New Yorkers sued by debt collectors can now get legal advice from non-lawyers — here’s what that could mean for low-income consumers across the country

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New Yorkers facing debt-collection lawsuits are ready to get a little extra help in the wake of a federal court ruling — and some observers say it could translate to a win for consumers across the country, whose Have basic legal questions, but can’t afford lawyers.

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Upsolve, a non-profit organization that enables people to file for bankruptcy for free, wants to create a program that allows non-attorneys from lenders and third-party loan buyers facing debt-collection tasks. Basic advice for New Yorkers.

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The advice will also include suggestions on how to complete a one-page answer form so that self-representing borrowers can avoid a default judgment, an outcome that results from failure to respond to a lawsuit. Default judgments can lead to wage garnishments, bad credit-report dings, and potential bankruptcy. According to the court papers, the volunteers will give advice after the training.

These cases may account for one-quarter of the caseload in New York, and many are answered, Upsolve said in court papers.

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But given New York state’s rules against the unauthorized practice of the law — and, in particular, restrictions on non-attorneys providing legal advice — Upsolve asked the state to prevent enforcement against the organization and any trained volunteers. filed suit. A Bronx reverend who wanted to provide debt-collection lawsuit advice to members of the community also filed suit.

Judge Paul Crotty of the Southern District of New York granted a preliminary injunction Tuesday that barred the New York Attorney General’s office from enforcing rules, for now, on unauthorized law practice against plaintiffs or his volunteers when it comes to debt. Came in for legal advice – Collection reference.

Plaintiffs had a protected free speech right to be advised, and the state’s rules on unauthorized law practice weren’t narrow enough, Crotty said. In addition, the judge said, the program would “help reduce the avalanche of unanswered debt collection cases while minimizing the risk of consumer or moral harm.”

Crotty stresses that their protections do not apply if volunteers roam outside the limits of their training. Crotty said the attorney general’s office has not announced any plans to prosecute the program. The office did not immediately respond to a request for comment.

Although people are guaranteed the right to a defense attorney in criminal cases, no matter the size of their wallet, there are no such guarantees for civil lawsuits, including those related to debt recovery – and attorney’s fees are prohibitive. Can get expensive.

“If you’re poor and can’t afford a lawyer, you live in a different legal system than everyone else,” Rohan Pavuluri, CEO of Upsolve, told MarketWatch. The decision was “a huge step forward” for the concept of equal justice, Pavuluri said, but he declined to comment on any broader applications.

Concerns about ‘unexpected consequences’

Between the trial’s filing in January and the decision this week, the case has attracted attention and amicus briefing from law professors, advocacy groups and legal-services providers. Many supported Upsolve’s bid, but some opposed it.

“We are disappointed in the decision, and we are concerned about the unintended consequences of implicating low-income New Yorkers and New Yorkers of color into a below-par legal-advice model without any external oversight or accountability,” said attorney Matthew Brinkerhoff. he said. , which is representing organizations including Legal Services NYC.

“A better solution would be to once and for all crack down on predatory debt-collection practices, such as sewer serviceWhich turn our courts into debt-collection mills,” he said.

Groups backing Upsolve’s bid said cash-strapped litigants needed help and that state regulations on business licenses got in the way, as they did in other states.

Robert McNamara, a senior attorney at the Institute for Justice, a liberal non-profit public-interest law firm, said the ruling raised arguments challenging the licenses of dietitians, counselors and veterinarians on cases pending in other courts.

“The government doesn’t silence people just because it is worried in the essence that something bad will happen if people listen to them,” he said.

Of course, faulty law and order, flawed legal documents and dishonest representation can harm people badly.

But McNamara said the ruling was not authorizing anything like that, and that the law licenses were not in jeopardy. He said the profession includes drafting legal documents, court arguments and other duties beyond giving advice.

Plus, McNamara said, people without a law license serve up their legal two cents all the time. “It is only given to rich people, and the person giving the advice is a business manager or a financial advisor,” he said.

Another organization that supported Upsolve’s proposal was Fordham Law School’s National Center for Access to Justice.

“The Upsolve case makes clear that in almost every state in the country, the judiciary and the bar should immediately consider withdrawing the antiquated laws that still make it a crime today – for people to talk to each other about the law. So, the organization’s executive director, David Udell, told MarketWatch.

“Just as we are all free in this country to give each other basic medical advice about choosing between Advil and Tylenol, the Upsolve decision recognizes that we are also free to give each other basic legal advice. — for example, to tell a landlord to return a security deposit, to ask an employer to pay overtime, or to appear in court on a given day,” Udell said.

To be sure, some New York-based legal-services organizations were skeptical of Upsolve’s efforts. The legal system could certainly access more services for those with lower incomes, but not necessarily a “lack” of services, he said in court papers. Organizations, he said, rarely turned down people who needed help responding to debt recovery lawsuits.

He said people without law licenses assist with the work, including paralegals and law students, who are trained and supervised.

other states, such as Arizona And UtahUpsolve’s lawyers, said Upsolve, allowed a very limited number of instances in which non-attorneys could help an individual in legal bondage.

Opposing organizations said the major difference was that Upsolve’s “proposed model is in stark contrast to these non-attorney regimes, which are all subject to oversight and regulation aimed at ensuring standards and protecting the public.”

Pavuluri doesn’t see it that way. “There’s no way we’ll have access to equal rights under the law unless we expand the supply” of those who can help, he said.

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