What's happening
The Consumer Credit Fairness Act reforms New York's procedures for consumer debt lawsuits, including stronger notice requirements, more detailed pleadings, and a three-year statute of limitations.
Why it matters
Reduces likelihood of “zombie debt” lawsuits. By clearly stating that payments or acknowledgments made after the statute of limitations has expired do not revive old debts, the law prevents debt collectors from pursuing time-barred debts, protecting consumers from legal actions on very old debts.
Makes it harder for debt buyers to win by default. The law requires plaintiffs—especially debt buyers—to submit detailed proof, including a chain of title and affidavits from every assignment of the debt, before a default judgment can be entered. This reduces the risk of consumers being sued for debts they do not owe or that have been sold multiple times without proper documentation.
Ensures consumers receive clear and accessible notices. Multiple points in the bill require courts to mail plain-language, bilingual (English and Spanish) notices to consumers sued for debt, explaining their rights, the consequences of not responding, and where to find legal help. This is designed to reduce default judgments caused simply by confusion or lack of information.
Requires more transparency and accuracy in debt lawsuits. Plaintiffs must attach contracts (or charge-off statements for revolving accounts) and itemized breakdowns of the amount claimed, including all fees and charges. This increased transparency makes it harder for creditors to inflate amounts or sue for the wrong amount, and helps consumers and judges understand what is truly owed.
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Protect Consumers From Debt Lawsuits
Plain English, a few words. Used as the page title.
Sponsors
History
- Print number 4827e
- Amend and recommit to judiciary
- Print number 4827d
- Amend and recommit to judiciary
- Print number 4827c
- Amend and recommit to judiciary
- Referred to judiciary
- Recommitted to rules
- Ordered to third reading cal.1771
- Committee discharged and committed to rules
- Print number 4827b
- Amend and recommit to judiciary
Show 3 earlier actions
- Print number 4827a
- Amend (t) and recommit to judiciary
- Referred to judiciary
Companion bill
The same bill in the other chamber. A bill becomes law when one version passes both houses and the governor signs it, so either number can carry it.
Protect Consumers From Debt Lawsuits
Assembly Floor Calendar · Sponsor Helene Weinstein
Full text
8 pagesUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗
STATE OF NEW YORK
4827--E
2019-2020 Regular Sessions
IN SENATE
March 26, 2019
Introduced by Sens. THOMAS, BAILEY, CARLUCCI, FELDER, JACKSON, KAPLAN, KRUEGER, MAY, PERSAUD, RAMOS, SEPULVEDA -- read twice and ordered printed, and when printed to be committed to the Committee on Judiciary -- committee discharged, bill amended, ordered… Show allHide
Introduced by Sens. THOMAS, BAILEY, CARLUCCI, FELDER, JACKSON, KAPLAN, KRUEGER, MAY, PERSAUD, RAMOS, SEPULVEDA -- read twice and ordered printed, and when printed to be committed to the Committee on Judiciary -- committee discharged, bill amended, ordered reprinted as amended and recommitted to said committee -- committee discharged, bill amended, ordered reprinted as amended and recommitted to said committee -- recommitted to the Committee on Judiciary in accordance with Senate Rule 6, sec. 8 -- committee discharged, bill amended, ordered reprinted as amended and recommitted to said committee -committee discharged, bill amended, ordered reprinted as amended and recommitted to said committee -- committee discharged, bill amended, ordered reprinted as amended and recommitted to said committee
AN ACT to amend the civil practice law and rules and the judiciary law, in relation to consumer credit transactions
The People of the State of New York, represented in Senate and Assembly, do enact as follows:
Section 1. Short title. This act shall be known and may be cited as the "consumer credit fairness act".
§ 2. Section 105 of the civil practice law and rules is amended by adding two new subdivisions (h-1) and (q-1) to read as follows:
(h-1) Finance charge. The term "finance charge" means the cost of consumer credit as a dollar amount, includes any charge payable directly or indirectly by the consumer and imposed directly or indirectly by the creditor as an incident to or a condition of the extension of credit, and does not include any charge of a type payable in a comparable cash transaction.
(q-1) Original creditor. The term "original creditor" means the entity that owned a consumer credit account at the date of default giving rise to a cause of action.
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD00927-16-0
S. 4827--E 2
§ 3. Subdivision 2 of section 213 of the civil practice law and rules, as amended by chapter 709 of the laws of 1988, is amended to read as follows:
2. an action upon a contractual obligation or liability, express or implied, except as provided in section two hundred thirteen-a or two hundred fourteen-i of this article or article 2 of the uniform commercial code or article 36-B of the general business law;
§ 4. The civil practice law and rules is amended by adding a new section 214-i to read as follows:
§ 214-i. Certain actions arising out of consumer credit transactions to be commenced within three years. An action arising out of a consumer credit transaction where a purchaser, borrower or debtor is a defendant must be commenced within three years, except as provided in section two hundred thirteen-a of this article or article 2 of the uniform commercial code or article 36-B of the general business law. Notwithstanding any other provision of law, when the applicable limitations period expires, any subsequent payment toward, written or oral affirmation of or other activity on the debt does not revive or extend the limitations period.
§ 5. The civil practice law and rules is amended by adding a new section 306-d to read as follows:
§ 306-d. Additional mailing of notice in an action arising out of a consumer credit transaction. (a) At the time of filing with the clerk of the proof of service of the summons and complaint in an action arising out of a consumer credit transaction, the plaintiff shall submit to the clerk a stamped, unsealed envelope addressed to the defendant together with a written notice in clear type of no less than twelve-point in size, in both English and Spanish, and containing the following language:
ADDITIONAL NOTICE OF LAWSUIT
(NAME OF COURT) (COUNTY) (STREET ADDRESS, ROOM NUMBER) (CITY, STATE, ZIP CODE)
(NAME OF DEFENDANT) (ADDRESS OF DEFENDANT)
Plaintiff: Defendant: Name of original creditor, unless same: Index number:
Attention: a lawsuit has been filed against you claiming that you owe money for an unpaid consumer debt. You may wish to contact an attorney.
You should respond to the lawsuit as soon as possible by filing an "answer" which may be done at the court clerk's office listed above.
If you do not respond to the lawsuit, the court may enter a money judgment against you. Once entered, a judgment is good and can be used against you for twenty years, and your personal property and money, including a portion of your paycheck and/or bank account, may be taken from you. Also, a judgment may affect your credit score and can affect your ability to rent a home, find a job, or take out a loan. You CANNOT be arrested or sent to jail for owing a debt.
S. 4827--E 3
Additional information can be found at the New York state court system website. Sources of information and assistance: The court encourages you to inform yourself about your options as a defendant in this lawsuit. In addition to seeking assistance from a private attorney or legal aid office, there are free legal assistance computer programs that you can use online to help you represent yourself in this lawsuit. For further information, or to locate a legal aid program near you, you may visit the LawHelpNY website or the New York state court system website, which has information for representing yourself and links to other resources at: ___________________.
(b) The face of the envelope shall be addressed to the defendant at the address at which process was served, and shall contain the defendant's name, address (including apartment number) and zip code. The face of the envelope also shall state the appropriate clerk's office as its return address.
(c) The clerk promptly shall mail to the defendant the envelope containing the additional notice set forth in subdivision (a) of this section. No default judgment based on the defendant's failure to answer shall be entered unless there has been compliance with this section, and at least twenty days have elapsed from the date of mailing by the clerk. No default judgment based on the defendant's failure to answer shall be entered if the additional notice is returned to the court as undeliverable. Receipt of the additional notice by the defendant does not confer jurisdiction on the court in the absence of proper service of process.
(d) The chief administrative judge shall issue a Spanish translation of the notice in subdivision (a) of this section and shall maintain and publish the URL address for the web page containing consumer resources for unrepresented litigants.
§ 6. Subdivision (a) of section 3012 of the civil practice law and rules is amended to read as follows:
(a) Service of pleadings. The complaint may be served with the summons, except that in an action arising out of a consumer credit transaction, the complaint shall be served with the summons. A subsequent pleading asserting new or additional claims for relief shall be served upon a party who has not appeared in the manner provided for service of a summons. In any other case, a pleading shall be served in the manner provided for service of papers generally. Service of an answer or reply shall be made within twenty days after service of the pleading to which it responds.
§ 7. Rule 3016 of the civil practice law and rules is amended by adding a new subdivision (j) to read as follows:
(j) Consumer credit transactions. In an action arising out of a consumer credit transaction where a purchaser, borrower or debtor is a defendant, the contract or other written instrument on which the action is based shall be attached to the complaint, however, for the purposes of this section, if the account was a revolving credit account, the charge-off statement may be attached to the complaint instead of the contract or other written instrument, and the following information shall be set forth in the complaint:
(1) The name of the original creditor;
(2) The last four digits of the account number printed on the most recent monthly statement recording a purchase transaction, last payment or balance transfer;
S. 4827--E 4
(3) The date and amount of the last payment or, if no payment was made, a statement that the purchaser, borrower or debtor made no payment on the account;
(4) If the complaint contains a cause of action based on an account stated, the date on or about which the final statement of account was provided to the defendant;
(5) (A) Except as provided in subparagraph (B) of this paragraph, an itemization of the amount sought, by (i) principal; (ii) finance charge or charges; (iii) fees imposed by the original creditor; (iv) collection costs; (v) attorney's fees; (vi) interest; and (vii) any other fees and charges.
(B) If the account was a revolving credit account, an itemization of the amount sought, by: (i) the total amount of the debt due as of charge-off; (ii) the total amount of interest accrued since charge-off; (iii) the total amount of non-interest charges or fees accrued since charge-off; and (iv) the total amount of payments and/or credits made on the debt since charge-off;
(6) The account balance printed on the most recent monthly statement recording a purchase transaction, last payment or balance transfer;
(7) (A) Whether the plaintiff is the original creditor.
(B) If the plaintiff is not the original creditor, the complaint shall also state (i) the date on which the debt was sold or assigned to the plaintiff; (ii) the name of each previous owner of the account from the original creditor to the plaintiff and the date on which the debt was assigned to that owner by the original creditor or subsequent owner; and (iii) the amount due at the time of the sale or assignment of the debt by the original creditor; and
(8) Any matters required to be stated with particularity pursuant to rule 3015 of this article.
§ 8. Subdivision (e) of rule 3211 of the civil practice law and rules, as amended by chapter 616 of the laws of 2005, is amended to read as follows:
(e) Number, time and waiver of objections; motion to plead over. At any time before service of the responsive pleading is required, a party may move on one or more of the grounds set forth in subdivision (a) of this rule, and no more than one such motion shall be permitted. Any objection or defense based upon a ground set forth in paragraphs one, three, four, five and six of subdivision (a) of this rule is waived unless raised either by such motion or in the responsive pleading. A motion based upon a ground specified in paragraph two, seven or ten of subdivision (a) of this rule may be made at any subsequent time or in a later pleading, if one is permitted; an objection that the summons and complaint, summons with notice, or notice of petition and petition was not properly served is waived if, having raised such an objection in a pleading, the objecting party does not move for judgment on that ground within sixty days after serving the pleading, unless the court extends the time upon the ground of undue hardship. The foregoing sentence shall not apply in any proceeding to collect a debt arising out of a consumer credit transaction where a consumer is a defendant or under subdivision one or two of section seven hundred eleven of the real property actions and proceedings law. The papers in opposition to a motion based on improper service shall contain a copy of the proof of service, whether or not previously filed. An objection based upon a ground specified in paragraph eight or nine of subdivision (a) of this rule is waived if a party moves on any of the grounds set forth in subdivision (a) of this rule without raising such objection or if, having made no objection
S. 4827--E 5
under subdivision (a) of this rule, he or she does not raise such objection in the responsive pleading which, in any action to collect a debt arising out of a consumer credit transaction where a consumer is a defendant, includes any amended responsive pleading.
§ 9. Rule 3212 of the civil practice law and rules is amended by adding a new subdivision (j) to read as follows:
(j) Additional notice in any action to collect a debt arising out of a consumer credit transaction where a consumer is a defendant.
1. At the time of service of a notice of motion any part of which requests summary judgment in whole or in part, where the moving party is a plaintiff and the respondent is a consumer defendant in an action to collect a debt arising out of a consumer credit transaction, and where the consumer defendant against whom summary judgment is sought is not represented by an attorney, the plaintiff shall submit to the clerk a stamped, unsealed envelope addressed to the defendant together with the following additional notice in English and Spanish to be printed in clear type no less than twelve-point in size:
IMPORTANT NOTICE The Plaintiff has asked the Court to enter judgment against you by making a Motion for Summary Judgment. Keep this Notice and the envelope it came in. The Motion for Summary Judgment was separately served on you. To avoid entry of judgment: (1) You must appear in court as directed below: WHERE: Name of Court, Street Address, Room Number WHEN: Date and time (2) You should oppose the motion IN WRITING. HOW TO OPPOSE THE MOTION:
(1) State the legal reasons why the court should not enter judgment against you, including your defenses.
(2) State the facts that support your defenses.
(3) Attach affidavits and/or exhibits to support the facts you assert.
(a) Affidavits are sworn statements of witnesses (including you) who state facts they know to be true. The affidavit should state the facts and how the witness knows them. Also, the affidavit should explain any exhibits. An affidavit of service is an affidavit that states how and when papers were served. An affidavit must be signed in front of a notary. Free forms are available on the New York State Court system website at: ____________________.
(b) Exhibits are copies of documents. Exhibits are usually attached to affidavits.
(4) Have someone (not you or another defendant in the lawsuit) mail a copy of your opposition to the plaintiff's attorney before your court date and have them prepare an affidavit of service by mail.
(5) Bring a copy of your opposition and the affidavit of service to your court date.
Reflowed for reading: line numbers and page breaks removed. Cite the official text.
Sponsor's memo
Title of bill
An act to amend the civil practice law and rules and the judiciary law, in relation to consumer credit transactions
Purpose of bill
This bill would strengthen consumer protections in consumer debt collection proceedings.
Summary of provisions
OF BILL:
Read the full memo (2,107 words)
The bill would amend pleading requirements particular to consumer credit actions by requiring that the complaint provide the name of the original creditor, the last four digits of the account number printed on the most recent monthly statement recording a purchase transaction, last payment, or balance transfer, the date and amount of the last payment, an itemi- zation of the amount sought, the account balance printed on the most recent monthly statement recording a purchase transaction, last payment, or balance transfer, and whether the plaintiff is the original creditor, and if not, information about the sale and assignment of the debt. The bill also requires that a copy of the contract or other written instru- ment on which the action is based 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 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.
It would require that an additional notice of a pending consumer credit action be mailed to the defendant by the clerk of the court, with the notice and mailing envelope provided by the plaintiff. This notice would provide important information to the consumer credit defendant, includ- ing the website address for consumer credit resources maintained by the New York State Office of Court Administration. The chief administrative judge would be required to make available Spanish translations of said additional notices.
Similar in concept to the notice provided to the consumer upon commence- ment of the action, the bill would require an additional notice advising defendants in consumer credit actions against whom a summary judgment motion has been made of the significance and consequence of such a motion, and how to respond. It would also include the website address for consumer credit resources maintained by the New York State Office of Court Administration to assist consumer credit defendants in responding to such motions.
To prevent the entry of default judgments on claims that lack merit, the bill would require applications for default judgments in consumer credit actions to conform with specific requirements. These include (1) 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; (2) 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 (3) an affidavit of a witness of the plaintiff, which includes a chain of title of the debt, completed by the plaintiff or plaintiff's witness. The bill will also require that applications for default judgments in consumer credit actions include a statement that after reason- able inquiry, the plaintiff or its attorney has reason to believe that the statute of limitations has not expired. Finally, the chief administra- tive judge would be required to issue form affidavits for default motions based upon consumer credit transactions, which would standardize and make uniform the motion disposition process for the courts.
The bill would provide similarly exacting requirements for consumer creditors who seek to enter judgment based upon an arbitration award.
Finally, the bill clarifies § CPLR 5019(c)applies only to judgment cred- itors.
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. Original creditors, such as credit card issuers, routinely sell large portfolios of consumer debt accounts to debt buyers, who regularly re-sell the debts. Minimal infor- mation or documentation is transferred to debt purchasers. The process makes it difficult for a consumer to identify the debt, the current owner, or amount claimed and results in collection efforts that continue for years, including lawsuits filed after the statute of limitations has expired. There have been instances in which a consumer paid a debt, but was later contacted by another debt buyer attempting to collect it. 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. These default judg- ments are collected through wage garnishment and bank account restraints, which is often the first time a consumer learns that they were sued. Stopping garnishment and unfreezing bank accounts requires that the consumer take action in court, but rarely do consumers have attorneys to help. It is especially burdensome given the limitations on daily life and the health challenges related to the COVID-19 pandemic.
The devastating toll that abusive debt collection lawsuits take on consumers is a longstanding and persistent problem identified by numer- ous governmental and public policy institutions up through this day. In its 2010 report, Repairing A Broken System: Protecting Consumers in Debt Collection Litigation and Arbitration. the Federal Trade Commission recommended state-level reforms similar to those contained in this bill. In 2016, Human Rights Watch made similar recommendations in a study called Rubber Stamp Justice, which incorporated data supplied by the New York court system. Most recently, in May 2020 The PEW Charitable Trusts issued How Debt Collectors Are Transforming the Business of State Courts, which noted, among many other things: "Debt collection lawsuits that end in default judgment can have lasting consequences for consum- ers' economic stability."(Page 17.) PEW also recommended a review of state policies to ensure that both sides can effectively present their cases. This bill responds to these calls for better delivery of justice to consumer defendants. 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 insid- ious 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 meliorating economic abuse suffered by domestic abuse survivors.
This legislation requires statewide institution of additional notice requirements that are presently in place through court rules and which have indeed been helpful to consumer credit defendants, who rarely have attorneys to represent them, even when they learn that they have been sued. The notice provides basic understanding of the consequences of legal actions taken against them and the importance of responding to the lawsuit. It has also reduced the number of default judgments. 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 are public records, making it close to impossible for a consumer 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 Yorkers receive actual notice of debt collection actions.
Current law allows debt collectors to provide minimal and vague informa- tion in the complaint that initiates the case, making it very difficult for consumers to identify the debt or the company collecting it. This bill 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 on which they are being sued. There are many debts that result from identity theft or mistaken identity and, in other situ- ations the defend- ant may not recognize the debt as theirs from the minimal information provided on the initial legal papers and may there- fore not respond. 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 limita- tions 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. Pennsylva- nia has a two-year statute of limitation.
Debt collection actions are rife with poor service of process as confirmed in numerous studies and by New York governmental institutions. Indeed, questionable service of process is the reason for the exceeding- ly high number of default judgments in consumer credit actions. Because consumer defendants rarely have attorneys, improper service is a defense they often unknowingly waive when they finally discover they have been sued, even though service of process is a requirement of due process rights afforded under the United States Constitution. Current law places time limits on a defendant's right to assert improper service as a defense or to seek dismissal of the case on this basis. To protect consumers from unknowingly waiving this legitimate defense, the bill would allow consumer defendants to assert improper service as a defense and seek dismissal of the lawsuit beyond the time limits in current law.
Debt collection actions are also rife with faulty documentation and debts that are too old to be sued on. To ensure that default judgment applications in debt collection lawsuits are evaluated on the merits, and that default judgments are not entered on time-barred debts, this bill requires plaintiffs seeking default judgments to provide basic proof of the debt, its entitlement to judgment, and the timeliness of the lawsuit. This includes an affidavit from the original creditor with proof of the debt and the consumer's default in payment. If the debt was sold, affidavits proving the sale must be submitted to show that the plaintiff is the current owner entitled to obtain the judgment. To protect consumers from the entry of judgment on time-barred debts, this bill would require that applications for default judgments in consumer credit actions include a statement that the creditor or its attorney has reason to believe that the statute of limitations has not expired.
This legislation will benefit all consumers and for domestic violence survivors, it will go a long way toward helping break the 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 which forces them to return to it.
Legislative history
2018: A.1752-A/S. 8959-A - A.Cal/S.Rules 2017: A.1752 - A. Cal. 2016: A.4438 - A. Judi 2015: A.4438 - A. Cal. 2013-14: Similar to A.9053/S.2454 - Passed Assembly/S. Judiciary 2011-12: Similar to A.633/5.677-A - Assembly Calendar/S. Judiciary 2010: A.7558-A/S. 4398-A - Passed Assembly/S. Finance 2009: A.7558-A/S. 439S-A - Passed Assembly/S. Codes
Fiscal implications for state and local governments
None.
Effective date
Immediately; provided, however, that sections two, three, five, six, seven, eight, nine, ten, eleven and twelve shall take effect on the one hundred eightieth day after it shall have become a law and shall apply to actions and proceedings commenced on or after such date; and provided, further, that section four of this act shall take effect on the one hundred fiftieth day after this act shall have become a law.
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