Center Files Amicus Brief Supporting Greater Access to Justice for Consumers Facing Debt Collection Judgments

July 24, 2023

Last week, the Center, along with our co-counsel Bay Area Legal Aid and OneJustice and ten other legal services organizations, filed an amicus brief urging the California Supreme Court to ensure that consumers with debt collection lawsuits can have their day in court when they were never properly served with the lawsuit and never knew about it. Under a line of appellate cases, defendants with default judgments against them who were not properly served with the lawsuit initially can only file a motion to set aside the judgment and reopen the case within two years after the judgment is entered. We argue that this two-year time limit defies the law and basic principles of due process and fairness, especially as illustrated by our experiences working with low-income consumers. Instead, as we argue, defendants should be afforded a reasonable time to challenge those judgments once they find out about them, without any limitation.

Debt collection suits are the most common type of civil lawsuit filed in California’s courts–amounting to about a quarter of all cases filed. Most debt collection suits are filed en masse by debt buyers and other corporate plaintiffs who swamp the judicial system with cases that they have little intention of litigating on the merits. Rather, these cases overwhelmingly end in default judgments, in which the defendant (the consumer who allegedly owns the debt) never appears–or, very rarely, does so without legal representation–and the debt collector wins a judgment in their favor automatically. Once a judgment is issued, interest starts to accrue on the debt. The debt collector can then wait for years to enforce the judgment. When it does, it can try to garnish the consumer’s wages or bank accounts to recover the amount owed, which by then will have spiraled to thousands or even hundreds of thousands of dollars more than the initial debt. 

The consequences of a default judgment on the life of an alleged debtor can be catastrophic. Garnishing wages or seizing a bank account can mean a person is left without sufficient income to pay for food, shelter, childcare, or other necessities. 

Why do so many debt collection suits wind up in default judgments? Study after study show that consumers are often never aware of the lawsuit because they were never properly served with it, or that the process server never attempted to serve them but then falsified the affidavit of service–a practice known as “sewer service.” Examples of fraudulent service in debt collection cases abound: for instance, the process server might deliver the summons and complaint to an old address and list as a “member of household” that they served a relatively generic person who bears no resemblance to any actual member of the defendant’s family. Nevertheless, the process server’s affidavit will appear valid, and an overwhelmed court will often sign off on the default judgment–ultimately without the defendant ever even knowing the existence of the lawsuit until their wages are being garnished. 

This pattern runs counter to the basic tenets of fairness and due process that are core to our legal system. Yet the miscarriage of justice gets even worse. Under a peculiar–and erroneous–interpretation of California law, certain courts have ruled that a defendant in a default judgment has only 2 years since the judgment was entered to file a motion to “set aside” the judgment (i.e., challenge it) and then have their day in court. As a result, if a defendant finds out for the very first time years later about the judgment, they will have no viable remedy to try to attack it, even if the default judgment is premised on an improperly or fraudulently served lawsuit. Essentially, alleged debtors have no way to escape a ballooning debt certified with the imprimatur of the judicial system that, through no fault of their own, they knew nothing about.

The Center’s amicus brief argues that defendants in such situations should have a reasonable time after they finally learn of the case to try to set the judgment aside–which is in fact the well-accepted practice in federal court. We assert that the two-year time limit imposed by some courts, including the court of appeal in this case, is based on an incorrect reading of the law. The brief also provides a thorough background about the epidemic of fraudulent service in debt collection cases and illustrates its impact with stories of clients whom we represent. We also explain why the procedural mechanism involved here, a motion to set aside a default judgment, the most efficient means for obtaining justice for improperly served defendants, and why alternative procedures proposed by debt collectors are impractical and inequitable.