The Langel Firm dismisses $31,578 credit card lawsuit by debt-buyer, First American Investment Company, LLC, for its failure to prove debt's chain of custody.

This case illustrates the importance of scrutinizing your credit card debt chain of title. Generally, courts consider legal custody of the debt to be a threshold issue that must be resolved first before addressing the issue of your liability for the debt.

In the case reported today, (American Investment Company, LLC, an Assignee of Citibank v. N.D., 116326/2007) we successfully cross-moved to dismiss the case due to the debt buyer's failure to produce proof evidencing ownership of the debt.

We became involved in the case when American Investment's attorneys, Lacy Katzen, LLP, heavy-handedly sought to strike our client's Answer (before he retained us) and to enter judgment for his alleged failure to provide demanded information. In response, we immediately challenged American Investment's legal interest in the debt.

We argued that the case brought by First American and Lacy Katzen, LLP fell short in the following respects:

  • First American Investment Company, LLC lacked witness testimony to authenticate the proposed "Bill of Sale," and "Assignment and Assumption Agreement." Stated another way, First American failed to provide a foundation to establish when, how, and by whom the alleged assignment documents were made.
  • The documents did not identify the particular account at issue.
  • The documents referenced "schedules" that were not annexed.
  • The last date of assignment actually predated the first.
  • The documentation contained logical contradictions.

Judge Scarupulla of the Supreme Court of New York County agreed with our position and upheld the basic rules of assignment that:

  1. The assignee has the burden to prove that it possesses legal standing to bring the lawsuit (burden not met here).
  2. The assignment documentation must be authenticated (not done here).
  3. A complete chain of custody must be established (not done here).

Now that the case is dismissed, we ask, "was it misleading and deceptive to represent to our client and to the court that American Investment Company, LLC possessed a legal interest in the debt"?

If you recall our March 7th blog, a class action in Illinois accuses debt buyer Cavalry Portfolio Services, LLC of violating these assignment rules and thus violating FDCPA §§ 1692e(2)(A) and 1692e(5) for falsely representing the legal status of the debt and threatening to take action that could not legally be taken. Why shouldn't the same reasoning apply here?

We have indeed brought an action against the attorneys representing American Investment Company, LLC. That case is pending. We will keep you posted.

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