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How Unpaid Bills End Up in Court: The Rise in Debt Collection Litigation and What States Can Do



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The system for collecting unpaid debts is broken. One in three American adults had debt in collections prior to the pandemic in 2019 — and during the pandemic, almost half of Americans reported facing serious financial problems. The leading cause for debt collectors to contact consumers for non-loan debt include medical bills, telecom bills, and utility bills — and many times, people are unaware they owe a debt until a collector calls.

The consequences of burdensome debt are clear: consumer debt threatens people’s financial security by making it harder to stay housed, obtain credit, and build wealth. What is far less discussed is this: for 68 million people across America with debt in collections, the average amount was less than $2,000.

Some states and advocates are pioneering ways of fixing the broken system of debt collection litigation. To do this, they must first understand the common ways the system fails individuals, and the state and federal solutions to ensure that debt is legitimate; that defendants know they are being sued; and that judgments do not permanently damage debtors’ financial security.

The Aspen Institute Financial Security Program is pleased to publish A Financial Security Threat in the Courtroom: How Federal and State Policymakers Can Make Debt Collection Litigation Safer and Fairer for Everyone. A simple, non-technical explanation of debt collection litigation, including a review of the process and of the impacts of debt and debt collection litigation in the lives of people in America. This publication coincides with a panel conversation on what we all should understand about the debt collection litigation system, and what we can do to create better outcomes for people across America.

This is a recording of a webinar co-hosted by the Aspen Institute Financial Security Program and The Pew Charitable Trusts on October 28, 2021.
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