Debt Collection Lawsuits in Davidson County, TN

The ability for businesses to use the courts to collect debts helps
ensure they remain financially solvent. Ensuring that people in debt
meet their financial obligations can safeguard access to and
mitigate increases in the costs of credit (or other services) for
others. (1) However, the over- or misuse of lawsuits involves
trade-offs for both courts and defendants. In this report, we
explore consumer debt collection lawsuits in Davidson County,
Tennessee. Using Davidson County civil court data for January 2016
through March 2023, this study explores how creditors use Nashville
courts to collect consumer debt, the kinds of debts most likely to
end up in court, and who is most affected. A similar review focused
on Shelby County is available
here.

Key Findings

Key Findings

At least 112,000 debt collection cases were filed in Davidson
County civil courts between January 2016 and March 2023
(Figure 1)
— including about 12,000 in 2022. Between 2016 and
2018, the number of cases steadily climbed (Figure 2) — peaking at over 19,500 yearly cases. Filings declined
precipitously during the pandemic as courts closed or restricted
access to courtrooms. (2) As of 2022, the number of debt collection
filings was almost 40% lower than the peak in 2018. (3)

Debt Collector Types

High-interest lenders and debt buyers filed over two-thirds of
debt collection lawsuits in Davidson County between January 2016
and March 2023
(Figure 1). Lawsuits by high-interest lenders alone
made up 38% of all filings over this period — followed by debt
buyers and 3rd-party collectors, which accounted for another almost
30%. By 2022, these made up even greater shares of total cases – 40%
and 33%, respectively. (3) (See
Collector Types text box for additional information
on each type of collector.)

Compared to Shelby County — the only other one for which we have
data — Davidson County debt collection filing rates were similar
but distributed quite differently across collector types (Figures
3 and 4). While high-interest lenders accounted for
38% of all debt collection cases in Davidson — or about 63 cases per
1,000 residents, they made up only 12% — or 21 cases per 1,000
residents — in Shelby County. Debt buyers/collectors, medical
providers, and auto lenders made up larger shares with higher case
filing rates in Shelby County than in Davidson. (3) (4)

Medical and high-interest lender debt collection suits in
Davidson County were still below pre-pandemic levels in 2022,
while other types were about the same as before the pandemic (Figure 5). All types of cases declined
significantly at the onset of the pandemic (Figure 6). Those by debt buyers/3rd-party collectors and auto lenders
jumped back up to pre-pandemic levels within months. Others more
steadily climbed back up, while medical debt suits remained low —
consistent with other studies that show national declines in medical
debt during the pandemic. (3)

Top Plaintiffs

A few companies file most debt collection cases in Davidson
County – mostly high-interest lenders and debt buyers
(Figure 7). Between January 2016 and March 2023,
Advance Financial, a Tennessee-based high-interest lender, filed
over 17% of cases. In 2022, Speedy Cash, another high-interest
lender, overtook Advance Financial in filings — accounting for 13%
of all debt collection lawsuits. In both time periods, just seven
plaintiffs accounted for about half of all debt collection
lawsuits. (3)

A few plaintiffs also account for most lawsuits within almost
every debt type (Figures 8 and 9). For example,
between January 2016 and March 2023, the top three plaintiffs in
each category brought 76% of all high-interest lender cases, 61% of
debt buyer cases, 48% of bank and credit card suits, and 38% of auto
lender cases — with similar proportions in 2022. Medical debt cases
tended to have a more even mix of plaintiffs over the entire period.
Still, as medical debt cases declined (Figure 5),
lawsuits became more concentrated among a few plaintiffs. By 2022,
Middle Tennessee Imaging accounted for 53% of medical debt
filings. (3)

Representation

An attorney almost always represents plaintiffs in Davidson
County debt collection lawsuits, while defendants rarely have
legal representation
(Figure 11). Across all collector types, plaintiffs
had representation about 99% of the time and defendants about 0.6%.
These rates varied little across collector types. (3)

Garnishment

Settlements come in many ways — including garnishment, in which
debts are deducted straight from a defendant’s paycheck or bank
account. For example, cases can be dismissed, delayed, or settled between
the parties without court action. If a court rules in a plaintiff’s
favor, it determines a settlement that can include the debt, court
costs, attorney’s fees, and interest. With approval from the court,
collectors can use wage garnishments and asset seizures to recoup
these settlements.

About one-third of debt collection lawsuits in Davidson County
between January 2016 and March 2023 involved a garnishment. These rates varied across debt types. High-interest lender cases
were most likely to lead to a garnishment, and half of those
lawsuits during this period did so (Figure 12). (3)

Affected Neighborhoods

Defendants in a handful of Davidson County zip codes had debt
collection lawsuit rates well above the county-wide average —
including 37207, 37218, 37208, 37115, and 37076
(Figures 13 and 14). Residents of
these five zip codes made up about 31% of all cases against Davidson
County residents but only 22% of the county’s population (Figure 15). The rate of debt collection lawsuits against defendants in 37207
(Northeast Nashville) — 220 cases per 1,000 residents — was about
seven times higher than for 37215 (Green Hills and Forest Hills),
where it was just 26 cases per 1,000. (3) (4)

Debt collection lawsuit rates across zip codes varied more for
some debt types than others (Figures 16-21). For example, the rate of
high-interest lender lawsuits varied from a high of 87 cases per
1,000 residents in 37208 (North Nashville) to a low of just 5 cases
per 1,000 in 37215 (Green Hills/Forest Hills). However, the range
was much tighter for bank and credit card lawsuits – 27 cases per
1,000 residents in 37214 (Donelson) compared to 7 cases per 1,000 in
37212 (Hillsboro Village/Vanderbilt). These variations likely
reflect the extent to which different populations access different
types of credit options — with banks and credit cards more
universally accessed than high-interest lenders. (3) (4)

Among nearly 40 neighborhood characteristics we explored, just a
handful emerged as having a meaningful association with debt
collection case filing rates. We looked at 39 zip code-level metrics representing demographics,
family structures, economic well-being, educational achievement,
workforce and jobs, transportation, housing, use of services and
supports, population changes, and health. Some – but not all – were
associated with higher rates of debt collection lawsuits filed
against defendants living in those zip codes. (3) (4) (6) (7) (8)
See the
Appendix
for a full list of the metrics we explored, definitions, sources,
and results.

The Nashville zip codes with the highest lawsuit rates had more
black residents, single-parent families, lower incomes and
education levels, poorer health, and greater reliance on food
stamps
(also known as the Supplemental Nutrition Assistance Program or
SNAP) (Table 1). These findings are consistent with
similar studies from other states. (4) (5) Meaningful associations
with these characteristics, however, varied across debt types:

• High-interest lender, medical debt, and auto lender case rates
  shared many of the same associations as overall debt collection
  case rates. Notably, higher high-interest lender case rates were
  also associated with higher rates of poor mental health. Higher
  medical debt case rates were associated with higher rates of
  disability and adult diabetes, and higher auto loan case rates
  with higher child poverty and lower access to broadband.
• Higher debt buyer/collector case rates were only associated with
  lower education and income levels.
• Bank and credit card case rates had no meaningful associations
  with the characteristics we explored.

What It Could Mean

These findings give us imperfect insights into debt collection
practices and financial security.

Financial Security

Our analyses give us some insights about who in Nashville may be
most affected by different types of debt, variations in access to
credit, and overall financial security. The following are some potential explanations, but all would
require further investigation to confirm:

Possible Explanations for Our Findings

• Residents of lower-income neighborhoods need access to small
  loans but have difficulty paying them back — at least as the
  options are structured today.
• Predictably, those with lower incomes may be more likely to have
  delinquent debt. The absence of meaningful associations with
  poverty rates, however, may mean that certain types of debt are
  a greater challenge for those with lower incomes but above
  poverty thresholds. It may be that impoverished individuals have
  less access to the types of credit represented by these
  lawsuits, or access to public programs may protect them from
  specific types of debt (e.g., medical debt and TennCare
  coverage).
• The auto lender associations suggest that people with the lowest
  incomes — and those less able to afford other services like
  broadband — may be the most likely to take out loans they
  ultimately cannot afford to access a vehicle.
• Lawsuits by banks/credit cards and debt buyers/collectors seem
  to have a comparatively more widespread impact across
  neighborhood characteristics — likely reflecting the latter as a
  traditional credit option that could be for any number of
  expenses (including those covered by other debt types) and the
  former as encompassing all debt types.
• The results suggest that medical debt lawsuits – and, by
  extension, medical debt – in Davidson County may be associated
  with having more medical needs.

A
similar review of Shelby County cases
did not find all the same correlations.

Debt Collection Practices

Debt collection lawsuits may tell as much about business models
and debt collection practices as they do about delinquent debt and
financial security. There are no uniform standards for when a creditor may file a
lawsuit and no requirements for what types of efforts most creditors
must exhaust before suing someone (except
certain hospitals). As a result, these findings may partially reflect the degree to
which different kinds of collectors rely on courts as a routine
collection mechanism that allows them to garnish wages and assets
directly. Prior studies show that certain collector types are more
likely to take debtors to court than others. (11) (9)

Regardless of what may be driving the lawsuits, they can create
challenges for both courts and the people sued. While the window covered by our data shows a decline in cases,
reports at a national and state level indicate an increasing
reliance on courts for debt collection. (5) (4) This can overwhelm
courts and divert resources from other civil cases. (7) National
studies also highlight several aspects of debt collection lawsuits
that adversely impact those sued, including:

• Notification — Individuals may never receive
  clear or proper notification of a lawsuit. As debts can be sold
  or contracted out to collectors, plaintiff names may not be
  familiar and get disregarded.
• Unchallenged Lawsuits — Nationally, most debt
  lawsuits go unchallenged. In a 2015 Consumer Financial
  Protection Bureau survey, about 15% of Americans contacted by a
  debt collector in the past year reported being sued. Of those,
  only about 26% attended the court proceeding. (7) Some reasons
  people may not attend include lack of notice or legal
  representation, receiving incorrect or misleading information,
  confusion about the alleged debt, resignation to an adverse
  outcome, and income, job, or travel constraints. (13)(14) When
  people don’t show up, courts often issue default judgments —
  ruling in favor of the plaintiff without any substantive review
  of the facts or defendant circumstances. (13) (7)
• Legal Representation — There is no guaranteed
  right to legal representation in civil suits, and — as our data
  show — many people who do challenge them are unrepresented.
  (14)(13) This often gives debt collectors an advantage, as
  non-lawyers may not have the expertise to challenge the
  plaintiff’s allegations. (14) (7) Plaintiffs often drop cases
  when defendants have representation. (13)
• Inaccuracies — Some studies have reported that
  suits are brought based on inaccurate or incomplete information
  about the debt.(13) (14) For example, suits may be brought to
  collect on debts against the wrong individual or on amounts that
  have already been paid off. A 2009 review by the Federal Trade
  Commission found that only about 6% of purchased debt nationally
  came with any documentation. (13)
• Added Costs — On top of the
  original debt and any fees and interest that accrue pre-lawsuit,
  court settlements often add attorney’s fees, court costs, other
  reimbursable expenses, and post-judgment interest. Any
  settlement in Tennessee is subject to a pre-determined
  post-judgment interest rate set by state law — currently at
  10.25%. (10) In default judgments, interest can significantly
  inflate this new total without the defendant’s awareness.(7)
  These settlements can drag on for years as Tennessee has no time
  limit for enforcing civil judgments, but they must be renewed by
  a judge every 10 years. (11)

Parting Words

Debt collection lawsuits are a legitimate business practice that
helps ensure people meet their financial obligations and businesses
stay afloat. However, when lawsuits are over- or misused, it can
create trade-offs for the court system and people facing lawsuits.
Court data provide a unique look into consumer creditors’ collection
practices and Nashvillians’ financial security. These insights
conjure additional questions to understand more about both.

Explore the Data

Explore neighborhood characteristics and compare debt types among
zip codes with the interactive dashboard below.