May 30, 2014
John W. McConnell, Esq. Office of Court Administration
25 Beaver Street, 11th Floor
New York, NY 10004
RE: Proposed reforms relating to consumer credit collection cases
Dear Mr. McConnell:
Thank you for the opportunity to comment on the proposed reforms relating to consumer credit collection cases. The undersigned members of the New Yorkers for Responsible Lending (NYRL) coalition applaud the Office of Court Administration (OCA) for issuing strong proposed court rules to address the debt collection industry’s longstanding abuse of the courts, which has caused serious harm to countless New Yorkers. We also make several recommendations that we believe will strengthen the proposed reforms. We request that OCA deems this comment letter as constituting 42 separate letters for the purpose of counting the total comments received on this proposal.
NYRL is a state-wide coalition that promotes access to fair and affordable financial services and the preservation of assets for all New Yorkers and their communities. NYRL’s more than 160 members include community development financial institutions, community-based organizations, affordable housing groups, advocates for seniors, legal services organizations, housing counselors, and community reinvestment, fair lending, labor and consumer advocacy groups.
NYRL strongly supports the proposed reforms because they would help prevent debt collectors from routinely violating the due process rights of hundreds of thousands of New Yorkers each year. The proposal makes explicit what is already required of all plaintiffs by law and echoes those that OCA has already implemented in the mortgage foreclosure context to curb robo-signing. By enacting the proposed changes, OCA would set a national standard for due process protections in debt collection lawsuits.
The proposed reforms are critically needed. For years, NYRL members have seen the profound harm that abusive debt collection practices have caused New Yorkers, particularly in lower- income communities and communities of color. Debt collectors, especially debt buyers, routinely engage in unfair and deceptive tactics to collect on debts about which they have little or no documentation or other basic information. One of their worst tactics involves obtaining default judgments against people on the basis of fraudulent affidavits, and then using these judgments to garnish people’s wages and seize their bank accounts. The judgments also appear on people’s credit reports and prevent them from obtaining housing, employment, mortgage modifications, and fairly-priced consumer credit.
In its Memorandum describing the proposed rules, OCA states that the reforms would “prevent unwarranted default judgments and ensure a fair legal process.” We are confident that the proposed changes would further these goals. We strongly support those aspects of the proposed rules that would:
- Prevent debt buyers from obtaining default judgments using “robo-signed” affidavits based on hearsay. New York law requires all plaintiffs to submit an affidavit of facts based on personal, or firsthand, knowledge when applying for a default judgment. Debt buyers routinely flout this requirement by submitting robo-signed affidavits in which they claim, based on a review of their books and records, that there was a credit agreement between the defendant and the original creditor, that the defendant breached the agreement, and that a certain amount is due and owing. However, debt buyers obtain little to no documentation about the debts they purchase, and their records virtually never contain any basis to support such assertions. Nor do debt buyers have the requisite firsthand knowledge of these alleged facts; rather, it is the original creditor, and only the original creditor, that has firsthand knowledge of the facts and is in the proper position to testify about them. The proposed reforms would prevent debt buyers from continuing to evade this fundamental evidentiary requirement, by requiring them to submit an affidavit of facts from the original creditor when applying for a default judgment.
- Help to address the problem of “sewer service” and level the playing field for unrepresented New Yorkers. The proposed expansion to courts outside New York City of the “additional notice” requirement under 22 NYCRR § 208.6(h) would help to ensure that more New Yorkers receive notice that they have been sued. The proposed adoption by all courts of certain user-friendly forms – namely, an answer form with a simple checklist of possible defenses and a form affidavit that explains, in layman terms, what a defendant needs to tell the court when seeking to vacate a default judgment (“Affidavit in Support of Order to Show Cause”) – would help the 98% of defendants across the state who are unrepresented in debt collection lawsuits. We also support the requirement of an affidavit attesting that the statute of limitations has not expired. NYRL also makes the following recommendations to strengthen the proposed reforms:
1. Strengthen the provisions relating to chain of title. The proposed form affidavits would require only that the Debt Buyer Plaintiff attach “[t]rue and correct copies of all written assignments of the Account” to its Affidavit of Facts and Purchase of Account. While we strongly endorse the concept of requiring debt buyers to establish ownership of the debt as a condition of obtaining a default judgment, we see two fundamental problems with the rule as drafted:
a. Currently, when debt buyers include in their application for a default judgment a copy of a bill of sale or assignment, it does not refer to the specific account on which the debt buyer is seeking a default judgment. Without reference to the specific account being sued on, any bill of sale or assignment indicates only that some portfolio of debts was bought and sold on a particular date, and has no probative value with respect to the account at issue. For this reason, we recommend that the rule be amended to require documentation that the specific account being sued on was part of the sale or assignment.
b. The proposed rule would require the Debt Buyer Plaintiff to attach all the prior bills of sale to its own affidavit. However, the Debt Buyer Plaintiff has personal knowledge only of any sale or assignment to which it was a party, and not to any prior sale or assignment to which its predecessor(s), i.e., Debt Seller(s), would have been a party. The Debt Seller, and not the Debt Buyer Plaintiff, is the proper entity to attest to the authenticity of any written assignment related to a prior sale. To comply with evidentiary law, each Debt Seller should be required to attach to its affidavit a copy of the bill of sale or assignment, together with proof that the account at issue was part of that sale or assignment.
2. Refer to the person sued as “Defendant,” not “Debtor.” We recommend referring to the person sued as “Defendant,” not “Debtor,” throughout the form affidavits. In our collective experience advising and representing thousands of New Yorkers who must seek to vacate default judgments on alleged debts, many people sued are not in fact “debtors” because the alleged debt arose from identity theft or mistaken identity, or was already paid or discharged in bankruptcy. It would therefore be more appropriate and more accurate to refer to the person sued simply as “Defendant.”
3. Make the proposed reforms applicable to Supreme Court as well. We are concerned that if the proposed reforms do not also apply in Supreme Court, creditors and debt buyers will simply “forum shop” and file lawsuits only in that forum, thereby denying those defendants the fundamental protections afforded defendants sued in other New York courts.
NYRL also believes that the courts should establish a specialized part dedicated to handling some or all aspects of consumer credit actions, including the review of default judgments. At the very least, NYRL believes that thorough training of court clerks will be critical to the successful and effective implementation of the proposed reforms. This is essential to ensure that all default judgment applications in debt collection lawsuits meet the new requirements and that clerks make the user-friendly forms available to pro se defendants as appropriate.
Finally, in addition to strengthening the proposed reforms, NYRL recommends that OCA implement a rule requiring attorney affirmations in debt collection lawsuits, similar to the attorney affirmations that OCA previously required in mortgage foreclosure actions. Like mortgage foreclosure actions, debt collection lawsuits – especially those filed by debt buyers – have been fraught with such problems as robo-signed affidavits and affidavits that falsely attest to the affiant’s personal review of the relevant documents and records. The foreclosure rule helped curb robo-signing and other fraudulent practices in the foreclosure context, and should be implemented in the debt collection context as well.
Thank you for the opportunity to comment.
Albany County Rural Housing Alliance, Inc.
Bedford-Stuyvesant Community Legal Services
Brooklyn Cooperative Federal Credit Union
Buffalo Urban League
BWICA Educational Fund
CAMBA Legal Services
Central New York Citizens in Action, Inc.
Central New York Fair Housing Council
Consumer Justice for the Elderly: Litigation Clinic of St. John’s University School of Law
Cypress Hills Local Development Corporation
District Council 37 Municipal Employees Legal Services
Empire Justice Center
Fifth Avenue Committee
Housing Help Inc.
Housing Resources of Columbia County
JASA/Legal Services for the Elderly in Queens
The Legal Aid Society
Legal Services NYC
Legal Services NYC – Bronx
Long Island Housing Services, Inc.
Manhattan Legal Services
MFY Legal Services, Inc.
Nassau/Suffolk Law Services
Neighborhood Housing Services of New York City
Neighbors Helping Neighbors
New Economy Project
New York Legal Assistance Group (NYLAG)
New York Public Interest Research Group (NYPIRG)
New York StateWide Senior Action Council
Pratt Area Community Council
Queens Legal Services
South Brooklyn Legal Services
Staten Island Legal Services
SUNY Buffalo Law School’s Consumer Financial Advocacy Clinic
Syracuse University College of Law’s Securities Arbitration and Consumer Clinic
Teamsters Local 237
University Neighborhood Housing Program
Urban Justice Center’s Community Development Project
Westchester Residential Opportunities Inc.
Western New York Law Center