Can State-Level Legislative Reform Ensure Due Process Protections for Debtors?

Authored By 
Michelle Grisé
Blog contributor 
Policy Fellow

In the spring of 1977, Assistant United States Attorney for the Civil Rights Division Drew S. Days III spoke to the graduating class of the Temple University School of Law about the relationship between the federal government and the states in the protection of civil rights. Could states be effective laboratories for the development policies that would address violations of fundamental rights? Days was pessimistic. He told his audience that day in Philadelphia that states simply didn’t seem to be up to the challenge of protecting civil rights.

Nearly forty years later, the evidence increasingly supports Days’ pessimism. The case of New York is revealing. In the 1970s, New York’s contempt statutes had such procedural shortcomings that a challenge to their constitutionality as applied to debtors went all the way to the Supreme Court in Juidice v. Vail. During preparations for Juidice, the New York State Consumer Protection Board filed an Amicus Brief detailing the application of contempt statutes in consumer debt suits. The Brief noted that extrajudicial collection practices included public denunciation, attempts to collect non-existent debts, the use of obscenity, communication at unreasonable times, and threats of violence. When these extrajudicial methods failed, creditors would initiate legal proceedings. The Brief argued that high rates of default judgments, which occurred in ninety percent of cases, could be attributed to procedural inadequacies in the legal process. Debtors received neither sufficient notice of their court date nor legal representation. As a result, debtors were often held in contempt and imprisoned.

In 1977, the state of New York overhauled its contempt statutes to provide individuals with improved procedural due process protections. The amended statutes required that potential contemnors be given adequate notice and counsel in order to “assure fairness and comply with federal due process requirements.”

Recent studies from New York reveal, however, that little has changed in the last three and a half decades. As in the 1970s, the current rate of default judgments still exceeds ninety percent. Studies have attributed this high rate of default judgments to inadequate notice, perhaps the most common due process failure in today’s consumer debt litigation system in New York. Judges have observed that process servers frequently fail to serve debtors with subpoenas, resulting in default judgments. Despite legislative reform, it seems that much has stayed the same in New York.

In 2011, prompted by growing concern over high rates of default judgments, New York City began requiring process servers to use GPS to record their locations while serving subpoenas. This policy represents a move toward increased accountability for process servers and permits debtors and other defendants to challenge improper service. Critics have argued, however, that GPS tracking merely verifies the time and location of a process server, not the act of serving a subpoena. While GPS may be a welcome innovation, it is not a cure.    

In recent years, several states have adopted contempt statutes substantively similar to those adopted by New York in the late 1970s. Lawmakers in Washington and Illinois have enacted legislation designed to better protect debtors, and a similar bill has been considered in Missouri. While only time will tell if these measures will effectively protect the due process rights of debtors, the example of New York suggests that something more than state-level reform of contempt statutes will ultimately be necessary.

Michelle Grisé is a graduate student in the Department of History. Her research at ISPS focuses on the development of Younger abstention doctrine in the 1970s and its impact on the ability of litigants to challenge state civil contempt laws.