ At the point where collectors start suing consumers is where many consumers say enough and hire a bankruptcy attorney. That does everyone a lot of good, right? The only winner in that situation is the bankruptcy attorney.” (consumer)
“How about allowing arbitrators to not be bound entirely by the law, but also by common sense when it comes credit card defaults? Common sense tells us that if a Colorado flood washes away a community, those in the community are possibly not going to be able to pay their credit card bills for a few months. Common sense tells us that a medical emergency, being the victim of a hit and run accident, destruction of a home, or becoming an unpaid CareGiver for a family member should take precedence over the monthly payment requirement. This is not about debt forgiveness, it’s about declaring a debt neutral, no more penalties, fees or interest rate charges are applied to the debt, and the debtor agrees to pay off the debt in a reasonable manner, even if it takes 10 years to do so.” (consumer)
Comments1
Commenting is now closed.
Moderator
March 4, 2014 - 3:49pm
Just a reminder that the only question at this point is whether the draft summary missed, or misstated, something relevant in the comments that RegulationRoom participants made before CFPB’s public comment period closed on Friday, Feb. 28.