Debt Weight: The Consumer Credit Crisis in New York City and Its Impact on the Working Poor

Abstract

The number of consumer debt cases filed in New York City Civil Court has exploded in recent years. In 2006 alone, approximately 320,000 such cases were filed in the five boroughs; this number is comparable to the total number of civil and criminal cases filed in the federal trial courts nationwide that year. Almost $1 billion in claims were made against New York City residents in consumer debt filings in 2006; in that year, we estimate that creditors ultimately obtained judgments of almost $800 million. In many ways, New York City Civil Court has become the “credit card court”, with a majority of the cases filed throughout the five boroughs classified as consumer debt cases. The impact of this judgment debt is profound. Once a judgment is obtained by a creditor against a debtor, the situation goes from bad to tragic. A creditor with a judgment can garnish wages and freeze bank accounts. Often, due to additional penalties, interest, fees and costs, the ultimate judgment obtained far exceeds any original debt that might have accrued. Sometimes, the defendant never owed the alleged debt, which may have been the result of identify theft, mistaken identity, clerical errors, or illegal fees and charges. Once an account is frozen, a debtor under such a crushing weight may be unable to pay rent bills, utilities, obtain medicine and pay for food and other necessities. A judgment will invariably show up on credit reports and such a black mark on a credit report will make it more difficult to find an apartment, get a better job, and obtain credit. For the working poor, the judgment blocks their climb up the economic ladder, and they cannot obtain better housing or a better job, or get a loan for a car or home. The total amount of judgments obtained against city residents in 2006, approximately $800 million, is the equivalent of building one new stadium for the Mets every year. Against this backdrop, this report is an attempt to understand the manner in which creditors are using the Civil Court of the City of New York to collect debts. To this end, the Urban Justice Center reviewed 600 randomly selected cases, all filed in February of 2006, in the five borough courthouses of the Civil Part of New York City Civil Court. The results of our research are striking.