Enacts the "consumer credit fairness act"; establishes a 3 year statute of limitations for commencement of a cause of action arising out of a consumer credit transaction where the defendant is a purchaser, borrower or debtor; establishes a notice of lawsuit which must be mailed to the defendant in such a cause of action; establishes certain requirements for the complaint in such an action; provides for arbitration of such actions; requires debt collectors to send consumers a written notice of their rights under state law along with their initial debt collection correspondence; such notice would contain information such as who and when a principal creditor may contact a debtor about the debt owed as well as the fact that a principal creditor cannot disclose information affecting a consumer debtor's reputation for creditworthiness if the principal creditor knows or has reason to know such information is false; applies to consumer rather than commercial debts.
TITLE OF BILL: An act to amend the civil practice law and rules, 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: 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 plaintiff's 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: 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.
STATE OF NEW YORK ________________________________________________________________________ S. 2454 A. 2678 2013-2014 Regular Sessions S E N A T E - A S S E M B L Y January 17, 2013 ___________IN SENATE -- Introduced by Sen. SAVINO -- read twice and ordered print- ed, and when printed to be committed to the Committee on Judiciary IN ASSEMBLY -- Introduced by M. of A. WEINSTEIN, JAFFEE, BOYLAND, MILL- MAN, GIBSON, TITONE, CASTRO, COLTON, WEPRIN, GALEF -- Multi-Sponsored by -- M. of A. CRESPO, CYMBROWITZ, GLICK, GOTTFRIED, JACOBS, PERRY, SCHIMEL -- read once and referred to the Committee on Judiciary AN ACT to amend the civil practice law and rules, in relation to consum- er credit transactions THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. Short title. This act shall be known and may be cited as the "consumer credit fairness act". S 2. 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-F of this article or article 2 of the uniform commer- cial code or article 36-B of the general business law; S 3. The civil practice law and rules is amended by adding a new section 214-f to read as follows: S 214-F. 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 COMMER- CIAL CODE OR ARTICLE 36-B OF THE GENERAL BUSINESS LAW. WHEN THE PERIOD WITHIN WHICH AN ACTION MAY BE COMMENCED UNDER THIS SECTION HAS EXPIRED, THE RIGHT TO COLLECT CONSUMER CREDIT DEBT IS EXTINGUISHED AS WELL AS THE REMEDY.EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD05625-02-3 S. 2454 2 A. 2678
FOR PURPOSES OF THIS SECTION, "THE RIGHT TO COLLECT CONSUMER CREDIT DEBT" SHALL MEAN ANY ATTEMPTS BY THE CREDITOR, THIRD PARTY PURCHASER, OR OTHER AUTHORIZED THIRD PARTY TO COLLECT SUCH DEBT INCLUDING, BUT NOT LIMITED TO, CALLS, MAIL OR OTHER ATTEMPTS TO COLLECT. S 4. The civil practice law and rules is amended by adding a new section 306-d to read as follows: S 306-D. ADDITIONAL MAILING OF NOTICE IN AN ACTION ARISING OUT OF A CONSUMER CREDIT TRANSACTION. 1. 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 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: NOTICE OF LAWSUIT (DATE) (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 CREDIT CARD, MEDICAL, STUDENT LOAN OR OTHER DEBT. YOU SHOULD GO TO THE COURT CLERK'S OFFICE AT THE ABOVE ADDRESS AS SOON AS POSSIBLE TO RESPOND TO THE LAWSUIT. YOU MAY WISH TO CONTACT AN ATTOR- NEY. IF YOU DO NOT HAVE AN ATTORNEY, HELP IS AVAILABLE AT THE COURT. IF YOU DO NOT RESPOND TO THE LAWSUIT, THE COURT MAY ENTER A JUDGMENT AGAINST YOU. ONCE ENTERED, A JUDGMENT IS GOOD AND CAN BE USED AGAINST YOU FOR TWENTY YEARS, AND YOUR MONEY, INCLUDING A PORTION OF YOUR PAYCHECK AND/OR BANK ACCOUNT, MAY BE TAKEN. ALSO, A JUDGMENT WILL HURT 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. IT IS IMPORTANT THAT YOU GO TO THE COURT CLERK'S OFFICE LISTED ABOVE AND BRING THIS NOTICE WITH YOU. ADDITIONAL INFORMATION CAN BE FOUND AT THE COURT SYSTEM WEBSITE AT: WWW.COURTS.STATE.NY.US 2. 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. 3. THE CLERK PROMPTLY SHALL MAIL TO THE DEFENDANT THE ENVELOPE CONTAINING THE ADDITIONAL NOTICE SET FORTH IN SUBDIVISION ONE 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. S 5. Subdivision (a) of section 3012 of the civil practice law and rules is amended to read as follows:S. 2454 3 A. 2678
(a) Service of pleadings. The complaint may be served with the summons, EXCEPT THAT IN AN ACTION ARISING OUT OF A CONSUMER CREDIT TRAN- SACTION, 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. S 6. Rule 3016 of the civil practice law and rules is amended by adding a new subdivision (i) to read as follows: (I) 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 AND THE FOLLOWING INFORMA- TION SHALL BE SET FORTH IN THE COMPLAINT: 1. THE NAME OF THE ORIGINAL CREDITOR; 2. THE LAST FOUR DIGITS OF THE ORIGINAL ACCOUNT NUMBER; 3. THE DATE AND AMOUNT OF THE LAST PAYMENT; 4. IF THE COMPLAINT CONTAINS A CAUSE OF ACTION BASED ON AN ACCOUNT STATED, THE DATE THAT THE FINAL STATEMENT OF ACCOUNT WAS MAILED TO THE DEFENDANT; 5. 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. THE TERM "FINANCE CHARGE" MEANS A FINANCE CHARGE AS DEFINED IN REGULATION Z, 12 C.F.R. S 226.4. 6. WHETHER THE PLAINTIFF IS THE ORIGINAL CREDITOR. IF THE PLAINTIFF IS NOT THE ORIGINAL CREDITOR, THE COMPLAINT SHALL STATE (I) THE DATE ON WHICH THE DEBT WAS ASSIGNED TO THE PLAINTIFF; AND (II) THE NAME OF EACH PREVIOUS OWNER OF THE ACCOUNT AND THE DATE ON WHICH THE DEBT WAS ASSIGNED TO THAT OWNER. 7. ANY MATTERS REQUIRED TO BE STATED WITH PARTICULARITY PURSUANT TO RULE 3015 OF THIS ARTICLE. S 7. 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; IN ANY ACTION OTHER THAN AN ACTION ARISING OUT OF A CONSUMER CREDIT TRANSACTION WHERE A PURCHASER, BORROWER OR DEBTOR IS A DEFENDANT, 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 under subdivision one or two of section seven hundred eleven of the real property actions and proceedings law. The papers inS. 2454 4 A. 2678
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 under subdivision (a) OF THIS RULE, he or she does not raise such objection in the responsive pleading. S 8. Subdivision (f) of section 3215 of the civil practice law and rules, as amended by chapter 453 of the laws of 2006, is amended and a new subdivision (j) is added to read as follows: (f) Proof. On any application for judgment by default, the applicant shall file proof of service of the summons and the complaint, or a summons and notice served pursuant to subdivision (b) of rule 305 or subdivision (a) of rule 316 of this chapter, and proof of the facts constituting the claim, the default and the amount due by affidavit made by the party, or where the state of New York is the plaintiff, by affi- davit made by an attorney from the office of the attorney general who has or obtains knowledge of such facts through review of state records or otherwise. Where a verified complaint has been served, it may be used as the affidavit of the facts constituting the claim and the amount due; in such case, an affidavit as to the default shall be made by the party or the party's attorney. IN AN ACTION ARISING OUT OF A CONSUMER CREDIT TRANSACTION, IF THE PLAINTIFF IS NOT THE ORIGINAL CREDITOR, THE APPLI- CANT SHALL INCLUDE: (I) AN AFFIDAVIT BY THE ORIGINAL CREDITOR OF THE FACTS CONSTITUTING THE DEBT, THE DEFAULT IN PAYMENT, THE SALE OR ASSIGN- MENT 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 ENTI- TY, 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 PLAINTIFF'S WITNESS. When jurisdiction is based on an attachment of property, the affidavit must state that an order of attachment granted in the action has been levied on the property of the defendant, describe the property and state its value. Proof of mailing the notice required by subdivision (g) of this section, where applica- ble, shall also be filed. (J) A REQUEST FOR A DEFAULT JUDGMENT ENTERED BY THE CLERK, MUST BE ACCOMPANIED BY AN AFFIDAVIT BY THE DEBT COLLECTOR (WHO MAY BE THE PLAIN- TIFF OR PLAINTIFF'S ATTORNEY) STATING THAT AFTER REASONABLE INQUIRY, HE OR SHE HAS REASON TO BELIEVE THAT THE STATUTE OF LIMITATIONS HAS NOT EXPIRED. S 9. The civil practice law and rules is amended by adding a new section 7515 to read as follows: S 7515. CONFIRMATION OF AN AWARD BASED ON A CONSUMER CREDIT TRANS- ACTION. IN ANY PROCEEDING UNDER SECTION 7510 OF THIS ARTICLE TO CONFIRM AN AWARD BASED ON A CONSUMER CREDIT TRANSACTION, THE PARTY SEEKING TO CONFIRM THE AWARD SHALL PLEAD THE ACTUAL TERMS AND CONDITIONS OF THE AGREEMENT TO ARBITRATE. THE PARTY SHALL ATTACH TO ITS PETITION (1) THE AGREEMENT TO ARBITRATE; (2) THE DEMAND FOR ARBITRATION OR NOTICE OF INTENTION TO ARBITRATE, WITH PROOF OF SERVICE; AND (3) THE ARBITRATION AWARD, WITH PROOF OF SERVICE. IF THE AWARD DOES NOT CONTAIN A STATEMENT OF THE CLAIMS SUBMITTED FOR ARBITRATION, OF THE CLAIMS RULED UPON BY THE ARBITRATOR, AND OF THE CALCULATION OF FIGURES USED BY THE ARBITRATOR IN ARRIVING AT THE AWARD, THEN THE PETITION SHALL CONTAIN SUCH A STATEMENT. THE COURT SHALL NOT GRANT CONFIRMATION OF AN AWARD BASED ON A CONSUMERS. 2454 5 A. 2678
CREDIT TRANSACTION UNLESS THE PARTY SEEKING TO CONFIRM THE AWARD HAS COMPLIED WITH THIS SECTION. S 10. This act shall take effect on the first of January next succeed- ing the date on which it shall have become a law, except that section three of this act shall take effect on the one hundred fiftieth day after this act shall have become a law.