The National List of Attorneys - Producing Sufficient Documents for Collection Lawsuits
The article below was published in The National List of Attorneys April 2012 Quarterly eNewsletter.
Producing Sufficient Documents for Collection Lawsuits
Featured Presentation at Recently Concluded DBA International Annual Conference Attorney Ronald S. Canter of Rockville, Maryland, was a featured speaker at the recent DBA International annual conference in Las Vegas, Nevada. DBA International is a trade association of experienced, knowledgeable and ethical debt buyers that provides educational and networking opportunities to its members through its annual conferences.
Mr. Canter’s presentation, entitled “Pulling Together Documentation for a Lawsuit,” focused on the rapidly changing legal environment faced by debt buyers who retain collection attorneys to file suit on delinquent accounts. This one-hour session, attended by over 100 industry members, stressed the increasing scrutiny that state courts are applying to lawsuits filed by debt buyers. Mr. Canter’s lecture began with a discussion of the historical perspective of assignments of debts to third parties. He explained that common law contract principles permit a creditor to assign the right to collect to a third party, and that once the debtor receives notice of the assignment, the debtor is obliged to deal with the assignee.
The discussion shifted gears by next exploring the creation of a market for delinquent credit card receivables. Several favorable comments on the debt buyer industry were highlighted, including a speech made by Allen Greenspan, former Chair of the Federal Reserve Board, in September, 2002, in which he credited the secondary market for bank receivables for providing an infusion of cash to banks, which helped bolster bank liquidity after the September 11, 2001 attacks. Mr. Canter also cited a decision by Judge Richard Posner, Chief Judge of the United States Court of Appeals for the Seventh Circuit. He is a renowned proponent of the Chicago School of Economics theory, stressing the utility and efficiency of collection of accounts by third-party purchasers.
The presentation included a detailed review of the documents exchanged between a credit card account seller and a third-party debt purchaser and explained that the agreement of sale customarily includes representation and warranties as to the validity of the credit card account. Additional documents associated with the purchase, including the assignment of the account and a “chain of title” evidencing the prior sales of the account were also discussed. A recent trend to include a charge-off statement in the documents of purchase in order to meet more stringent Court’s requirements was also addressed.
The discussion then focused on the specific documents needed to file a lawsuit by referring to the account information provided with the sale, including standard demographic information on the debtor, the account number associated with the transaction, the identity of the original creditor and information regarding the opening of the account, date of last payment, date of charge-off and the amount due as of the charge-off statement.
The discussion then turned to Court evidentiary requirements and explained how the “hearsay” rule, which allows business records to be introduced into evidence in a Court proceeding, can be used by a third-party debt buyer, provided the debt buyer has incorporated the assignor’s records into its record keeping practices, that the debt buyer typically relies upon the accuracy of the seller documents and that the circumstances otherwise indicate that the documents are trustworthy.
The discussion then focused on the requirements for reviewing documents before signing an affidavit supporting a debt buyer’s lawsuit, and it was explained that debt buyers should disclose that the records are those incorporated from the original creditor’s business and should also disclose that the affiant is the assignee of the debt.
Mr. Canter explained that the recent mortgage foreclosure crisis and “robo-signing” allegations surrounding mortgage foreclosures has resulted in additional documentation requirements being imposed on debt buyers. The Federal Trade Commission’s report on debt collection litigation, issued in February, 2009, and ominously entitled “Fixing A Broken System,” accelerated the attacks by consumer advocates on the sufficiency of documents in collection lawsuits filed by debt buyers. This has led to a series of court decisions throughout the country that have imposed additional evidence requirements on what a debt buyer must show to obtain a court judgment.
Mr. Canter’s presentation concluded by explaining that decisions from courts have not created a uniform rule for debt buyers to follow and suggested that debt buyers implement enhanced contracting and compliance procedures to ensure that lawsuit filings and affidavits supporting their claims will withstand challenge and allow courts to enforce purchased debt claims through entry of judgment.
About the author
Ronald S. Canter is the founding member of The Law Offices of Ronald S. Canter, LLC, Rockville, Maryland. He is a recognized authority on creditor’s rights and the regulation of collection practices. He has represented creditors, attorneys and collection agencies in complex litigation in both Federal and state courts and has successfully prosecuted appeals on a number of significant issues affecting the credit and collection industry. He appeared, as counsel of record for the National Association of Retail Collection Attorneys (NARCA) in Heintz v. Jenkins, the first Fair Debt Collection Practices case to reach the Supreme Court.
Mr. Canter is a member of the Board of Directors of NARCA. He has also served on the Legislative Committee of the American Collectors Association and received that organization’s Beacon Award for outstanding achievement on two occasions. He has published articles in Law Reviews and trade publications on creditor’s rights issues.
April 17, 2012