California Debt Collection Lawsuits, Geography, Credit, and Race/Ethnicity: An Exploration

Claire Johnson Raba & Dalié JiménezJune 01, 2024

From 2009 to 2020, California state courts saw approximately 2.75 million debt collection cases, comprising a quarter of all civil court filings. Debt collection lawsuits have significant implications for individuals and communities. The broader community inequalities in debt lawsuits burdens are disproportionately experienced by non-White consumers and people in low-income communities. In California, where diverse demographics intersect with varying economic landscapes, understanding the relationship between debt collection, geography, credit and race/ethnicity is crucial.

Findings in this study led by Claire Johnson Raba and Dalie Jiménez, researchers with the Debt Collection Lab, focus on four counties in California — Fresno, Los Angeles, San Bernardino, and Santa Clara — over the period of 2017-2020. The researchers use credit reporting data from a nationwide consumer reporting agency to find that, for example,

Californians living in zip codes where 67% or more of the population identifies as Hispanic have among the lowest number of collection accounts on their credit reports on average and yet are sued in debt collection cases at rates that are more than twice as high as their White counterparts.

The study also finds that default judgments were entered against defendants in 70% of the cases in the sample, which is made up entirely of cases in which the defendant was served. The default rate varies by race, with White defendants defaulting in 67% of cases whereas Black defendants defaulted in 74% of cases. Regression analyses in the report suggest that these disparities cannot be fully explained by income alone.

The study sheds light on the pervasive challenges faced by marginalized communities in California’s debt collection courts. By examining the intersections of race, income, education, and family structure, the report reveals systemic disparities that impact legal outcomes and credit scores disproportionately. It urges courts and advocates to prioritize reforms that promote equity, enhance consumer protections and alleviate the burden of debt litigation on those least able to navigate the legal system effectively.

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