Katy Drahos, access to justice director at the Minnesota State Bar Association (MSBA), spoke at a February 9th press conference about the Bar’s Consumer Debt Litigation Report alongside Governor Tim Walz, Attorney General Keith Ellison, legislators, and Minnesotans affected by the burden of unfair medical debt. The press conference was held to preview medical debt solution proposals, notably the Minnesota Debt Fairness Act discussed by AG Ellison. If passed, the Act would address medical debt, wage garnishment and collections, and would include unique provisions for medical debt. It would ban the denial of medical care based on outstanding patient debt, repeal the current law allowing transfer of medical debt to a patient’s spouse, ban charging interest on medical debt and reporting it to credit bureaus, and more.
Ellison shared that the impetus for the proposed bill was the MSBA’s Consumer Debt Litigation Report, and the stark picture it painted of how broken debt collection policies are in Minnesota. Drahos spoke on behalf of the Bar’s access to justice committee and explained how the group regularly looks at the biggest gaps in representation in the court system. They found that consumer debt litigation always rises to the top. Consumers rarely have representation in these cases and Drahos emphasized that the report’s data revealed over half of all civil cases in Minnesota are consumer debt cases. Medical debt is included in these cases.
KARE 11 news also spoke with Drahos who noted that debt collection cases are filed against Black and Latino Minnesotans at double the rate of white Minnesotans. Families in lower income areas are also more likely to be taken to court for debt and that the number of cases is probably higher than it appears because of the way the debt is handled and paid. "That debt has been sold to collectors, or individuals put medical debt on their credit cards and then default on those cards, or they prioritize paying their medical bills at the cost of other debts they owe,” Drahos said.
The Pew Charitable Trusts Offer Perspective on Minnesota Debt Litigation Report
According to a new debt litigation report from the Minnesota State Bar Association’s Access to Justice Committee (A2J), policies for Minnesotans being sued for debt are not being applied uniformly or equitably. The MSBA’s comprehensive report, issued on October 10th, is the first of its kind to delve into the issue of debt collection lawsuits and present a data-informed roadmap for civil courts.
In its overview, The Pew Charitable Trusts, which supported the A2J committee in the report’s creation, highlights the need for consistency in order to assist Minnesotans without lawyers as they navigate the court system. Because the state gives plaintiffs a choice between conciliation and district court (for debts involving $4000 or less), plaintiffs often choose district court, which favors those represented by a lawyer while presenting additional barriers for the self-represented. Small claims court, on the other hand, is simpler and more accessible for both sides. Additionally, the report’s analysis shows that more than half of the cases filed in district court from 2018 - 2021 were actually eligible for conciliation court. Minnesota’s two-venue system is resulting in a higher default rate as defendants without attorneys are directed away from small claims court.
Pew’s overview concludes, “Ensuring that the same rules apply to all plaintiffs suing for small dollar amounts would make debt litigation processes in Minnesota less onerous for consumers—and help them receive the benefit of policies in place to assist them. It also would allow state civil courts to resolve debt issues in a more consistent, equitable manner.” Read more in “How Minnesota’s Dual System for Civil Debt Cases Harms Consumers.”
MSBA's Access to Justice Committee Issues In-Depth Report on Debt Collection in Minnesota
Today, the Minnesota State Bar Association’s (MSBA) Access to Justice Committee released a comprehensive report on debt collection in Minnesota. Debt collection lawsuits – when a debt collector sues an individual for money owed – are the most common case types within Minnesota’s civil court dockets. Current policies can be confusing and difficult to navigate for individuals without legal counsel. And because individuals struggle to participate in their cases, debt collection lawsuits often result in an automatic win for the plaintiff – also known as default judgment. A staggering 82% of debt lawsuits filed in district courts end in default judgment, which leads to a court-authorized garnishment of a person’s wages and bank account. Communities of color disproportionately encounter debt collection lawsuits in Minnesota.
To better understand the impact of Minnesota debt collection lawsuits, the MSBA’s Access to Justice Committee (ATJ) examined bulk civil court data, analyzed policies, and conducted interviews in the state. The ATJ Committee was supported by Legal Services State Support, the Minnesota State Bar Association (MSBA), the Minnesota Judicial Branch, January Advisors Data Science Consulting, and The Pew Charitable Trusts.
“Minnesota Consumer Debt Litigation: A Statewide Access to Justice Report” is the first of its kind to delve into the issue of debt collection lawsuits and present a data-informed roadmap for civil courts to be more open, efficient, and effective. In a press conference this morning, Attorney General Keith Ellison highlighted the report’s most striking findings and his commitment to the continued conversation about addressing and supporting its recommendations. Erika Rickard of The Pew Charitable Trusts shared a national perspective on debt collection cases and court practices and how Minnesota can help lead a growing awareness of these cases' impact on consumers.
Some of the Report’s key findings include:
The majority of Minnesota civil cases are debt cases.
The overwhelming majority of debt cases in Minnesota end in default judgment in favor of the plaintiff.
Minnesota has fewer residents in debt than in most places in the U.S., but more litigious plaintiffs, with 1 in 8 debts in collections eventually filed as civil court cases.
More than half of debt cases filed in district court involved less than $4,000, which means they are eligible to be filed in conciliation court.
Overall, the rate of debt claims filed against Black and Latino Minnesotans is more than twice that of Non-Hispanic White Minnesotans
Most Minnesotans facing debt litigation represent themselves. They often don’t make enough money to hire a private attorney but make too much to qualify for legal aid.
The Report’s 4 recommendations are:
Develop specialized procedural rules for debt cases to better manage consumer debt cases.
Create and improve resources that enable self-represented litigants to participate in their cases.
Preserve economic stability so Minnesotans can afford basic needs while repaying their debts.
Expand services for lower- and moderate-income people who are struggling with debt.
“This report's findings and recommendations provide a data-driven path forward for Minnesota to become a leader in making debt collection litigation a more accessible and effective process for both consumers and creditors. I look forward to continuing to work with the great group of stakeholders who have put so much time and energy into shining a light on consumer debt cases and crafting thoughtful strategies," said J. Singleton, program manager of Legal Services State Support and member of the Consumer Debt Litigation Project Leadership Team.
Read more about this groundbreaking report and Minnesota’s medical debt landscape in “The dilemma of medical debt lawsuits in Minnesota: Too big to pay, too small to fight” in today’s Star Tribune.
Legal Services Advocacy Project Makes Gains for Clients in Active Legislative Session
The 2023 legislative session was historic. The well publicized “trifecta” produced perhaps the most momentous and transformative set of legislation in Minnesota’s history. Many major advancements for legal aid's clients, and all Minnesotans, that were enacted include paid family leave and earned sick and safe leave time; codification of reproductive freedoms; passage of significant gun safety laws; a 100% carbon-free energy requirement by 2040; and a massive affordable housing funding bill, which includes a permanent rental assistance fund.
While these broader issues captured headlines, the Legal Services Advocacy Project (LSAP) worked to pass a wide range of bills across a variety of substantive areas that made significant inroads in advancing protections for legal aid clients.
The first increase in General Assistance in 30 years;
Giving survivors of domestic violence a path to relief from “coerced debt”;
MFIP disregard for participants receiving RSDI;
Major MFIP sanction reform and MFIP drug testing repeal;
Banning school seclusion for children through 3rd grade;
Funding to fully fund wage supports for persons with disabilities holding subminimum wage jobs;
Extending the period within which to file a UI appeal to 45 days;
Providing for an annual COLA to the housing assistance grant;
Extending MNCare coverage to undocumented persons;
Providing for recertifications once every 12 months for MA recipients;
Removing asset limits for persons applying for MA-EPD;
Eliminating the requirement that tenants must pay back rent to assert a habitability defense;
Making eviction filings nonpublic until the court issues a final judgment;
Providing that the new 14-day pre-eviction notice is prima facie evidence of an "emergency" for purposes of emergency assistance eligibility;
Payday lending reform; and
Eliminating the court-imposed bar to taking actions under the Consumer Fraud Act.
LSAP — which is comprised of staff attorneys Jessica Webster, Ellen Smart, and Ron Elwood — annually champions both discrete and systemic policy issues that fundamentally impact the lives of thousands of Minnesotans. They work with lawmakers, legislative staff, government agencies, legal aid staff, and dedicated partner advocacy groups to design, negotiate, and refine hundreds of new and existing laws, and always with legal aid’s clients and mission guiding their work.
Minnesota at Forefront of Federal Move to Provide More Contract for Deed Protections
Late last year, ProPublica in collaboration with the Sahan Journal published an investigative report about the serious risks posed to Minnesota Somali families by the sale of contracts for deed. Many prospective Somali home buyers looking for increased space, better schools and neighborhoods, and a way avoid paying or profiting from interest (a principle important to members of the East African Muslim community), have taken the non-conventional, contract for deed route. But the potential pitfalls are not always clear, and buyers are often mistaken about the lack of protections and unforeseen consequences they might face.
Now, as a result of the ProPublica-Sahan Journal report, some federal lawmakers, including Senator Tina Smith of Minnesota, are calling for further consumer protections. A recent senate subcommittee hearing led to discussion about how to better shield unwary consumers and whether federal or state laws ought to apply to these deals.
Witnesses testified that low-income buyers, frequently from communities of color who cannot secure traditional mortgages or choose not to use them because of religious beliefs, instead have opted to use contracts for deed. Among those witnesses was Beth Goodell, supervising attorney at Mid-Minnesota Legal Aid (MMLA). Goodell told senators that because state law offers so few protections, buyers are at risk of losing everything.
“My clients tend to have trusted the sellers,” Goodell said. “One of my clients said to me, ‘Why would this seller sell me a house that he knew I couldn’t afford?’ And the answer, ‘The seller would make a lot of money if you fail,’ was beyond her understanding.” Read the full story.