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SALT LAKE CITY — The court system can be tough on defendants served with eviction and debt collection cases. A report released Wednesday shows that sometimes answering one of these challenges can lead to a worse outcome than ignoring them and receiving a default judgment.
In Utah, less than 5% of renters and debtors facing an eviction or debt collection legal challenge are represented by attorneys, but the majority of plaintiffs in those cases are companies who have representation and are familiar with the system.
The Utah Bar Foundation is looking for ways to improve this part of the legal system and worked with the Pew Charitable Trusts to comb through court records and compile data to help figure out how to address the issues.
"Nationwide, state courts are increasingly burdened with high-volume, low-dollar debt claims brought by plaintiffs with attorneys and defendants with no access to legal help. For various reasons, defendant participation rates in the legal system can be low, leading to a high rate of default judgments," said Kim Paulding, director of the Utah Bar Foundation.
Christine Durham, former chief justice of the Utah Supreme Court and current chairwoman of the Access to Justice Commission, said debt and eviction cases are almost one-fourth of the civil cases in Utah's district courts.
She said the courts' mission — to create an open, fair and efficient system — is taken seriously.
"For it to be realized, there must be a level of public trust and confidence that the courts are actually fulfilling their duty to reach fair decisions, and that's why today's report dealing with matters of concerning evictions and debt collection cases is so important," Durham said.
She expressed concern that in district court cases, most tenants and debtors are not represented by attorneys while most landlords and creditors are.
"Having only one side represented by an attorney creates an imbalance in our justice system which relies on adversary presentations, and it often slows down the court process," Durham said.
Report on debt collection, eviction cases
This research was initiated after an unmet legal needs study in 2019 found that the legal aid needs in Utah that are most unmet for lower income Utahns was financial services, Paulding said.
In a press conference on Tuesday, Paulding said researchers were able to receive information about 755,410 cases in Utah courts between 2013 and 2021, although they focused on data from the year 2019 as a sample year for many of the statistics provided in the study. The study also included 60 hours of interviews with people involved in debt collection or eviction legal challenges in the state.
Some of the findings of the study include:
- There are policies that disincentivize defendant participation in debt lawsuits, and lead to worse outcomes for defendants who do participate.
- There is a relatively low amount at stake in these cases; both justice and district court debt collection cases involve a median amount of about $1,200.
- Small claims cases filed in justice courts are easier for debtors to navigate since district court rules assume that parties will have legal representation.
- Debt collection lawsuits are primarily filed by financial institutions, not individuals or small businesses. Companies are the plaintiffs in almost 100% of district court debt claims, almost 85% of small claims cases and over 70% of eviction cases.
- Six plaintiffs account for about half of all district court debt collection cases, and nine plaintiffs account for half of small claims cases filed in justice courts.
- Almost 50% of the financial claims are due to personal debt, which could be credit cards or bank loans, and over 25% of financial claims are due to medical debt.
- Utah's eviction policies, which include a three-day pay or vacate notice, are some the worst for tenants in the country.
Paulding explained that for district court cases, over 89% of creditors had an attorney representing them, but only 3.7% of debtors had an attorney representing them. The representation statistics in evictions are very similar. However, with small courts debt collection claims, only 4.6% of creditors have representation, and about 2.8% of debtors, making the system more fair for debtors in the justice courts.
Erika Rickard, with the Pew charitable trust, said the data from this report lines up with what they are seeing in other states around the country. She said debt collection lawsuits are flooding state courts, and are now the most common type of civil court case in many states.
"That's a really big shift that has gone unnoticed by state leaders, but yet has profound implications for states, for taxpayers and for consumers," Rickard said.
In Utah, and around the country, about 70% of the time debtors don't show up to court, meaning that a default judgment is issued without courts ensuring that the right person was sued for the right amount, she said. Additionally, Rickard said other states are also seeing final judgments against debtors that are larger than the original debt.
Utah is the first state where officials have been able to look at the system for debt collection and eviction lawsuits through statewide data, Rickard said, and that data in the report will help modernize the process and address issues.
"These cases have tended to fly under the radar in large part because of a lack of data," she said.
Evictions
In Utah, landlords are eligible to receive "treble damages," which means that the amount owed by a tenant in an eviction can be multiplied by three. This can lead to tenants, who were already struggling to pay rent, owing significantly more money.
Paulding explained that in Utah, only 20% of those who have faced an eviction lawsuit since 2013 have been able to pay off the amount they owed to a former landlord, meaning 80% of them still owe a former landlord.
In a typical rental contract, after a judgment, a former landlord can charge a 24% post-judgment interest rate, making it even harder to pay off the debt. This is significantly higher than the typical interest rates for debt collection claims where rates are set by the state. For district court claims, the interest rate is an average of 12.59% and for justice court debt cases it is at an average of 4.59%, the report says.
The average starting amount owed in an eviction case is about $640, but over the short time that the legal case is in process, that amount can multiply to $4,000, with treble damages and attorneys fees, according to the report. After the case, it continues to escalate from interest until the full amount is paid or forgiven.
Paulding said the large majority of people who have been evicted in the past are having trouble finding a place to live because potential landlords can see they still owe a past landlord. As part of the study, researchers talked to landlords and found that they often will not rent to tenants who have an unsatisfied eviction matter.
In addition to these open matters making it harder to find a place to rent, people who have an open eviction debt are also subject to collections, garnishments or repercussions until the creditor lets the court know that they have satisfied the debt, the report says, and they can also have a harder time finding employment.
Justice courts vs. district courts
A debtor has no control over where their case is filed, Durham said, but debt cases filed as a small claims matter in Utah's justice courts are more likely to end up with a debtor paying an amount similar to what they owe, as opposed to those cases filed in district courts.
For debt collection cases filed in small claims courts, typically neither party will be represented by a lawyer and debtors will not be asked to pay attorneys' fees for the creditors, debtors do not face as high interest rates and debtors are in a system built to be navigated by people who do not have an attorney.
Cases resolved in justice courts typically have a better outcome for a debtor, the report shows. They end up paying only a little bit more than the original debt, while in district courts, debtors pay an average of 1.3 times the original debt.
"The claims are exactly the same when they go in. But then, procedurally, different rules apply. Different rules on attorneys fees, different rules on damages, and so on. So that's why the outcome can differ, even when the initial choice is the same in terms of going to court on the same debt," Durham said.
Durham said data from the report shows it could be cheaper to not show up to court at all for those facing a debt collection lawsuit — particularly in district courts — when typically it is best when all parties participate. She said attorneys for creditors can ask for $350 in attorneys fees, but when a debtor responds, that attorney can ask for $750 — a significant amount when the average amount in dispute is $1,200.
"Our system is disincentivizing debtors to participate in their own cases. We can do better on behalf of all the parties involved in these civil legal matters," she said.
Most of the time, a creditor decides where the debt is filed, and they are not incentivized to have the claim in the justice courts. However, creditors who have purchased a debt from someone else are required to file the case as a small claims case in justice courts.
Avenues for improvement
Paulding said the data from the report has been presented to the Utah State Courts and some Utah legislators, and court officials have been very receptive of the information.
One of the suggestions Paulding said the Utah Bar Foundation is making is to require creditors to file an annual statement with the court until the debt is satisfied, showing payments that were made, how much interest has accumulated and the current balance. Additionally, she said creditors should be required to show the court the final amount paid toward the debt when it is satisfied, rather than just a statement saying it has been satisfied.
"This would just simply be a place to show the annual calculations and provide accountability for all parties involved in the legal matter," she said.
Through interviews, the study found that some people pay a lot more than was initially owed in an eviction or debt collection case, largely because of the interest and attorneys fees, while others end up paying less because some of the debt is forgiven, terms are negotiated, or plaintiffs' attorneys write off the debt. That data is not collected by the court system.
Another possible improvement is for employers who are asked to set up garnishments. Paulding said employers want a system similar to how they are able to set up employee tax payments, with people they can reach out to for help. She said some employers have needed to seek legal counsel themselves to be able to set a garnishment up when they are required to, making the process more costly.
Paulding said in many states treble damages are sometimes able to be granted by a judge in eviction cases, but in Utah, a judge is required to award them if a landlord or their attorney asks for them. They are a mandatory award. This is something she said they have talked to legislators about addressing.
She also said they have discussed ways to make it easier for people to respond to district court debt collection cases without an attorney, including providing friendly forms for people to use to respond.
Durham said there were many participants who have put time into the study and have been receptive to the findings and are willing to address issues.
"We hope that working together we will all go forward to improve the Utah courts for all parties involved," she said.
