This week, Fox 26 aired a story about a man who says he was arrested by U.S. Marshals for not paying a $1,500 student loan from 1987 — and, as outrageous stories often do, it went viral.
Paul Aker went on air to explain how seven Marshals armed with automatic weapons showed up at his doorstep, cuffed him and brought him downtown to the federal court building to appear before a judge so he could sign a payment plan for his nearly 30-year-old loan. Aker told the station he had not heard anything, not via U.S. mail or a bill collector knocking on his door, about this loan since the 1980s — not until he was arrested for it. “I still can't believe this,” Fox anchor Isiah Carey says. “It is just mind-blowing. This is a story that will likely outrage you and leave you wondering, why are the resources of the federal government being used this way?”
Everyone from Esquire magazine to The Guardian picked up Aker's story and asked similar questions, repeating perhaps the most alarming thing Fox reported toward the end of its clip: “Our reliable source with the US Marshal in Houston say Aker isn't the first and won't be the last. They have to serve anywhere from 1,200 to 1,500 warrants to people who have failed to pay their federal student loans.”
However, focusing just on the shocking nature of Aker's arrest-by-Marshals misses the larger problem here, says Dana Karni, a Houston lawyer who specializes in debt-collection defense. To Karni, there is nothing particularly "mind-blowing," as Fox put it, about Aker's case. It's something that happens to people every day across the country, not just with student loans but for all types of debts. What Aker's story really illustrates, Karni says, is how big-time debt-collection law firms are overwhelming the courts with small-time debt lawsuits against a mounting number of people who can't afford to pay — and may not even be aware of the litigation at all.
A closer look at federal court records in Aker's case shows that he was arrested for ignoring a decade-old court order to appear before a judge — not for failing to pay up, as has been widely reported. A prominent debt-collection law firm filed the case against Aker in 2006 on behalf of the federal government, which was attempting to collect on Aker's $1,222 balance remaining on his 1987 Prairie View A&M federal student loan, plus $492 in accrued interest. A process server never personally delivered the suit to Aker, but just left it at his doorstep with a copy of his business card, according to court records. Six years later, the debt collection firm just mailed it to him. The order to arrest Aker was issued in December 2012, after Aker still hadn't answered the suit. Last Thursday, the U.S. Marshals finally got around to storming his home.
Aker's case, Karni says, is just another disturbing sign of the explosion of debt-collection litigation, specifically for student loans, over the past decade, thanks to the rising cost of living and education. This has caused an immense backlog for courts facing more and more debt-collection lawsuits over even small-time loans. But this also means big bucks for the private collectors and lawyers, who have made a living off people who got swallowed up by the Great Recession.
“There's a bigger picture that needs to be addressed: We have a problem with dealing with student-loan problems and the cost of education, and students' inability to repay their student loans because the economy does not provide for jobs that merit that amount of debt for an education," Karni told us. "It's a problem. It's a real problem, and society needs to be worried about it.”
Since 2009, federal student loan debt has risen 76 percent to a rather mind-blowing $1.2 trillion, putting student loans ahead of credit cards for the second-largest outstanding debt balance in the U.S., next to mortgages. In the same time frame, defaults on student loans rose from 7.9 percent to 11.5 percent. Which is good news for debt collectors and lawyers.
Because of the huge volume of cases clogging the courts, Karni said this leads to sloppy litigation tactics — like “sewer service,” when process servers don't actually hand-deliver the suit to someone, leaving people clueless that they're being sued. The Houston Press was unable to reach Paul Aker, but Karni is concerned that this may have been the case for him — and if it was, then Aker's due process rights were violated, Kari said. She added that this is the No. 1 reason she is able to vacate judgments in consumer debt collection cases, given the prevalence of the issue.
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“Huge debt collection law firm — the mills — their practice of law, in my opinion, has become extremely sloppy because of the tremendous volume,” she said. “When you're carrying 5,000 cases on a two-, three- attorney docket, you're bound to have some mistakes and problems, and the process servers — there's no way they can keep up with that volume. So what you end up seeing are a lot of executions of service when there's no way that person actually got served.”
Many of these debt-collection law firms, she said, also collect on a contingency basis — meaning they have incentive to file as many cases as possible, no matter how old or petty they are, because such firms are paid on a per-case basis. In fact, a 2015 Bloomberg Businessweek piece, "The Lawsuit Machine Going After Student Debtors," found that many of the law firms didn't even own the debts and therefore had no right to enforce them — meaning they could be jamming courts with frivolous lawsuits.
As Carey put it, this case begs the question: Aren't there more important problems facing federal courts and their limited resources? Since when did decades-old $1,200 student loan debts become a federal priority?
In Aker's case, what seemed more mind-blowing was Judge Lynn Hughes's order that he reimburse the U.S. Marshals $1,258 for the cost to arrest him. Unfortunately, Karni says, that's pretty common, too.