The New York Court System has adopted new rules effective October 1, 2014, to obtain a default judgment in a consumer collection action, Chief Judge Jonathan Lippman announced recently. Debt collectors and debt buyers should review their record-keeping and document retention practices to prepare for the new requirements, which are expected to entail a significant volume of paperwork.

In May, we wrote about the New York Court System’s initial proposal to govern the collection of aged consumer debt that had been resold repeatedly. The proposal would have strengthened affidavit requirements, required additional proof of notice to the debtor, and required the collector’s attorney to file an affidavit swearing that the statute of limitations had not expired.

The final rule requires the plaintiff to file specific form affidavits to obtain a default judgment. In addition, the affidavits that are required depend on whether the plaintiff is the original creditor or a debt buyer. In a lawsuit brought by the original creditor, the plaintiff must file the following documents with the default judgment motion:

• Affidavit of Facts by Original Creditor, which must identify the date and amount of the last payment and attach a copy of the underlying credit agreement. The affidavit must also itemize the amount owed on the account by identifying the charge-off balance, post-charge-off interest, and post-charge-off fees and charges less any credits.
• Affirmation of Non-Expiration of Statute of Limitations, which is executed by the collector’s attorney and expressly alleges the date that the cause of action accrued and the applicable statute of limitations period.

Further, a debt buyer that moves for a default judgment to collect on debt purchased from an original creditor on or after October 1, 2014, must file the following documents:

• Affidavit of Facts and Purchase of Account by Debt Buyer Plaintiff, which must identify the date that the plaintiff purchased the debt and provide the complete chain of title for the debt, including the dates of all prior debt sales.
• Affidavit of Facts and Sale of Account By Original Creditor, which, among other things, must identify the date that the pool of accounts containing the defendant’s account was sold to the debt buyer and attach as an exhibit the bill of sale or written assignment of the account
• Affidavit of Purchase and Sale of Account by Debt Seller, which is required for each debt seller that owned the debt before the plaintiff and must identify the dates that the accounts were purchased from the prior debt seller and sold to the debt buyer. The affidavit must include a copy of the bill of sale or written assignment of the account as an exhibit.
• Affirmation of Non-Expiration of Statute of Limitations.

The rule also requires the plaintiff to file with the clerk, at the time of filing the proof of service of the summons and complaint, a stamped, unsealed envelope that contains in English and Spanish a notice informing the consumer of the nature of the lawsuit. The clerk then “promptly” mails the notice to the defendant. Further, a default judgment cannot be entered if 20 days have not passed since the Clerk mailed the notice, or the notice is returned to the clerk as undeliverable.

Given the amount of paperwork required by the new rule to obtain a default judgment, it is important that debt buyers and collectors ensure that they have the proper record-keeping and document retention procedures in place. In July, the New York Department of Financial Services (DFS) issued revised debt collection rules, and the Consumer Financial Protection Bureau is working on its own debt collection rule. A failure to have robust debt collection records will not only result in the inability to collect on pools of consumer debt, but also could invite an enforcement action from the DFS or Attorney General, which have targeted debt collectors and debt buyers repeatedly over the past year.