Third-party debt collectors, also known as debt buyers and zombie creditors (for really old debts) have had to do little in the past to prove that a debt was yours, you owed it, and that it wasn't barred by the statute of limitations.
Now, a new New York court rule will require debt collectors take additional steps which will help level the playing field. The new court rule is a game changer – for everyone.
An Overview Of New York Uniform Court Rule 208.14-a
Here's a quick overview of the new rule (Proof of Default Judgment in Consumer Credit Matters (Uniform Civil Rules for the New York City Civil Court)):
What It Does. The new rules will help debtors re-open cases, defeat judgments and perhaps even hold collectors accountable for non-compliance. More importantly, it levels the playing field, so to speak, as plaintiff-creditors must provide documentation which shows the court that they are suing the
right person, for the
correct amount and that the debt is
not time barred.
How It Works. Creditors will now be
required (as part of a default judgment application arising from a consumer credit transaction) to submit affidavits in these situations:
- Original credit actions. The plaintiff creditor must submit an AFFIDVIT OF FACTS by the original creditor. This went into effect on October 1, 2014.
- Debt buyer actions. In actions involving debt purchased from an original creditor on or after October 1, 2014, the plaintiff debt buyer must submit an:
- AFFIDAVIT OF FACTS AND PURCHASE OF ACCOUNT BY THE DEBT BUYER PLAINTIFF,
- AFFIDAVIT OF FACTS AND SALE OF ACCOUNT BY THE ORIGINAL CREDITOR, and
- AFFIDAVIT OF PURCHASE AND SALE OF ACCOUNT BY DEBT SELLER who owned the debt prior to the plaintiff (if applicable).
In addition, plaintiffs must submit the AFFIRMATION OF NON-EXPIRATION OF STATUTE OF LIMITATIONS executed by counsel in all applications for a default judgment arising from a consumer credit transaction. This will, once and for all, prohibit debt buyers from trying to collect on debts which are time-barred.
Important Dates. The new rules have a bit of a "grace" period – seemingly to allow creditors to understand the new process and get up to speed. Although the rules went into effect on October 1, 2014, most debt buyers have until July 1, 2015 before they must comply.
For now, the new rules do not apply to debt purchased from original creditors prior to October 1, 2014. In those cases, debt buyers are only required to affirm in an AFFIDAVIT OF FACTS that the debt was purchased from the original creditor before that date – although some proof of that must be provided.
However, starting July 1, 2015, the new rules make it clear that all the affidavits listed above are required
regardless of when the debt was purchased. In fact, the court can refuse to accept the filing of a default judgment if it doesn't meet the new rule's requirements!
Creditors Must Now Have The Right Information. Under the new rule, affidavits can't be combined, but
can be augmented to explain or supplement. However, they now
must be supported by exhibits, including a copy of the:
- credit agreement;
- bill of sale or written assignment of the account (where applicable), and
- records of the original creditor that set forth the:
- name of the defendant;
- last four digits of the account number;
- date and amount of the charge off balance;
- date and amount of the last payment [if any];
- amounts of any post charge off interest and post charge off fees and charges, less any post charge off credits or payment made by or on behalf of the defendant; and
- balance due at the time of sale.
It should be noted that if a verified complaint has been served, it may be used as the plaintiff's affidavit of facts where it satisfies the elements of the AFFIDAVIT OF FACTS AND PURCHASE OF ACCOUNT BY THE DEBT BUYER PLAINTIFF.
Why The New Rule Is Important To You
For decades, third party debt collectors have come up with ways to bring substantively defective lawsuits. The new court rule provides New Yorkers with greater protections than ever before such as the ability to re-open cases, defeat judgments and perhaps sue collectors for non-compliance and forces debt-buyers to certify that the information they have is accurate. Debt-buyers purchase over $100,000,000 in debt every year, and in the past, they've enjoyed the benefit of buying debts in bulk without being scrutinized as to the particularity of each case. It looks like that benefit will lessen, at least when debt buyers will seek enforcement in court.
Contact us right away if you've been the victim of third party debt buyer abuse.
Addendum: Definitions Under New York Uniform Court Rule 208.14-a
Definitions under any rule are important as they clarify what terms mean, and more importantly, what they do
not mean. New York Uniform Court Rule 208.14-a defines the terms consumer credit transaction, original creditor, debt buyer and credit agreement:
- Consumer Credit Transaction. This is a revolving or open-end credit transaction wherein credit is extended by a financial institution, which is in the business of extending credit loan individual primarily for personal, family or household purposes, the terms of which include periodic payment provisions, late charges and actual interest.
Examples would be a VISA, MasterCard and store credit cards such as Macy's, Target or Costco. However, it does NOT include debt incurred in connection with medical services, student loans, auto loans, retail installment contracts and others.
Original Creditor. This is a financial institution, which owned the consumer credit account
at the time the account was charged off (meaning that it has been removed from an original creditor's books as an asset and treated as a loss or expense) – even if that financial institution did not originate the account. Again, examples of creditors would be the same as those listed above.
- Debt Buyer. This is a person or entity that is regularly engaged in the business of purchasing charged-off consumer debt for collection purposes. This is true regardless of whether it collects the debt itself, hires a third party for collection or hires an attorney for collection litigation.
- Credit Agreement. This is a copy of a contract or other document governing the account provided to the defendant evidencing the:
- name of the original creditor;
- account number; and
- name and address of the defendant.
The charge-off statement or the monthly statement recording the most recent purchase transaction, payment or balance transfer is sufficient evidence of a credit agreement.