Noting a rise in credit card delinquencies, the Consumer Financial Protection Bureau (CFPB or Bureau) released a new blog post analyzing civil judgments, the final recourse for creditors to collect on unsecured debt. According to the CFPB, civil judgments are “”both common and unevenly distributed.””

Specifically, the CFPB reports that civil judgments are:

  1. Almost twice as common as bankruptcies.
    • Bankruptcy filings are sometimes used as a measure of consumers struggling with debts, but the CFPB’s research shows struggling consumers are more likely to be sued by creditors than to seek bankruptcy protection.
    • According to the CFPB, consumers filing for bankruptcy protection also differ from consumers affected by civil judgments. Bankruptcy is primarily used by people with assets. In contrast, people who have a civil judgment filed against them are much less likely to have a mortgage or auto loan.
  2. Twenty times more common in some states than others.
    • Civil judgments are governed by state law. Some states prohibit wage garnishment for consumer debts, while others only protect the federally required minimum from garnishment. There are also differences across states in the cost of filing suit.
    • The CFPB found that states that protect more wages from garnishment have fewer civil judgments. But the CFPB also noted that its data suggests increasing wage garnishment protections also reduces credit card limits.
  3. More concentrated in areas with a higher percentage of Black residents.
    • The Bureau’s research found that even comparing across areas with the same delinquency rates, areas with a higher share of Black residents have more civil judgments.

Troutman Pepper will continue to monitor the CFPB’s activity in this area and report if the Bureau’s findings prompt more enforcement actions.