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Post: : New Yorkers sued by debt collectors can now get legal advice from non-lawyers — here’s what that could mean for low-income consumers across the country

New Yorkers facing debt-collection lawsuits are poised to get a little extra help in the wake of a federal court’s ruling — and some observers say it could translate to a win for consumers across the country who have basic legal questions but can’t afford a lawyer.

Upsolve, a nonprofit organization enabling people to file for bankruptcy on their own for free, wanted to create a program that would let non-lawyers give basic advice to New Yorkers facing debt-collection actions from lenders and third-party debt buyers.

The advice would include tips on how to complete a one-page answer form so borrowers representing themselves could avoid default judgments, an outcome resulting from failure to respond to a lawsuit. Default judgments can lead to wage garnishment, nasty credit-report dings and potentially bankruptcy. Volunteers would offer the advice after training, according to court papers.

These cases can constitute one-quarter of the caseload in New York, and many go answered, Upsolve said in court papers.

But eyeing New York state’s rules against the unauthorized practice of law — and, specifically, the ban on non-lawyers providing legal advice — Upsolve sued to block the state from enforcing them against the organization and any trained volunteers. A Bronx reverend who wanted to give debt-collection lawsuit advice to community members also sued.

Southern District of New York Judge Paul Crotty granted a preliminary injunction on Tuesday that restrained the New York attorney general’s office from enforcing the rules, for now, on unauthorized law practice against the plaintiffs or its volunteers when it came to legal advice in the debt-collection context.

The plaintiffs had a protected free-speech right to give advice, and the state’s rules on unauthorized law practice were not narrow enough, Crotty said. Besides, the judge added, the program “would help alleviate an avalanche of unanswered debt collection cases, while mitigating the risk of consumer or ethical harm.”

Crotty emphasized his protections didn’t apply if the volunteers veered outside the limits of their training. The attorney general’s office hasn’t announced any plans to sue over the program, Crotty noted. The office did not immediately respond to a request for comment.

Though people are guaranteed the right to a defense lawyer in criminal cases no matter the size of their wallet, there’s no such guarantee for civil lawsuits, including those relating to debt collection — and attorney fees can be prohibitively expensive.

“If you are poor and can’t afford a lawyer, you live in a different legal system than everybody else,” Rohan Pavuluri, Upsolve’s CEO, told MarketWatch. The ruling was “a big step” for the concept of equal justice, Pavuluri said, but he declined to comment on any broader application.

Concerns about ‘unintended consequences’

Between the lawsuit’s January filing and the decision this week, the case garnered attention and amicus briefs from law professors, advocacy groups and legal-services providers. Many backed Upsolve’s bid, but some opposed it.

“We’re disappointed in the decision, and we remain concerned about the unintended consequences of relegating low-income New Yorkers and New Yorkers of color to a below-par legal-advice model with no external monitoring or accountability,” said attorney Matthew Brinckerhoff, who is representing organizations including Legal Services NYC.

“A better solution would be to crack down once and for all on predatory debt-collection practices, like sewer service, that turn our courts into debt-collection mills,” he said.

Groups supporting Upsolve’s bid said cash-strapped litigants needed the help and state rules connected to occupational licenses stood in the way, just as they did in other states.

Robert McNamara, a senior attorney at the Institute for Justice, a libertarian nonprofit public-interest law firm, said the ruling bolstered arguments on pending cases he has in other courts challenging the licenses for dietitians, counselors and veterinarians.

“The government doesn’t get to silence people just because it’s worried in the abstract that something bad will happen if people listen to them,” he said.

Of course, faulty lawyering, flawed legal documents and unscrupulous representation can badly harm people.

But McNamara said the ruling wasn’t authorizing anything like that, and that law licenses were not in danger. The profession involves drafting legal documents, court arguments and other duties beyond offering advice, he noted.

Besides, McNamara added, people without law licenses serve up their legal two cents all the time. “It’s just given to rich people, and the person giving the advice is a business manager or a financial consultant,” he said.

Another organization supporting Upsolve’s motion was Fordham Law School’s National Center for Access to Justice.

“The Upsolve case makes clear that in virtually every state in the country, the judiciary and the bar should promptly consider dialing back the antique laws that still make it a crime — to this day — for people to talk to one another about the law,” David Udell, the organization’s executive director, told MarketWatch.

“Just as we are all free in this country to give each other basic medical advice about whether to choose between Advil and Tylenol, the Upsolve decision holds that we are also free to give each other basic legal advice — for example, to tell the landlord to return a security deposit, to ask an employer to pay overtime, or to show up in court on a given day,” Udell added.

To be sure, some New York-based legal-services organizations did have misgivings about Upsolve’s efforts. The legal system could surely use more services for low-income people, but there wasn’t necessarily a “dearth” of services, they said in court papers. The organizations rarely, if ever, turned away people who needed help replying to debt-collection lawsuits, they added.

People without a law license assist in the work, including paralegals and law students who are trained and supervised, they said.

Other states, like Arizona and Utah, allowed very limited instances in which non-attorneys could help a person in a legal bind, Upsolve’s lawyers said.

The big difference, the opposing organizations said, was that Upsolve’s “proposed model stands in stark contrast to these non-attorney regimes, which are all subject to oversight and regulation that aim to ensure standards and protect the public.”

Pavuluri doesn’t see it that way. “There’s no way we will reach equal rights under the law unless we expand the supply” of people who can help, he said.

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