Utah’s Chatroom Justice Program Benefits Payday Lenders the Most
It took a year and a half for Utah court authorities to make those little changes
Tomkins received a court summons in September 2021 that had the same perplexing language and organization that University of Arizona researchers had identified as a major hurdle a year before.
That summons was in use until Utah produced a revised version with a reduced URL, a QR code that links users to the online conflict resolution website, and the contact information for the court on Feb. 12 of this year. The third of five pages of the revised summons still does not reference online dispute resolution.
According to a University of Arizona usability research, the first thing litigants see when glancing at a summons should be information on using online dispute resolution.
Tomkins is once again struggling to pay rent and food due to a court order garnishing her salary, and the default judgment has harmed her credit score, making it even more difficult for her to acquire a $5000 max amount loan from anybody other than a payday lender.
Jessica Tomkins’s case
Jessica Tomkins was one of the numerous persons who suffered financial hardship as a result of the COVID-19 outbreak. During a particularly difficult period last summer, the Grantsville, Utah, resident’s wages did not even fund rent and food. She took out a payday loan from NJS Lending in nearby West Valley City, feeling stuck.
Then her spouse became jobless, and she had to make a difficult decision.
“Having a roof above my head is more important to me than making a payment on a payday loan,” Tomkins added. “I’m sorry, but I’ve fallen behind.”
A private investigator arrived at the couple’s house two months after the loan was taken out to serve her with a summons for a small claims complaint brought by NJS Lending.
“If you don’t pay them, they will take you to court,” she explained. However, there was no day or venue for her hearing on the documents, which The Markup reviewed.
Tomkins received notice four weeks later that a judgment had been obtained against her, stating that she owed NJS Lending $671.42 for the original loan and interest, plus $324 for the company’s court fees. The court ordered NJS Lending to withhold her salary to retrieve the money.
Since it turns out that destroying things and moving quickly broke some critical things. Unbeknownst to her, Utah has begun testing an online dispute resolution system for small claims cases, similar to a chatroom. Its goal is to make the courts more accessible to low-income litigants by removing the requirement that they appear in court at a specific time, which is often during work hours and often far from their homes.
Online dispute resolution allows parties to communicate with one another from any location and at any time. Tomkins, on the other hand, missed the notification, which was in the middle of the third page of the five-page court summons packet, warning her that if she didn’t register for the online dispute resolution system within 14 days, a default judgment may be recorded against her.
The warning was followed by a fifty-five-character web link for the online dispute settlement mechanism that was case-sensitive. The package also included a separate, thirty-one-character web URL for the system on the next page. When The Markup notified Tomkins about online conflict settlement, she stated, “It was a shock. I had no idea such sort of thing existed.”
According to The Markup, the switch to the online resolution of disputes has had serious effects for many of the Utah residents it was designed to assist, and the state’s courts have been slow to enact potential improvements.
The rate of default judgments—court judgments in favor of one party because the other refused to respond.
Payday lenders have been the big winners.
The introduction of online dispute resolution in the West Valley City Justice Court, which has been using the program since September 2018, coincided with a sustained increment of cases that end in default judgments—from about 43% before online dispute resolution to 59 percent after. During the two and a half years of online dispute settlement that The Markup studied, there’d be 603 fewer default judgments in court if the default rate had remained at 43%.
Small lawsuits filed by corporate plaintiffs such as payday lenders and other companies drove almost all of the change. Individual plaintiffs’ default judgment percentage remained largely unchanged, at roughly one in five. However, the default rate for institutional plaintiffs increased dramatically, from 46 to 62 percent of instances. There’d be 583 fewer default judgments throughout the time we studied if the default rate for institutional plaintiffs had remained constant at 46%.
This means that payday lenders continue to win cases even though the persons they are suing have never responded to the litigation.
From September 2018 to January 2021, only five payday lenders were responsible for 83 percent of all complaints filed in West Valley City Justice Court. The companies did not respond to calls for comment.
“I think it’s more in the defendant’s because it allows them more time to reply,” NJS Lending owner Misti Brunelle said. “Only a small percentage of the time did anybody show up for in-person court.” … [Now] they don’t have to miss work, they don’t have to hire a babysitter; they can take a lunch break and make phone calls for 10 to 15 minutes” to sort out their differences.
It’s unclear how many people missed the sign-up notification, but The Markup looked into dozens of cases in which payday lenders filed motions for default judgments after respondents missed the fourteen-day deadline to register for online dispute resolution.
Our analysis of case resolutions in West Valley City Justice Court is based on data from two years before the pilot program, from September 2016 to September 2018, and nearly two and a half years following the switch, from September 2018 to January 2021.
Although Utah has implemented the program in 29 courthouses and is growing, the majority of them began too recently for us to undertake fair trend analysis. Only the Orem City Justice Court has adequate data for a comprehensive analysis, aside from the West Valley City Justice Court.
We discovered that the default rate there fell marginally after the court implemented an online conflict resolution mechanism in August 2019—from 51% of cases in August 2019 to 46 percent in January 2021.
The court’s most frequent filer saw a considerable decline in its default rate, which dropped from 72% before online resolution of disputes to 62% after it was implemented. A request for information from the corporation was not returned.
It should be noted that our data for Orem City Justice Court only covers a year and a half of cases, which is less than our research of West Valley City Justice Court, and that we are lacking data for all cases filed between September 2018 and August 2019 in Orem City Justice Court.
Unlike other states, Utah penalizes those who do not use the online system.
In recent years, dozens of individual courts across the country, as well as some states, such as Ohio, Michigan, and New Mexico, have introduced online dispute resolution systems.
However, Utah is unique in that it is the only state to do so. Not registering for online dispute settlement can result in an instant default judgment, which is a serious penalty that can result in income garnishment and a ruined credit score.
In some regions, the service is either wholly voluntary, or the matter is just scheduled for a regular court hearing if a party fails to register for any reason. Debt litigation specialists believe the growth in default judgments against defendants is unsurprising given Utah’s system’s design and implementation.
Defendants may not even be aware that the system exists, let alone that they are required to utilize it, as Tomkins claims were the case in her case. Researchers studying the system’s usability advised Utah court officials in 2020 that the documentation defendants like Tomkins received when they were served was so complex that it was likely to lead to “possible widespread impact prohibiting actual users from participation in the ODR process.”
However, frequent claimants are well-versed in online dispute resolution. By the time it sued Tomkins in September 2021, the corporation had filed 363 small claims cases in West Valley City Justice Court using the online dispute resolution system.
Brunelle, of NJS Lending, says that online dispute resolution has resulted in more settlements with her clients and that she’s agreed to settlements for less than the original amount, as well as liberal payment plans with borrowers paying as little as $10 per month.
“Anyone with whom I have any sort of communication, I strongly suggest them to use online conflict resolution since it is in their best interest 100 percent of the time,” she stated.
Brunelle’s firm has witnessed an increase in default judgments under the new system, despite her belief that online dispute resolution benefits defendants.
NJS Lending cases resulted in default judgments 49 percent of the time before the advent of online dispute resolution in West Valley City Justice Court.
The company’s default judgment rate increased to 65 percent under the system, a figure that spanned hundreds of instances.
Payday lenders dominate Utah’s small claims system, and the state has mostly turned a blind eye to them.
Utah court officials say they’ve noticed an increase in default judgment rates since the online dispute resolution system went live, and they’re concerned about the pattern.
“We wanted to reduce that. Judge Brendan McCullagh, who administers West Valley City Justice Court, stated, “We have not yet done it. I’m not sure we’ve made the system completely easier for plaintiffs in a way that encourages them to [continue pursuing debt collection] more.”
“I believe they were already doing it.”
According to the organization Center for Responsible Lending, Utah’s legislature has left its payday lending business largely unregulated compared to other states, and the state has the second-highest mean annual interest rate for payday loans in the country—652 percent.
In light of this, debt experts told The Markup that any system that makes it simpler and faster to litigate debt collection litigation is likely to disfavor low-income people. Since at least 2020, scholars and detractors have been warning Utah policymakers about these issues.
In the following months, the University of Arizona released the findings of their user testing study, which was done at the request of the Utah Courts. The research “showed that typical online dispute resolution users had significant difficulty transitioning from the affidavit and summons to the online dispute resolution website,” and the authors warned that the problems could have “potential widespread impact… preventing actual users from engaging in the ODR process.”
The researchers suggested gathering details about the online dispute resolution system and how to access it more accessible on summons paperwork, shortening the URL litigants would have to manually enter and include a QR code that would guide users to the site.