Debt Purchaser, Collins Financial, is not Entitled to Default Judgment due to Lack of Sufficient Proof

The Civil Court of Richmond County, New York vacated an underlying judgment against a consumer when debt collector, Collins Financial, applied to assign the judgment to a third-party debt purchaser. In Collins Financial Services vs. Vigilante (Civ. Ct. Richmond County 2011), the court issued a decision with great implications for debt purchasers like Collins Financial: in order for a plaintiff to enter a default judgment against a consumer, very specific and ascertainable facts must be included in the plaintiff's proof.

In this case, Collins Financial brought suit against a consumer, alleging that she failed to pay charges as per a consumer credit agreement. Collins Financial was the assignee of the consumer's account, pursuant to an assignment from American Investment Bank, N.A. When the consumer failed to appear in court, the matter was marked "inquest clerk" and Collins Financial prepared a judgment form and an "affidavit of facts" from the "Custodian of Records," and a judgment was entered in favor of Collins Financial. Collins Financial later sought to assign that judgment to Precision Recovery Analytics, Inc.

To enter a default judgment in this Civil Court, the court held, all plaintiffs must submit an affidavit of facts from a party to the action. Complaints verified by an attorney for the plaintiff are not sufficient to enter default judgment, unless the attorney submits an additional affirmation, specifically acknowledging that he has personal knowledge of the facts. Further, when a third-party is seeking to enter a default judgment, an affidavit of sale of the account by the original creditor must be provided. An affidavit is also required by the plaintiff to set forth the chain of title of the sold account.

Here, Collins Financial did not provide sufficient documentation to permit the entry of the default judgment. The "affidavit of facts" did not come from someone with personal knowledge of facts. Rather, it was made by a "Custodian of Records" of Collins Financial and was only based on "information." It was missing information concerning the date of the alleged contract between the original creditor and defendant, as well as the date of the last payment. Collins Financial also failed to provide a notice of assignment.

The court ultimately found issue with the entire practice of entering a default judgment against a non-answering defendant. A default in appearing and answering is only an issue as to liability – it is not an admission that the amount claimed is correct. Thus, plaintiffs like Collins Financial must support their motions for default judgments with "enough facts to enable the court to determine that a viable cause of action exists." Where the claim is for a sum certain, entry of judgment is only authorized where there can be no reasonable question about the amount of the judgment.

Current practice accepts entry of judgments based on an "affidavit of facts" from someone with "personal knowledge" of the facts. The court stated that typical complaints in consumer credit transactions usually only plead an amount due and owing, but it would no longer tolerate a system of entering default without requiring "substantially greater documentation from plaintiffs claiming the amount due and owing is a 'sum certain.'"

In order for a plaintiff in these cases to enter a default judgment, the court stated that the following information must be included in every affidavit of facts: date of the consumer credit agreement; name of the original creditor; a complete history of the assignment; date and amount of the last payment by the consumer; last date a purchase was made by consumer; original credit card number and any change in the account number; the outstanding balance on the date of the last payment; a calculation of the outstanding balance on the date of the last payment; a statement of how interest was calculated; a statement that the address for the consumer set forth in the summons and complaint is his current address; copies of extrinsic documents referred to in the consumer credit agreement.

Collins Financial was not entitled to a default judgment, as there was an absence of proof regarding how the amount due and owing was calculated. The judgment was thus vacated.

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