Over the past year, collection practices of the consumer credit card industry have been the target of considerable action by virtually all branches of the government of the Commonwealth of Massachusetts, a state whose history of aggressive protection of consumer rights is well documented. With the leadership change at the CFPB and recent actions by the Bureau appearing to embrace a less strident approach to enforcement, states such as Massachusetts are stepping in to fill the void.
Legislatively, Senate Bill 120, entitled an Act Relative to Fairness in Debt Collection, is currently pending before the Senate Ways and Means Committee. S. 120, one of several bills focused on debt collection practices applies to most types of consumer debt, creditors including debt buyers and the attorneys who represent them. The bill further restricts the income available for wage garnishment, reduces both the time and method of calculating the applicable statute of limitations and the duration of judgments on debts, allows a consumer to avoid a court appearance and examination under oath in a supplementary proceeding by submitting an affidavit of no assets and liberalizes the attorney’s fees awarded to a successful consumer while restricting those awarded to a successful creditor. A copy of bill can be viewed here. Orlans is actively involved with stakeholders in opposing this legislation as the end of the current legislative session draws to a close.
In July of last year, the Office of the Massachusetts Attorney General (“AG”) reached a settlement with the collection law firm of Lustig, Glaser & Wilson (“LGW”) in a suit filed in 2015 which can be viewed here. In the suit the AG accused the firm of engaging in unlawful and deceptive practices in violation of both the MA Consumer Protection law (MA.G. L Ch. 93A) and applicable debt collection regulations. The AG alleged the firm was filing actions to collect debts owed to its clients (primarily debt buyers) without adequate documentation of the debt or sufficient attorney review of filed documents, seeking payment of time barred debts, allegedly filing affidavits, the signer of which, had not personally verified the accuracy of the amounts stated and finally seeking payment from exempt income sources. Under the terms of the settlement, LWG agreed to change the process by which it confirmed the amount and validity of the debt owed, how it verified affirmations made in affidavits submitted to the Court as well as including a disclosure relative to exempt income beginning with the initial communication to the consumer.
Not to be outdone, the judicial branch of the Commonwealth has also focused on credit card debt collection. In 2016, an Ad Hoc Committee of the MA Court Standing Advisory Committee on the Rules of Civil Procedure was formed to study alleged abuses in revolving credit agreements cases including credit card filed in Courts of the Commonwealth. Described abuses included inadequate verification of the address of the consumer and difficulties the consumer encountered in determining the identity of the original creditor.
On May 23, 2018 the Committee issued amendments to the SJC Civil Rules of Procedure in the form of two new rules effective January 1, 2019. The press release can be viewed here. Rules 8.1 and 55.1 apply to any “Action” in which the plaintiff seeks to collect a debt relative to a transaction primarily for personal, family or household purposes pursuant to a revolving credit agreement. Many of the requirements under the new Rules originated from requirements under rules in other states surveyed by the Committee and appear to be particularly aimed at large volume debt buyers.
Under MRCP Rule 8.1 any complaint filed in an Action must be accompanied by one or more affidavits, a statute of limitations certification and relevant supporting documentation. There is no specific requirement that the information be produced in separate affidavits although given the expansive information required, several affidavits maybe required. It can be expected that the process of assembling and producing the necessary documents will be laborious and require careful and through redaction. The entire complaint package must be served on the defendant.
The party executing the affidavits must attest to having acquired the requisite personal knowledge in making the affirmations. The Affidavit Regarding Debt must recite the identity of the current owner of the debt including the identity of any retailer sponsor, a chronological listing of all prior owners including the dates of transfer, the date and amount of the last payment, date of charge off and the amount of debt at such time. If the debt was incurred post charge off, a detailed itemization of the amount, terms and the method of calculating the debt owed must be included. The Affidavit Documenting the Existence, Amount and Terms of the Debt must include a legible copy of the notice of charge off sent to the consumer, proof the debt was incurred, the applicable terms and conditions and evidence of signing or acceptance of the same or if absent, the most recent monthly statement showing a purchase, payment or balance transfer. The most burdensome requirement particularly where the debt may have been transferred multiple times, will be proof of virtually every transfer of the ownership of the debt including the bill of sale, assignment, etc. specifically referring to the consumer or his/her account.
The Address Verification Affidavit must include supporting documentation showing that the defendant’s residential address has been verified within three months prior to filing the complaint by a variety of means and in most cases by multiple means. The affidavit must describe the verification means selected and the dates of the same. If the applicable data base or municipal records show more than one address in the last twelve months, the affiant must explain why that address was chosen and include the verification documents.
The plaintiff or its counsel must execute a certification that the Statute of Limitations (SOL) has not expired, a description of any choice of law/limitations provisions and the statute relied upon in establishing the SOL.
The affidavit to be submitted at the time of entry of a default judgment under new MRCP Rule 55.1 requires counsel for the plaintiff to sign, serve and file an affidavit affirming that based on a personal review of the documentation filed and served under Rule 8.1, it complies with the requirements with any exceptions noted and that plaintiff is entitled to judgment as claimed. The request for entry must be served on the defendant in accordance with existing rules and in compliance with Rule 8.1 at his/her residential address. The clerk must be satisfied the plaintiff has fully complied with Rules 8.1 and Rule 55.1.before entering a default judgment. Otherwise, he or she must notify the parties and dismiss the action without prejudice unless within 30 days of the notice the plaintiff shows cause why the action should not be dismissed.
Please direct any questions to Julie Moran, Senior Executive Counsel at firstname.lastname@example.org.