By Michael J. McCulley, Esq.
New Jersey Courts are considering drastic changes to Court Rules for debt buyers. The changes would require debt buyers to produce an “unbroken chain of ownership” for each debt and even list the store or vendor associated with the card on the complaint. On October 20, 2011 a memo was issued to the Judicial Council of the New Jersey Courts by a special subcommittee charged specifically with the study of what proofs are adequate to support the entry of judgment by default in collection cases. The subcommittee was formed by the Special Civil Part Practice Committee in response to a request by the Judicial Counsel for proposed rule changes. During the course of the summer, the subcommittee met and deliberated on current practices in the debt collection industry nationally, and examined the practice in states surrounding New Jersey. The subcommittee found that Delaware, Maryland, North Carolina, Pennsylvania, Illinois, Michigan, and Massachusetts have taken steps to require some degree of proof regarding the ownership of claims acquired by assignment. Ultimately the committee decided to adopt Delaware’s model with some modifications. The subcommittee’s proposed changes drastically increase the requirements in Special Civil Part actions on consumer loans and credit card debt, for both captions and pleadings, as well as in the submission of proofs in motions for default judgment. If enacted, the rule amendments will significantly impact debt buyers and the collection industry in New Jersey.
Proposed Changes to Pleading Rules: The subcommittee recommends changing Rule 6:3-2 to add a paragraph (b) which would require “The caption in any action to collect a consumer loan or credit card debt shall name both the original creditor and the current assignee. The caption shall also include the name of the vendor, if any, that appears on the credit card.” The committee reasoned that many collection actions involve credit cards that are issued by banks through specific vendors (i.e. a specific department store, electronics store, etc.) and therefore debtors think of these cards as “my XYZ Electronics card.” As such, the committee recommended that if the vendor’s (i.e. store’s) name appears on the card, the rule should require it be included on the caption. Additionally the committee would add a paragraph (c) which would state “The complaint in actions to collect consumer loans or credit card debt shall set forth with specificity the name of the original creditor, the last four digits of the original account number of the debt, the current owner of the debt and the full chain of the assignment of the debt, if the action is not filed by the original creditor.” This is a significant change and a stringent increase in pleading requirements, as the current rules only require that the name of the original creditor be set forth in the affidavit of proof, which is filed when the defendant is defaulted.
Proposed Changes to Proofs for Entry of Default Judgment: The subcommittee recommends changing Rule 6:6-3 by adding a paragraph stating “In any action to collect a consumer loan or credit card debt a copy of the assignment or other documentary evidence establishing that the plaintiff/creditor is the owner of the debt shall be attached to the affidavit of proof. If the debt has been assigned more than once, then each assignment or other writing evidencing transfer of ownership must be attached to establish an unbroken chain of ownership. Each assignment or other writing evidencing transfer of ownership of the debt must clearly show the debtor’s name associated with the account.” This proposed change was recommended only by a narrow margin of 10 to 8 votes in the subcommittee and 11 to 7 in the main committee, with the opponents raising the obvious logistical concerns of compliance with such a stringent requirement. The resulting compromise was a recommendation that the change requiring the debtor’s name to be required in each of the assignments should not take effect until September 1, 2013.
The New Jersey Creditors Bar Association is planning to write a minority report opposing these measures, however the Supreme Court generally follows the recommendation of its committees, and therefore it’s very likely these changes will be enacted shortly, in whole or part. Our firm will continue to monitor the recommendations and will update you with any changes. For further information, please contact attorney Michael J. McCulley, who is an associate based in the Philadelphia office of Weltman, Weinberg & Reis Co., LPA. He can be reached at (215) 599-1502, or email at firstname.lastname@example.org.