Bar News - December 16, 2015
NH Bar Foundation: Legal Services Providers Focus on Debt Collection Issues
The New Hampshire Bar Foundation recently approved a $9,659 grant from the Consumer Protection Law Reform (CPLR) Fund, to New Hampshire Legal Assistance, to continue advocacy on behalf of low-income debtors. Advising low-income individuals with debt problems who are facing aggressive and sometimes illegal collection tactics has become an increasing focus of the New Hampshire legal services programs the NH Bar Foundation funds.
The CPLR fund, administered by the Bar Foundation but separate from IOLTA, was established in 2007 with a cy pres award of $152,254, the remainder in unclaimed funds from a $4 million award from several class actions involving failures to refund insurance premiums to consumers, with the purpose of addressing consumer law issues. The cy pres award was suggested by the plaintiffs’ attorneys in the class action, Charles Douglas and Edward O’Brien.
The mushrooming of consumer lending in the 1990s and early 2000s, followed by the recession, led to a massive expansion in the debt-collection industry, including so-called “debt-buyers” or businesses that buy up bad debts for a fraction of the loan value and then attempt to collect the full amounts to make a profit.
Some of these debt collectors use aggressive and unlawful tactics to harass and exploit consumers. “Debt collectors have been the most complained-about industry on the Federal Trade Commission’s consumer website for many years running. And abuses by out-of-control collectors appear to be getting worse,” reports the National Consumer Law Center, which provides resources to attorneys and individuals on consumer law issues.
In its request for funding, NHLA said it will use the funds to go beyond working with clients on debt-collection matters to working on a policy level, including lobbying on debt collection laws in the upcoming session of the NH Legislature. Because many of the debtors facing collection lawsuits are unrepresented, “laws and rules that govern debt collection must be especially responsive to the needs of pro se litigants,” NHLA wrote.
Over the past several years, with crucial support from the CPLR Fund, NHLA successfully collaborated with the NH Judicial Branch and attorneys specializing in debt collection to implement significant reforms to the debt collection laws. For example, the cy pres fund, which can be tapped outside the normal Bar Foundation grant cycle, has assisted NHLA in lobbying for caps in interest rates on so-called “payday” or “car title” loans that focus on low-income people who lack other options to borrow money.
NHLA has also collaborated with the NH Bar Association’s Pro Bono Referral Program to conduct periodic payment clinics at circuit court locations, providing unrepresented debtors with the opportunity to consult with a volunteer attorney before a hearing on a debt-collection lawsuit. The Pro Bono Referral Program recently hosted a Lawline session – during which members of the public can call in for free legal advice from volunteer attorneys – focused on consumer debt questions, and plans to continue offering legal advice to debtors in a variety of innovative settings.
Cy pres typically represents a small portion of funding for legal aid. The recent foreclosure settlement with several national banks was exceptional, resulting in a cy pres award to foreclosure prevention legal services of $45.3 million nationwide, but regular cy pres awards outside of that bank settlement totalled $17.7 million nationwide.
Legal services-related charities are the default option for cy pres awards in class action litigation in some states, by court rule or legislation, but New Hampshire does not have a cy pres rule.