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.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A2678 REVISED 04/18/13
SPONSOR: Weinstein (MS) 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 subse-
quent 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 assig-
nor; 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 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 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 defend-
ant 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 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, 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; Similar to 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
SENATE - ASSEMBLY
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:
1 Section 1. Short title. This act shall be known and may be cited as
2 the "consumer credit fairness act".
3 § 2. Subdivision 2 of section 213 of the civil practice law and rules,
4 as amended by chapter 709 of the laws of 1988, is amended to read as
5 follows:
6 2. an action upon a contractual obligation or liability, express or
7 implied, except as provided in section two hundred thirteen-a or two
8 hundred fourteen-f of this article or article 2 of the uniform commer-
9 cial code or article 36-B of the general business law;
10 § 3. The civil practice law and rules is amended by adding a new
11 section 214-f to read as follows:
12 § 214-f. Certain actions arising out of consumer credit transactions
13 to be commenced within three years. An action arising out of a consumer
14 credit transaction where a purchaser, borrower or debtor is a defendant
15 must be commenced within three years, except as provided in section two
16 hundred thirteen-a of this article or article 2 of the uniform commer-
17 cial code or article 36-B of the general business law. When the period
18 within which an action may be commenced under this section has expired,
19 the right to collect consumer credit debt is extinguished as well as the
20 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
1 For purposes of this section, "the right to collect consumer credit
2 debt" shall mean any attempts by the creditor, third party purchaser, or
3 other authorized third party to collect such debt including, but not
4 limited to, calls, mail or other attempts to collect.
5 § 4. The civil practice law and rules is amended by adding a new
6 section 306-d to read as follows:
7 § 306-d. Additional mailing of notice in an action arising out of a
8 consumer credit transaction. 1. At the time of filing with the clerk of
9 the proof of service of the summons and complaint in an action arising
10 out of a consumer credit transaction, the plaintiff shall submit to the
11 clerk a stamped envelope addressed to the defendant together with a
12 written notice in clear type of no less than twelve-point in size, in
13 both English and Spanish, and containing the following language:
14 NOTICE OF LAWSUIT
15 (DATE)
16 (NAME OF COURT)
17 (COUNTY)
18 (STREET ADDRESS, ROOM NUMBER)
19 (CITY, STATE, ZIP CODE)
20 (NAME OF DEFENDANT)
21 (ADDRESS OF DEFENDANT)
22 Plaintiff:__________________________________
23 Defendant:__________________________________
24 Name of original creditor, unless same:______________________________
25 Index number:_______________________________
26 Attention: a lawsuit has been filed against you claiming that you owe
27 money for an unpaid credit card, medical, student loan or other debt.
28 You should go to the court clerk's office at the above address as soon
29 as possible to respond to the lawsuit. You may wish to contact an attor-
30 ney. If you do not have an attorney, help is available at the court.
31 If you do not respond to the lawsuit, the court may enter a judgment
32 against you. Once entered, a judgment is good and can be used against
33 you for twenty years, and your money, including a portion of your
34 paycheck and/or bank account, may be taken. Also, a judgment will hurt
35 your credit score and can affect your ability to rent a home, find a
36 job, or take out a loan.
37 You CANNOT be arrested or sent to jail for owing a debt.
38 It is important that you go to the court clerk's office listed above and
39 bring this notice with you. Additional information can be found at the
40 court system website at: www.courts.state.ny.us
41 2. The face of the envelope shall be addressed to the defendant at the
42 address at which process was served, and shall contain the defendant's
43 name, address (including apartment number) and zip code. The face of the
44 envelope also shall state the appropriate clerk's office as its return
45 address.
46 3. The clerk promptly shall mail to the defendant the envelope
47 containing the additional notice set forth in subdivision one of this
48 section. No default judgment based on the defendant's failure to answer
49 shall be entered unless there has been compliance with this section, and
50 at least twenty days have elapsed from the date of mailing by the clerk.
51 § 5. Subdivision (a) of section 3012 of the civil practice law and
52 rules is amended to read as follows:
S. 2454 3 A. 2678
1 (a) Service of pleadings. The complaint may be served with the
2 summons, except that in an action arising out of a consumer credit tran-
3 saction, the complaint shall be served with the summons. A subsequent
4 pleading asserting new or additional claims for relief shall be served
5 upon a party who has not appeared in the manner provided for service of
6 a summons. In any other case, a pleading shall be served in the manner
7 provided for service of papers generally. Service of an answer or reply
8 shall be made within twenty days after service of the pleading to which
9 it responds.
10 § 6. Rule 3016 of the civil practice law and rules is amended by
11 adding a new subdivision (i) to read as follows:
12 (i) Consumer credit transactions. In an action arising out of a
13 consumer credit transaction where a purchaser, borrower or debtor is a
14 defendant, the contract or other written instrument on which the action
15 is based shall be attached to the complaint and the following informa-
16 tion shall be set forth in the complaint:
17 1. The name of the original creditor;
18 2. The last four digits of the original account number;
19 3. The date and amount of the last payment;
20 4. If the complaint contains a cause of action based on an account
21 stated, the date that the final statement of account was mailed to the
22 defendant;
23 5. An itemization of the amount sought, by (i) principal; (ii) finance
24 charge or charges; (iii) fees imposed by the original creditor; (iv)
25 collection costs; (v) attorney's fees; (vi) interest; and (vii) any
26 other fees and charges. The term "finance charge" means a finance charge
27 as defined in Regulation Z, 12 C.F.R. § 226.4.
28 6. Whether the plaintiff is the original creditor. If the plaintiff is
29 not the original creditor, the complaint shall state (i) the date on
30 which the debt was assigned to the plaintiff; and (ii) the name of each
31 previous owner of the account and the date on which the debt was
32 assigned to that owner.
33 7. Any matters required to be stated with particularity pursuant to
34 rule 3015 of this article.
35 § 7. Subdivision (e) of rule 3211 of the civil practice law and rules,
36 as amended by chapter 616 of the laws of 2005, is amended to read as
37 follows:
38 (e) Number, time and waiver of objections; motion to plead over. At
39 any time before service of the responsive pleading is required, a party
40 may move on one or more of the grounds set forth in subdivision (a) of
41 this rule, and no more than one such motion shall be permitted. Any
42 objection or defense based upon a ground set forth in paragraphs one,
43 three, four, five and six of subdivision (a) of this rule is waived
44 unless raised either by such motion or in the responsive pleading. A
45 motion based upon a ground specified in paragraph two, seven or ten of
46 subdivision (a) of this rule may be made at any subsequent time or in a
47 later pleading, if one is permitted; in any action other than an action
48 arising out of a consumer credit transaction where a purchaser, borrower
49 or debtor is a defendant, an objection that the summons and complaint,
50 summons with notice, or notice of petition and petition was not properly
51 served is waived if, having raised such an objection in a pleading, the
52 objecting party does not move for judgment on that ground within sixty
53 days after serving the pleading, unless the court extends the time upon
54 the ground of undue hardship. The foregoing sentence shall not apply in
55 any proceeding under subdivision one or two of section seven hundred
56 eleven of the real property actions and proceedings law. The papers in
S. 2454 4 A. 2678
1 opposition to a motion based on improper service shall contain a copy of
2 the proof of service, whether or not previously filed. An objection
3 based upon a ground specified in paragraph eight or nine of subdivision
4 (a) of this rule is waived if a party moves on any of the grounds set
5 forth in subdivision (a) of this rule without raising such objection or
6 if, having made no objection under subdivision (a) of this rule, he or
7 she does not raise such objection in the responsive pleading.
8 § 8. Subdivision (f) of section 3215 of the civil practice law and
9 rules, as amended by chapter 453 of the laws of 2006, is amended and a
10 new subdivision (j) is added to read as follows:
11 (f) Proof. On any application for judgment by default, the applicant
12 shall file proof of service of the summons and the complaint, or a
13 summons and notice served pursuant to subdivision (b) of rule 305 or
14 subdivision (a) of rule 316 of this chapter, and proof of the facts
15 constituting the claim, the default and the amount due by affidavit made
16 by the party, or where the state of New York is the plaintiff, by affi-
17 davit made by an attorney from the office of the attorney general who
18 has or obtains knowledge of such facts through review of state records
19 or otherwise. Where a verified complaint has been served, it may be used
20 as the affidavit of the facts constituting the claim and the amount due;
21 in such case, an affidavit as to the default shall be made by the party
22 or the party's attorney. In an action arising out of a consumer credit
23 transaction, if the plaintiff is not the original creditor, the appli-
24 cant shall include: (i) an affidavit by the original creditor of the
25 facts constituting the debt, the default in payment, the sale or assign-
26 ment of the debt, and the amount due at the time of sale or assignment;
27 (ii) for each subsequent assignment or sale of the debt to another enti-
28 ty, an affidavit of sale of the debt by the debt seller, completed by
29 the seller or assignor; and (iii) an affidavit of a witness of the
30 plaintiff, which includes a chain of title of the debt, completed by the
31 plaintiff or plaintiff's witness. When jurisdiction is based on an
32 attachment of property, the affidavit must state that an order of
33 attachment granted in the action has been levied on the property of the
34 defendant, describe the property and state its value. Proof of mailing
35 the notice required by subdivision (g) of this section, where applica-
36 ble, shall also be filed.
37 (j) A request for a default judgment entered by the clerk, must be
38 accompanied by an affidavit by the debt collector (who may be the plain-
39 tiff or plaintiff's attorney) stating that after reasonable inquiry, he
40 or she has reason to believe that the statute of limitations has not
41 expired.
42 § 9. The civil practice law and rules is amended by adding a new
43 section 7515 to read as follows:
44 § 7515. Confirmation of an award based on a consumer credit trans-
45 action. In any proceeding under section 7510 of this article to confirm
46 an award based on a consumer credit transaction, the party seeking to
47 confirm the award shall plead the actual terms and conditions of the
48 agreement to arbitrate. The party shall attach to its petition (1) the
49 agreement to arbitrate; (2) the demand for arbitration or notice of
50 intention to arbitrate, with proof of service; and (3) the arbitration
51 award, with proof of service. If the award does not contain a statement
52 of the claims submitted for arbitration, of the claims ruled upon by the
53 arbitrator, and of the calculation of figures used by the arbitrator in
54 arriving at the award, then the petition shall contain such a statement.
55 The court shall not grant confirmation of an award based on a consumer
S. 2454 5 A. 2678
1 credit transaction unless the party seeking to confirm the award has
2 complied with this section.
3 § 10. This act shall take effect on the first of January next succeed-
4 ing the date on which it shall have become a law, except that section
5 three of this act shall take effect on the one hundred fiftieth day
6 after this act shall have become a law.
