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Why We Need To Create New Rules For Debt Collection Lawsuits


Judge Jonathan Lippman, New York's chief judge, recently proposed a new set of rules for debt collection lawsuits filed in the State of New York. Based on the state of the debt collection lawsuits that I see filed in Illinois, I fully support Judge Lippman's proposed rules. Illinois would do well to adopt similar rules. The proposal can be found here.

Here are some of my favorite items from the proposed rules:

The affidavits filed in most debt buyer lawsuits are unsupported by documentation. They are also rather vague and often fail to recite all of the necessary facts to properly plead a case. The proposed rules would create new affidavits. These affidavits would vary based on the nature of the plaintiff. Original creditors have a different burden of proof than debt buyers, for example.

In debt buyer actions, several affidavits would be required before obtaining a default judgment. There would need to be an affidavit from the original creditor setting forth enough facts to establish a cause of action, stating that the account was sold and the date of the assignment, stating that the debt-specific records were created and maintained in the original creditor's business, and stating the amount due at the time of assignment.

A debt buyer would also have to proivde similar affidavits from each entity in the chain of title to the account, including an affidavit from the debt buyer filing the lawsuit. In addition to the affidvits, a copy of the original agreement would have to be provided, along with copies of all written assignments of the account.

In all actions, whether brought by the original creditor, or a debt buyer, an affidavit stating that the statute of limitations had not yet expired would also be required.

These proposed rules would prevent a significant amount of abuse of the system. Right now, debt buyers file bare-bones pleadings that often are insufficient to prove their cases. However, because many people don't come to court, the debt buyers obtain default judgments. Of those who do come to court, most confess to judgment, even though they haven't been shown any real proof that the plaintiff owns the debt or that the amount claimed is correct.

Requiring that the plaintiff prove its case before obtaining a default judgment is a step in the right direction.

The new rules also require that defendants receive additional notice of the lawsuits filed against them. Once the defendant is served, the plaintiff would have an affirmative duty to send additional notice to the defendant. The proposed rules include the language that the letter must contain. The letter explains what the individual needs to do to respond to the lawsuit and the consequences of not responding.

These rules are a step in the right direction. I hope that other states take note and propose similar rules...they just might help level the playing field in debt collection actions.