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Memorandum of Support

Empire Justice Memo of Support: Pass the Consumer Credit Fairness Act


A.2678 (Weinstein)/S.2454 (Savino)


The Empire Justice Center strongly supports and urges the swift passage of the Consumer Credit Fairness Act (CCFA), A.2678 (Weinstein)/S.62454 (Savino).  The CCFA proposes a series of changes to New York’s Civil Practice Law and Rules designed to curb the abusive debt collection lawsuits that have become an epidemic in New York State.  Hundreds of thousands of debt collection lawsuits are filed against low and moderate income New Yorkers every year (in 2008, nearly 300,000 debt collection lawsuits were filed in New York City alone).  Most of these lawsuits are brought by third-party debt buyers, companies that buy portfolios of old, defaulted debts from original creditors for pennies on the dollar.  These lawsuits are fraught with problems which the CCFA addresses. 

In many cases, these portfolios include debts that are too old to be sued on, have already been paid or discharged in bankruptcy, or resulted from identity theft or mistaken identity.  In cases in which debt is legitimately still owed, debt buyers often pad the amounts owed with fees and interest they are not entitled to under the consumer credit contract.  Debt buyers also have been known to engage in “sewer service,” failing to properly serve the consumer-defendant with the lawsuit so the consumer does not appear in court and a “default judgment” is obtained without having to produce proof of the debt.

The Consumer Credit Fairness Act (CCFA) would prevent debt buyers from continuing to exploit gaps in our state’s Civil Practice Law and Rules, while allowing legitimate cases to proceed.  The CCFA requires a notice to be mailed to the defendants in consumer credit actions by the clerk of the court, ensuring that defendants are aware of the action.  This practice is already required and has proven effective in the New York City Civil Court and should be expanded to consumers statewide.  The CCFA also requires court filings to include more information about the debt sued upon, such as identifying the debt or account and providing proof that the debt is owed to the plaintiff.  This requirement will substantially decrease the number of unsubstantiated cases and frivolous claims brought against consumers.  For victims of domestic violence who often experience economic abuse and identity theft at the hands of their current or former abusive partners, these safeguards provide important protections.

The CCFA also reduces the statute of limitations for consumer credit transactions from six years to three years, and eliminates the right to collect the debt once the statute of limitations is expired.  These requirements are critical for a few reasons.  First, they compel creditors to file claims in a timely manner and better protect low and moderate income consumers from the excessive accumulation of interest charges and late fees.  Second, there is a much greater likelihood that a consumer will move to a new address within six years, making it less likely that they will be properly served and alerted to the existence of the lawsuit.  The current six year statute of limitations also increases the likelihood that the records related to a specific debt will be lost or destroyed by the original creditor.  By shortening the statute of limitations, the Legislature would be reducing the possibility that the passage of time would introduce additional sources of error into any collection action brought in the courts of New York State.

Finally, the CCFA extinguishes the ability of debt buyers from suing on expired debt.  This provision is critical to protecting consumers.  Debt buyers successfully collect time barred debts because the vast majority of consumers in New York do not have access to legal representation in these cases and do not have the legal knowledge that they should raise a statute of limitation defense.  Allowing lawsuits to be filed on time barred debts results in the financial victimization particularly of low and moderate income New Yorkers who lack access to legal counsel.  (In upstate communities, only a few legal services programs have the resources to provide assistance with debt collection issues.  Though more legal services are available in NYC, the majority of consumers still proceed in these cases pro se.)  

Empire Justice Center strongly supports the Consumer Credit Fairness Act and urges its swift passage to ensure that debt collection actions are fair to consumers throughout New York State.

This memo was prepared by:


Kirsten E. Keefe

Empire Justice Center
119 Washington Avenue
Albany, NY  12210 


(518) 462-6831
(518) 935-2852
kkeefe@empirejustice.org

02/11/13