Utah has begun piloting a new chatroom-like system for small claims cases, known as online dispute resolution. - court justice
Samantha Thompson is among the many people who struggled financially during the COVID-19 pandemic.
Four weeks later, Thompson received notice that a judgment had been entered against her: She now owed Action Rent to Own the $671.42 for the original loan and interest, plus another $324 to cover the company’s court fees.Unbeknownst to her, Utah had begun piloting a new chatroom-like system for small claims cases, known as online dispute resolution.
Rather than reducing the incidence of parties failing to engage in small claims cases, the rate of default judgments—court rulings in favor of one party because the other failed to respond—has increased under online dispute resolution, The Markup found.
That means payday lenders are winning more cases without the people they’re suing ever having responded to the lawsuit. Our analysis of West Valley City Justice Court case resolutions is based on two years of case disposition data immediately before the pilot program—from September 2016 to September 2018—and nearly two and a half years of data after the switch—from September 2018 through January 2021.
The most frequent filer in the court, payday lender Red Rock Financial, saw a significant drop in its default rate, from 72 percent prior to online dispute resolution to 62 percent under the system.It should be noted that our data for Orem City Justice Court covers only a year and a half of cases, less than our analysis of West Valley City Justice Court, and that we are missing data for Orem City Justice Court for all cases filed between September 2018 and August 2019 .
“The more efficient the system, the lower the marginal cost of debt collection, the more likely that repeat, high-interest lending predators will use the system to pursue borrowers,” said Chris Peterson, a University of Utah law professor who studies debt collection practices in the state. Frequent plaintiffs like Action Rent to Own, however, are intimately familiar with online dispute resolution. The company had filed 363 small claims cases under the online dispute resolution system in West Valley City Justice Court by the time it sued Thompson in September 2021.
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