For the second time in less than a year, the New York State Unified Court System has proposed affidavits that a plaintiff would be required to execute and file before seeking a default judgment in a consumer credit collection action. Last October, we wrote about the initial proposal, which created five affidavit forms that would have to be filed depending on whether the plaintiff was the original creditor or a subsequent debt buyer. This most recent proposal effectively supersedes the proposed affidavit forms.
The latest proposal, announced by Chief Judge Jonathan Lippman in a 2014 Law Day speech at the New York Court of Appeals, represents the latest efforts in New York to address “zombie debts.” The term refers to consumer debts that are several years old, have been resold repeatedly, and are missing the original credit card agreement and account statements. According to the Chief Judge, these debts represent “another issue of great importance to the lives of New Yorkers that must be addressed by the judicial system.”
Among other things, the New York Unified Court System proposed:
- Stronger affidavits containing detailed proof for default judgment applications. Affidavits for default judgments will need to be made by a person having knowledge of the debt buyer, original creditor, and debt seller’s books and records. “Robosigned” affidavits, and ones with hearsay allegations, will not suffice, and full and complete documentation will be necessary. Further, for repurchased debt, affidavits showing the complete chain of ownership and debt amounts will be necessary.
- Enhanced proof on timeliness. To prevent lawsuits being brought beyond the statute of limitations, the plaintiff must file an affidavit attesting that the statute of limitations has not expired.
- Additional proof of notice to the debtor. To combat “sewer service,” an additional notice requirement being used in New York City Civil Court (the court with jurisdiction over smaller monetary claims) will be adopted statewide. To complement the traditional affidavit of service of the summons and complaint, creditors will be required to submit to the court an envelope with the clerk’s return address and containing a further notification of the lawsuit addressed to the debtor. The clerk’s office then mails the notification to the debtor at the same address listed in the affidavit of service. A default judgment will not be granted if the notice is returned to the court because of an “unknown” or “wrong” address.
- Review of procedures/forms already in use selectively. The procedures and forms being used now in specialized consumer credit court parts (such as the New York City Civil Court) will be reviewed, and the New York Unified Court System will adopt for use throughout the state those forms that in its view best protect consumers in debt collection actions. Among the forms proposed by the New York Unified Court System is a consumer credit answer form, which helps self-represented litigants understand the claims against them and raise standard defenses readily.
Absent from the proposal was a requirement proposed by Superintendent Benjamin Lawsky of the New York Department of Financial Services (DFS) that the affiant specifically attest to personal knowledge of the debtor’s loan records. The New York State Unified Court System, however, did add language requiring the affiant to attest to the plaintiff’s books and records, “including those relating to the debtor.” Further, the requirement that the plaintiff provide an affidavit attesting that the statute of limitations has not expired is consistent with the requirements previously sought by Superintendent Lawsky.
We anticipate that the DFS will soon weigh in on the latest proposal, and encourage the courts to adopt additional debtor-friendly measures. The DFS has not yet released its final debt collection regulations, which govern pre-litigation collection activities. Should this proposal become law, creditors, debt sellers, and debt buyers transacting business in New York may need to bolster their record-keeping policies and procedures in order to ensure they will be able to obtain default judgments in consumer credit cases.
Ballard Spahr’s Consumer Financial Services Group is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws throughout the country, and its skill in litigation defense and avoidance (including pioneering work in pre-dispute arbitration programs). Our attorneys, including the attorneys who joined us from the New York City litigation firm Stillman & Friedman, P.C., to form Ballard Spahr Stillman & Friedman LLP, have substantial experience in handling litigation with DFS and the New York Attorney General.
For more information, please contact CFS Practice Leader Alan S. Kaplinsky at 215.864.8544 or firstname.lastname@example.org, Marjorie J. Peerce at 212.223.0200 x8039 or email@example.com, or Denise L. Plunkett at 646.346.8036 or firstname.lastname@example.org.
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