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How to help Boston’s working families struggling with debt

Nadine Cohen

In Suffolk County, 22% of folks have a debt in collection — rising to 31% in communities of color. The high cost of living in Eastern Massachusetts compounds the economic pressures around housing costs and inflation that working people face.

At Greater Boston Legal Services, we see this crisis playing out every day in court, where families have been pushed over a financial precipice because of a single emergency, like a medical bill or a car repair, or everyday financial realities, such as the high cost of housing or 8% inflation.

Greater Boston Legal Services operates a Debt Collection Lawyer for the Day program, where consumers who are being sued on credit-card debt can get free legal representation when they show up for their small claims court hearings. This program operates in the small claims sessions in the Roxbury, East Boston, Chelsea and Charlestown courts. Many times, the companies that buy the debts do not have the proper paperwork to show that they actually own the debt and thus have the right to collect it. We have won many cases that go to hearing, saving consumers over $1 million dollars. In other cases, we are able to get hardship dismissals, where someone’s income is exempt from collection because they are on disability or receive other government benefits or have very low incomes. We are also able to negotiate down the amount owed to 50% or less, so that consumers can enter a payment plan they can actually afford.

But more than 70% of debt collection lawsuits end with a default judgment in favor of the debt collector, without the defendant ever being present. That means in most debt cases, people never get the chance to defend themselves, often because they didn’t receive notice of a court date or couldn’t take time off from work or child care responsibilities to go to court. When that occurs, the court then automatically gives the debt collector what they are asking for. That can generate serious consequences for people, including a lower credit rating, diminished access to credit, and loss of their apartment or their job. A money judgment in a debt collection case can follow someone for 20 years. Also, interest of 12% can be added, making it virtually impossible to pay off even a small debt.

Equally troubling is that on any given day in courts where there are not free legal services attorneys, people who were able to make it to court but who don’t know their rights or understand the system are frequently lined up by a debt collection attorney in the courthouse halls (or virtually corralled into Zoom breakout rooms) without the benefit of counsel to “negotiate” payment plans for the total amount claimed — or simply agree to a judgment. The end result may exceed what a person is required to pay and may push already struggling families over the financial edge.

The long-term solutions to this debt crisis are complex, and include increasing wages for working families, eradicating white supremacist systems of oppression, and funding more attorneys able to advocate for working families at no cost.

An immediate remedy to help working families is before the Massachusetts Legislature now. The Debt Collection Fairness Act (House Bill 4749 and Senate Bill 2858) would, among other things:

Reduce the amount of interest paid on old debts from a national high of 12% to 6%

Increase the amount of wages protected from seizure per week to $926.25

Make clear that no one in the commonwealth will be imprisoned for failure to pay a consumer debt.

The debt crisis does not always get the attention it deserves, despite its astronomical impact on our community. Many working families often feel shame about being in debt and are hesitant to talk about it. The debt crisis, however, is not driven by profligate spending. It comes from hard-working families borrowing for necessities because wages have not grown with inflation and unanticipated medical costs and high education costs can create unmanageable financial consequences. 

Massachusetts legislators should act now to pass the Debt Collection Fairness Act to give working families relief and protection from the debt crisis.

Nadine Cohen is the managing attorney of the Consumer Rights Unit of Greater Boston Legal Services and has worked on many civil rights and fair housing cases.