New York State recently passed the Consumer Credit Fairness Act which primarily changes the statute of limitations (SOL) from 6 years to 3 years for all collection lawsuits. Ultimately this will put pressure on creditors to sue consumers quickly before their time runs out. It also prevents the revival of an SOL after payment is made or oral or written affirmation is made which has been a consistent problem that has allowed debts to live on long after the SOL should have expired. Collection agencies and law firms would often ask for one payment to be made in “good faith” or ask the client to confirm that the debt was indeed theirs which would then renew the SOL. This, debts would live on and the creditor would have far more than 6 years to sue consumers. These tactics finally seem to be over.
Each creditor must also notify the court once a lawsuit is filed so that the court may then send an additional written notice to the consumer before a default can be obtained. This section may be the most important change for practical purposes as default judgments based on poor or improper service have plagued consumers for years. This will provide a second opportunity for the court to send notice to a consumer and alternatively give them some additional time to answer a lawsuit if they missed being served or didn’t realize that the lawsuit was real.
The law also lays out a number of documentary pieces of evidence that must be provided by the creditor to the court for the case to move forward. This is an important change as we often saw one-page complaints from creditors with a few paragraphs void of any details or proof about the debt owed. The contract or other written instrument on which the lawsuit is based on must be provided now. Debt-buyers or non-original creditors such as Midland Funding, LVNV, CACH LLC, Unifund CCR, and Cavalry SPV as common examples, must initially provide proof of assignment of the debt from the original creditor as well as a full chain-of-title from creditor to creditor. This is an enormous development as we would always request these important pieces of evidence in the middle of litigation and find out that the creditor either lacked these documents entirely or had minimal proof of assignment. Many of these cases became default judgments against consumers before these creditors were ever asked to provide these documents clearly showing that these cases should never have been brought without proof in the first place. The Consumer Credit Fairness Act will become effective this April and May 2022.