Enacts the "consumer credit fairness act"

Summary of provisions of bill

The bill would require that the complaint in consumer credit actions provide the name of the original creditor, the last four digits of the original account number, the date and amount of the last payment, a chain of title of the account, and a breakdown of the amount that the plaintiff seeks to collect. The bill also requires that a copy of the contract be attached to the complaint.

The bill would reduce the statute of limitations on consumer credit actions from six years to three years. The bill would also bar debt collectors from collecting debts on which the statute of limitations has expired.

It would require that an additional notice of a pending consumer credit action be mailed to the defendant by the clerk of the court. This is required in New York City and the bill would adopt this requirement statewide.

The bill would permit defendants in consumer credit actions to raise improper service as a defense in their answer and preserve that defense for trial without having to file a separate motion to dismiss within 60 days as under current law.

To prevent the entry of default judgments on claims which have no merit, the bill would require applications for default judgments in consumer credit actions to include specific pleading requirements. These include an affidavit by the original creditor of the facts constituting the debt, the default in payment, the sale or assignment of the debt, and the amount due at the time of sale or assignment; (ii) for each subsequent assignment or sale of the debt to another entity, an affidavit of sale of the debt by the debt seller, completed by the seller or assignor; and (iii) an affidavit of a witness of the plaintiff, which includes a chain of title of the debt, completed by the plaintiff or plaintiffs witness. The bill will also require that applications for default judgments in consumer credit actions to include a statement that after reasonable inquiry, the creditor has reason to believe that the statute of limitations has not expired.

Justification

There have been serious concerns reported about the growing problem of abusive debt collection practices including filing suit on debts-that are too old to be sued on, are a result of identity theft or are debts that have been paid or otherwise discharged. Other reported concerns include lack of notice to the defendant of the law suit resulting in a

default judgment against the defendant without a requirement to produce proof of the debt sued on.

Abusive debt collection lawsuits exploit current gaps in our state's civil procedure laws and rules. The proposed legislation helps to fill those gaps. In doing so, this legislation will protect all consumers, and will particularly help ameliorate some of the forms of economic abuse, including identity theft, suffered by domestic violence victims at the hands of their abusers.

At a hearing on economic abuse as a form of domestic abuse, held on December 5, 2012, by the New York State Assembly Committees on Judiciary and Codes, civil legal service providers, domestic violence prevention advocates and the Office of Court Administration highlighted the insidious and pervasive nature of various forms of economic abuse perpetrated by abusers in the family violence context to exercise power and control over their victims and their finances. The types of abuse cited included incurring debt in the survivor's name through false statements or coercion, perpetrating identity theft or otherwise incurring debt without the survivor's knowledge. Witnesses at the hearing cited this legislation as important and helpful to ameliorating economic abuse suffered by domestic abuse survivors.

This legislation requires statewide institution of additional notice requirements that are presently in place in New York City. There is a significant and documented problem with faulty service that results in default judgments with serious life-altering ramifications. Without notice, defendants do not appear in court, and debt buyers easily obtain default judgments. These judgments are enforced by freezing people's bank accounts and garnishing their wages, hampering their ability to then pay for basic necessities such as food, utilities, medication and housing. These judgments appear on people's credit reports, making it close to impossible for them to secure housing or employment, or to take out a loan. The provisions of this bill would protect all consumers and domestic abuse survivors in particular, by ensuring that New Yorker's receive actual notice of debt collection actions.

To ensure that default judgment applications in debt collection lawsuits are evaluated on the merits, this bill also requires court papers to include more information about the debt sued upon. This would ensure that all New Yorkers will be better able to identify the debt or account on which they are being sued. There are many debts that result from identity theft or mistaken identity and, in other situations the defendant may not recognize the debt as theirs from the minimal information provided on the initial filing of legal papers and may therefore not respond. We learned from the hearing on economic abuse as a form of domestic abuse, that this legislation will be particularly important for domestic violence survivors as it will help them identify the debt and assert defenses in cases involving debts they did not voluntarily incur but that were incurred by their abusers in the survivor's name.

This legislation will reduce the statute of limitations for consumer credit actions from six to three years. Reducing the statute of limitations requires creditors to file their claims while memories are

fresh and records are still available. States with three year statutes of limitation include: Arizona, Arkansas, Delaware, Kansas, Louisiana, Maryland, Mississippi, Montana, and the District of Columbia. Pennsylvania has a two-year statute of limitation, In response to the now common practice of selling time-barred debt this bill would also extinguish the right to collect the debt after the statute of limitation has expired. States with similar requirements include Wisconsin and Mississippi.

Debt collection actions are rife with poor service and default judgments that are obtained after the statute of limitations have expired. To address this problem, the bill will require that applications for default judgments in consumer credit actions include a statement that the creditor has reason to believe that the statute of limitations has not expired and it will protect defendants from unknowingly waiving the legitimate defense that a debt is past the statute of limitations or that they were improperly served.

This legislation will benefit all consumers and for domestic violence survivors, it will go a long way toward helping break the perfect cycle of violence and domestic abuse that enables perpetrators of domestic abuse to exercise control over their victims and their finances in a manner that prevents the victim from leaving a dangerous relationship or forces them to return to it.

Legislative history

2013-14; A.2678/S.2454 - Passed Assembly/S. Judiciary 2011-12; A.633/S.677-A- Assembly Calendar/S. Judiciary 2010; A.7558-A/S.4398-A - Passed Assembly/S. Finance 2009; A.7558-A/S.4398-A - Passed Assembly/S. Codes

Fiscal implications for state and local governments

None.

Effective date

January 1, after becoming law. Section three of the bill, which shortens the statute of limitations, will take effect 150 days after becoming law.