Analysis by The Markup, a data-driven newsroom covering Big Tech, suggests Utah’s decision to move payday disputes to online courtrooms has increased default judgments against defendants. Defaulting on these loans can lead to garnished wages and a lower credit score.

Why should we care?
Looking at the West Valley City Justice Court, The Markup saw default judgments increase from 43 percent before online courtrooms to 59 percent afterward. Five payday lenders accounted for 83 percent of cases filed in that court over the period analyzed. In part, default judgments may have increased because summonses against defendants had confusing instructions, and included 50-chracter, case-sensitive URLs to join virtual courtrooms. “It feels like you’re getting screwed,” said one defendant. These results can have major consequences beyond a specific geography or sector, and can seriously affect trust in finance writ large—especially since the introduction of tech negatively affected consumers’s experience. What’s more, this tech may have encouraged payday lenders to be more litigious than they would have been otherwise. “The more efficient the system, the lower the marginal cost of debt collection, the more likely that repeat, high-interest lending predators will use the system to pursue borrowers,” said Chris Peterson, a University of Utah law professor. Garnished wages and lowered credit scores can also keep borrowers indebted to payday providers, since other lenders might decline them from loans on the grounds of their shaky lending history. Beyond the need for regulatory changes, this reporting highlights the need for financial institutions to hold each other accountable: a push for accessibility throughout the financial experience, including remediation processes. Fintechs may think they exist in a world apart from companies like these payday lending groups; borrowers don’t see it that way.