355,000 New Yorkers have achieved a far-reaching class-action settlement. In addition to paying $59 million, the defendants agreed to exit the debt-collecting business and to wipe out roughly $800 million in questionable debts, from default judgments.
News Story (New York)
New York Post
November 22, 2015
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Tags: Consumer Protection, Debt Collection
Organizations mentioned/involved: MFY Legal Services (New York City)
A widespread practice known as “sewer service” lies at the heart of Sykes’ case. That’s the term for what happens when debt collectors fail to properly notify consumers of lawsuits, then falsify court papers asserting a valid case.
When the consumer doesn’t appear in court, the debt collector wins by default and can then freeze the consumer’s bank account or garnish wages to collect. an unverified debt. The effects can be devastating, particularly on the low-income households most often hit with these suits.
“The due process was skipped,” said Sykes.
Ariana Lindermayer, a lawyer with MFY Legal Services, one of three firms representing the plaintiffs, compared the allegedly false court papers in consumer credit cases to the robosigned foreclosure documents that rocked the mortgage industry five years ago.