Relief for debtors
THE GLOBE'S Spotlight Team revealed a kind of perfect storm where flaws in the legal system, maverick enforcers, and lax governmental oversight coincide to create a debtors' hell for many consumers.
What can we do about it?
Police the constables. It is time to disband the renegade army of enforcers. Authority for selecting constables and ensuring that they adhere to high standards should be vested in the attorney general, an elected official with statewide supervisory powers. The attorney general can eliminate arbitrary, often punitive, fees imposed on consumers and set standard fees that reflect actual costs of repossession. Fees of both deputy sheriffs and constables should be subject to fair standards set by the attorney general.
Modernize the laws. The purpose of the Massachusetts exemption law is simple: Let the debtor keep enough assets, after he has paid his debts, to keep body and soul together and permit him to remain a productive member of the economy. In Colonial times, when the law originated, that meant a debtor could keep some livestock. But today, what a debtor needs most in order to work is a car, and a $700 exemption for a car is inadequate. The Legislature should increase that exemption to a meaningful amount. It should also update the law on garnishment of wages, which forces some debtors and their families to live on only $125 per week.
Also, the homestead law, which is riddled with inconsistencies and ambiguities, needs to be rewritten. The law requires a homeowner to record a valid declaration of homestead in the Registry of Deeds. Yet few homeowners -- other than the most legally sophisticated -- know how to do it. Massachusetts should eliminate the recording requirement, as many states have, and simply provide that each homeowner gets the benefit of the exemption automatically.
Educate the consumers.
Every repossession order served on a consumer should contain a brief, plain-language explanation of the consumer's rights.
For example: ``If you have any complaints or comments about the enforcement of this order, please telephone the attorney general's Consumer Protection Hotline at 1-800-. . . or notify the attorney general by mail or e-mail. You are entitled to receive the first $700 of the proceeds from the auction of your car. If you do not receive the funds within 10 days of seizure, contact the attorney general's office immediately."
Public school students should be offered courses in how to manage their money and how to avoid the pitfalls of easy credit. The Massachusetts Bankruptcy Court and the Boston Bar Association have offered such programs for some time.
Consumers, who have a legal right to receive a free copy of their credit report each year, should examine that report and correct any errors immediately.
Close judicial loopholes. It is encouraging that the chief justices of the trial courts and the District Court Department are willing to address the due-process safeguards that consumers need. The crux of the problem is that small-claims courts sometimes issue default judgments against people who never received actual notice of the pending lawsuit. Without notice and an opportunity to be heard, a consumer cannot challenge the amount or validity of the debt and the crushing ``add-ons" such as repossession fees and usurious interest charges.
Given that an Internet search can locate a current address for many people, there is little excuse for delivering complaints to old addresses. Collection firms that provide ``sewer service" -- that is, service made to an address they know or should know is wrong -- should be held accountable.
Wake up the watchdogs. The Federal Trade Commission and the Massachusetts attorney general should be on the front line of these problems. However, they were both asleep. As has been reported, consumer protection is one of the attorney general's basic responsibilities, yet consumers cannot even file a complaint via e-mail. Individual consumers often lack the knowledge, legal expertise, and resources to take on the ``repo" men and the debt collection companies. As professor Elizabeth Warren pointed out, the debt collectors are the ``repeat gladiators" in these battles. The consumer does not have a fighting chance.
If you incur a debt knowing you can't pay it, you commit fraud. However, if you incur a debt believing you can and will pay it, but later find you cannot, you join the ranks of millions of honest Americans struggling with unpaid credit card debt. Many consumers in Massachusetts are just a paycheck away from the debt collectors the Spotlight Team so accurately described. It is time to give those honest consumers some meaningful legal protection.
Carol J. Kenner is a retired US Bankruptcy Court judge for the District of Massachusetts and chief judge of the Bankruptcy Appellate Panel for the First Circuit. 