Financial Wellbeing

The Setting: 

What We’ll Learn:

Research Team:
Access to Justice Lab
Mothers Outreach Network

The Setting: The Financial Distress Research Project is a partnership among multiple branches of government, academia (students and professors), multiple non-profit service providers, and the private sector. The RCT investigates the effectiveness of attorney representation, financial counseling, and self-help materials on financial wellbeing.

The Problem: For many individuals and families in the United States, the problems of debt deteriorate into legal challenges, particularly into debt collection lawsuits and the possible need for bankruptcy. Debt collection lawsuits and especially bankruptcy proceedings, which require completion of a financial management course of questionable value, are challenging for the unassisted. Meanwhile, documentation practices in the consumer debt industry, along with some transparently abusive practices, suggest that many collection lawsuits could and should be successfully defended. But we will never have enough lawyers to offer a traditional attorney-client relationship to all in need, particularly because debt is considered less of a priority for legal services providers. Thus, we must find a way to deliver legal assistance through other methods. This project investigates the provision of paper-based self-help materials that implement the state of the art in adult communication, psychology, sociology, and behavioral economics.

The Questions: First, how closely does provision of paper-based state of the art legal self-help materials approximate the court and socioeconomic outcomes produced by an offer of a traditional attorney-client relationship? Second, does the financial management course required to complete bankruptcy provide any benefit to consumers?

The Study: The A2J Lab randomized individuals recently sued in a Connecticut small claims court debt collection proceeding to one of four conditions. Group 1 received state-of-the-art self-help materials and an incentive to undergo standard bankruptcy financial counseling. Group 2 receive state-of-the-art self-hep materials and an incentive to undergo placebo counseling addressing food safety. Group 3 received an offer of a Connecticut Legal Services attorney and an incentive to undergo standard bankruptcy financial counseling. Group 4 received an offer of a Connecticut Legal Services attorney and an incentive to undergo placebo counseling addressing food safety. The self-help materials covered the same topics as the Connecticut Legal Services attorney, namely, defense of the debt collection lawsuit, diagnosis as into either bankruptcy or debt management, and (if chosen) assistance in a bankruptcy proceeding. A2J Lab researchers will collect outcomes from small claims court files, from participant surveys, and from de-identified credit attributes from a credit reporting agency.

What We’ll Learn: A comparison of financial health across our four groups will provide gold-standard evidence regarding the effectiveness of self-help packets, financial counseling, and attorney representation. The result will be the richest and most detailed dataset ever conducted in an evaluation of what works for individuals whose debt problems have become legal problems.

Research Team: 
D. James Greiner, Faculty Director, Access to Justice Lab; S. William Green Professor of Public Law, Harvard Law School
Dalié Jiménez, Professor of Law, University of California, Irvine School of Law
Lois R. Lupica, Emeritus Professor of Law, University of Maine School of Law; Lead Designer, Community Economic Defense Project

The Setting: This study builds on a pilot RCT in Boston, The Problem of Default, Part I, a partnership with the Volunteer Lawyer’s Project of the Boston Bar Association. That study demonstrated that sending mailings from a legal services provider to debt collection defendants encouraging them to answer lawsuits and to appear in court roughly doubled answer and appearance rates. Those letters included cartoons and “don’t-get-tricked” messaging. They incorporated the state of the art in adult communication, psychology, sociology, and behavioral economics. The envelopes also included three copies of an answer form with instructions as well as pre-addressed envelopes. One treatment condition even had stamps on the pre-addressed envelopes. The question was, how much of the increase in answer and appearance rates was due to particular aspects of these mailings, and how much would have occurred through the mailing of any kind of letter?

The Problem: Default rates in debt collection lawsuits are high, as high as 90% or more in some jurisdictions. Default may result in loss of winnable lawsuits, and it may undermine confidence in the judicial system because it prevents courts accustomed to adversarial adjudication from deciding cases on the merits. Court filings ordinarily include only the defendants’ snail mail addresses, limiting the ways through which to reach defendants.

The Questions: What combination of messaging, envelope design, letter content, and other aspects of mailings is most cost effective in inducing debt collection defendants to contest lawsuits?

The Study: The study, which occurs in courts in Utah, Maryland, and Massachusetts, randomizes aspects of mailings sent to debt collection defendants. Outcomes include mailing costs, answers rates (in courts that requires answers), and default rates.

What We’ll Learn: The study will produce knowledge on what combination of messaging, envelope design, letter content, and other aspects of mailings is most cost effective in inducing debt collection defendants to contest lawsuits.

Research Team:
D. James Greiner, Faculty Director, Access to Justice Lab; S. William Green Professor of Public Law, Harvard Law School
Matthew Stubenberg, Innovator in Residence, William S. Richardson School of Law at the University of Hawaii

Resources:
The Problem of Default, Part I
Self-Help, Reimagined, 92 Ind. L. J. 1120 (2017)

The Setting: The study investigates the effect on debt collection defendant outcomes of proactive provision of information, simplified forms, and encouragement to visit the Hamilton County Help Center (“HC”).  The interventions in this study attempted to combine simplification and nudges, two access to justice tools, to improve take-up of the HC.  Some research has found that such a combination had an effect in other disciplines.  The HC provides free tiered legal service, including limited-scope legal advice, based on the needs of those who access it.  Without proactive outreach, it is unclear that defendants in debt collection matters, a common category of litigant that never engages with their case, know that the HC exists.

The Problem: Typical plaintiffs in a debt collection matter are large companies, credit card firms or debt collecting businesses, for example.  In Hamilton County, OH, the site of this study, defendants in debt collection matters must respond to the initial filing with a legal pleading called an “answer” to contest the matter. If they do not do so during the prescribed time period, they typically lose the case via a default judgment for the amount the plaintiff requested.  In the answer, a defendant can assert legal defenses to the claim.  There is no general federal or state right to counsel in civil litigation, including in debt collection matters,^[1] making the services of the HC possibly important for low- and moderate-income defendants. 

The overwhelming majority of cases filed against individuals in debt collection matters result in default judgements.  When an individual defendant representing themselves does respond, they rarely assert any defense or file a procedurally sufficient answer.  This study hypothesizes that a portion of debt collection cases could be defeated if defendants filed procedurally sufficient answers and asserted defenses. 

^[1] Lisa V. Martin, Securing Access to Justice for Children, 57 Harv. Civ. Rts. – Civ. Liberties L. Rev. 616, 636 (2022) (Martin argues that informing indigent legal actors about rights and remedies and how to navigate legal systems, is important to democracy). 

The Questions: This study examined the effect of sending by mail legal information about the debt collection case process, including forms and instructions to file an answer and assert appropriate defenses, and encouragement to seek out assistance at the HC.  It was important to the HC that individuals come to the HC for help. The HC hypothesized that it could guide defendants with legal advice, even if the defendant’s legal remedies were associated not with “winning” the case but rather with mitigating its effects.  The HC hoped to draw on the behavioral science literature that suggests coupling nudges with simplified processes may result in increased take-up where those two solutions on their own likely will not.^[1]  The HC also hoped to use outreach to inform the community about its existence to appropriately signpost a promising path to seeking legal advice and guidance.^[2]   

^[1]See, Elizabeth Linos, Vikash Reddy, & Jesse Rothstein, Demystifying College Costs: How Nudges Can and Can’t Help, Cal. Pol’y Lab, Working Paper 2021-7. 

^[2] Nigel J. Balmer, Pascoe Pleasence, Tenielle Hagland, & Cosima McRae, Law…What is it Good For? How People see the Law, Lawyers and Courts in Australia, Vict. L. Found. (2019), at 53.

The Study: The A2J Lab worked with the HC to develop and launch an evaluation of this proactive outreach using a randomized control trial (“RCT”). In the RCT, the A2J Lab selected a random sample of defendants in new debt collection filing and then randomly assigned approximately half to receive a mailing with information about the debt collection proceeding, a simplified answer form, and encouragement to visit the HC (“Extra Information Group”) versus half to receive no mailing (“Status Quo Group”). The A2J Lab collected data on case dispositions from the Clerk of Courts and visits to the HC from the HC. The study produced the intended volume of 600 participants in December of 2023.

What We Learned: There was no statistically significant effect from the mailings on either the disposition the debt collection defendant experienced or the frequency of HC visits. Thus, the mailings in this study, unlike those in previous research on mailings to debt collection defendants, altered neither defendant behavior nor events in the debt collection case.

Research Team:
Hamilton County, OH Help Center

Resources:
Final Report: Avoiding Default and Asserting Affirmative Defenses in Debt Collection Matters