The Wall Street Journal documents debt buyers' new strategy of resorting to the courts rather than standard collection techniques, with thousands of cases this year in the Bronx alone. This is not surprising—debt collection costs money and is fraught with potential liability if done wrong.

Larry Ribstein notes that the problem of debtors having no representation in courts is a function of lawyer licensing regimes that limit the supply of legal assistance. Indeed, this is true; he forgets, however, the public-choice aspect of the legal cartel's response to the problem: rather than end the cartel that is causing the problem, the legal community is rallying behind the idea of taxpayer subsidization of lawyers in these civil cases, i.e., "civil Gideon." Hearings are being held on the latter (without regard to the enormous direct and indirect costs of such a public policy) with no one mentioning the basic market reforms that could solve the problem.

Another irony is that the legal community is fighting against systems of alternative dispute resolution such as mandatory arbitration that would both reduce costs to consumers and improve the results for unrepresented debtors. As Sarah Cole and I documented in 2008, arbitration rules require scrutiny of creditors' claims even when the debtor defaults on the legal process; as a result, while debtors nearly invariably lose in claims court, a substantial number win reductions in debt even when they default. And because creditors save money through mandatory arbitration because they have less worry of frivolous lawsuits, consumers win with lower interest rates and higher benefits. Alas, Dodd-Frank includes provisions for regulation that will almost certainly ultimately bar mandatory arbitration in credit agreements, making consumers—and debtors—worse off.