New York Consumer Credit Fairness Act
whitm...@gmail.com
The governor just signed the New York Consumer Credit Fairness Act (S.153/A.2382). The Act amends the Civil Practice Law (CPLR) with regard to debt collection lawsuits by creditors and third-party debt collectors.
With the exception of the prohibition on revival or extension of the statute of limitations (the second bullet point below), which becomes effective on April 7, 2022, the other amendments mentioned below become effective on May 7, 2022.
● For most debt collection lawsuits arising out of a consumer credit transaction, the statute of limitations is reduced from six years to three years.
● A payment toward the debt or "written or oral affirmation" of ownership of the debt by a consumer does not revive or extend the limitations period.
● A plaintiff must attach to the complaint the contract upon which the action is based.
● The complaint must also include, among other things, the name of the original creditor, the last four digits of the account number, and the date and amount of the last payment.
● A plaintiff must provide a completed "additional notice of lawsuit" to the court clerk when filing the proof of service for the complaint, which the clerk will then mail to the consumer.
● If a third-party debt collector seeks a default judgment, it must submit supporting affidavits from the original creditor, any prior assignors or sellers of the debt, and a witness for the collector who can verify the chain of title for the debt.
● All plaintiffs requesting a default judgment must also include an affidavit, stating that the statute of limitations to enforce the debt has not expired.
From a real estate lawyer’s viewpoint, the big question is whether these changes apply to mortgage foreclosure actions. I’m not a NY lawyer, but it appears to me that they do. They apply to “consumer credit transactions,” which are defined in Civil Prac. L. 105(f) as ““a transaction wherein credit is extended to an individual and the money, property, or service which is the subject of the transaction is primarily for personal, family or household purposes.” This would seem to include owner-occupied residential mortgage loans. Is this correct?
I would appreciate further comment and analysis from New York counsel!
Dale
Dale Whitman
Professor of Law Emeritus
University of Missouri
Kenneth J. Flickinger
Hi Dale,
I do not believe this applies to mortgage foreclosures. When CPLR section 105(f), defining “consumer credit transaction” first became law, it was in connection with the Governor’s 1973 Consumer Protection Legislative program. That program included adding/amending CPLR 105(f), which defined consumer credit transaction; CPLR 305(a), which required a summons in a consumer credit transaction to include those words on the face of the summons; CPLR 503(f), which required venue in a consumer credit transaction to be in the county in which the debtor resides; and CPLR 513, which required the clerk to reject a summons for filing where venue was improper. All of this related to venue in “consumer credit transactions.” However, mortgage foreclosure actions were unaffected, because venue in foreclosures is governed by CPLR 507, relating to real property actions.
Also, CPLR section 213(4), creates a six-year statute of limitations for mortgage foreclosures, and was not amended. That would appear to, at the very least, preclude application of CPLR 214-i to foreclosures.
Mortgage foreclosures were treated separate from consumer credit transactions in CPLR 2111, enacted in 2015, with respect to electronic filing. If a mortgage foreclosure was considered a consumer credit transaction, the legislature would not likely have referenced them separately.
Finally, the amendment to CPLR 3215, which requires proof of the chain of title from the original creditor to the plaintiff would be contrary to UCC Article 3, regarding negotiable instruments, which includes promissory notes, and states that a holder is entitled to enforce the instrument in its own name, notwithstanding the history of assignments or chain of title.
Please let me know if you have any questions.
Thanks,
 |
| Kenneth J. Flickinger,
Member ECKERT SEAMANS CHERIN & MELLOTT, LLC 10 Bank Street, Suite 700 | White Plains, NY 10606 T: 914-286-2817 C: 718-986-4873 F: 914-949-5424 |
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whitm...@gmail.com
Ken - thanks for your analysis. What you say seems to me to make sense. I will forward to DIRT subscribers.
Best wishes,
Dale
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Chris Hardin
Since this is a new law, the legislative minutes and history are fresh. Reviewing these may clear-up whether the Act applies to mortgages. What did the legislature and Governor intend? Ask them.
With regard to the amendment to CPLR 3215, which requires proof of the chain of title from the original creditor to the plaintiff, does UCC Article 3 refer to negotiable instruments generally, but when a promissory note relates to real property, does the higher standard found in the amendment to CPLR 3215 take over?
In Nevada, we have a similar matter which has me scratching my head. Is a note related to real property subject to the lower standard found in UCC 3 or to the higher standard found in the Statute of Frauds (NRS 111.205). An argument can be made that the plain language, legislative intent and public policy objective of the statute means that NRS 111.205 applies to notes related to real property.
I am not an attorney and certainly am not an expert on UCC 3 but I have yet to find a legislature that allows or encourages mortgage notes to have murky and mysterious chains of title. Thus, simply from perspective of common sense, the higher standard would seem to apply. But, maybe I am wrong.
Thanks,
Chris Hardin
SFR Investments
Las Vegas, NV 89119
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Kenneth J. Flickinger
I checked the transcript of the session proceeding when the bill passed the assembly on June 2, 2021, and watched the Senate session when it passed there on May 25, 2021. Nothing mentioned about mortgage foreclosures, so no help there.
 |
| Kenneth J. Flickinger,
Member ECKERT SEAMANS CHERIN & MELLOTT, LLC 10 Bank Street, Suite 700 | White Plains, NY 10606 T: 914-286-2817 C: 718-986-4873 F: 914-949-5424 |
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Judith Fox
On Nov 23, 2021, at 11:00 AM, Kenneth J. Flickinger <kflic...@eckertseamans.com> wrote:
I checked the transcript of the session proceeding when the bill passed the assembly on June 2, 2021, and watched the Senate session when it passed there on May 25, 2021. Nothing mentioned about mortgage foreclosures, so no help there.
To view this discussion on the web visit https://groups.google.com/d/msgid/nyclarealprop/249a461850d0433d8ae2abbaa89a958e%40CDCEXCH01.eckert.escm.com.
Chris Hardin
I’ve not had time to study the entire Act (Assembly Bill A2382), but I did note that it uses the term “real property” one time. I have pasted an excerpt below. Go to the words I’ve highlighted in yellow. Perhaps one of you can research the nuances of this? Maybe the Act applies to a judicial foreclosure (lawsuit) but not a non-judicial foreclosure?
Thanks,
Chris Hardin
SFR Investments
Las Vegas, NV
==================================================================================
ADDITIONAL NOTICE OF LAWSUIT
(NAME OF COURT)
(COUNTY)
(STREET ADDRESS, ROOM NUMBER)
(CITY, STATE, ZIP CODE)
(NAME OF DEFENDANT)
(ADDRESS OF DEFENDANT)
PLAINTIFF:
DEFENDANT:
NAME OF ORIGINAL CREDITOR, UNLESS SAME:
INDEX NUMBER:
ATTENTION: A LAWSUIT HAS BEEN FILED AGAINST YOU CLAIMING THAT YOU OWE
MONEY FOR AN UNPAID CONSUMER DEBT.
YOU MAY WISH TO CONTACT AN ATTORNEY.
YOU SHOULD RESPOND TO THE LAWSUIT AS SOON AS POSSIBLE BY FILING AN
"ANSWER" WHICH MAY BE DONE AT THE COURT CLERK'S OFFICE LISTED ABOVE.
IF YOU DO NOT RESPOND TO THE LAWSUIT, THE COURT MAY ENTER A MONEY
JUDGMENT AGAINST YOU. ONCE ENTERED, A JUDGMENT IS GOOD AND CAN BE USED
AGAINST YOU FOR TWENTY YEARS, AND YOUR PERSONAL PROPERTY AND MONEY,
INCLUDING A PORTION OF YOUR PAYCHECK AND/OR BANK ACCOUNT, MAY BE TAKEN
FROM YOU. ALSO, A JUDGMENT MAY AFFECT YOUR CREDIT SCORE AND CAN AFFECT
YOUR ABILITY TO RENT A HOME, FIND A JOB, OR TAKE OUT A LOAN.
YOU CANNOT BE ARRESTED OR SENT TO JAIL FOR OWING A DEBT.
ADDITIONAL INFORMATION CAN BE FOUND AT THE NEW YORK STATE COURT SYSTEM
WEBSITE.
SOURCES OF INFORMATION AND ASSISTANCE:
THE COURT ENCOURAGES YOU TO INFORM YOURSELF ABOUT YOUR OPTIONS AS A
DEFENDANT IN THIS LAWSUIT. IN ADDITION TO SEEKING ASSISTANCE FROM A
PRIVATE ATTORNEY OR LEGAL AID OFFICE, THERE ARE FREE LEGAL ASSISTANCE
COMPUTER PROGRAMS THAT YOU CAN USE ONLINE TO HELP YOU REPRESENT YOURSELF
IN THIS LAWSUIT.
A. 2382 3
FOR FURTHER INFORMATION, OR TO LOCATE A LEGAL AID PROGRAM NEAR YOU, YOU
MAY VISIT THE LAWHELPNY WEBSITE OR THE NEW YORK STATE COURT SYSTEM
WEBSITE, WHICH HAS INFORMATION FOR REPRESENTING YOURSELF AND LINKS TO
OTHER RESOURCES AT: ___________________.
(B) THE FACE OF THE ENVELOPE SHALL BE ADDRESSED TO THE DEFENDANT AT
THE ADDRESS AT WHICH PROCESS WAS SERVED, AND SHALL CONTAIN THE DEFEND-
ANT'S NAME, ADDRESS (INCLUDING APARTMENT NUMBER) AND ZIP CODE. THE FACE
OF THE ENVELOPE ALSO SHALL STATE THE APPROPRIATE CLERK'S OFFICE AS ITS
RETURN ADDRESS.
(C) THE CLERK PROMPTLY SHALL MAIL TO THE DEFENDANT THE ENVELOPE
CONTAINING THE ADDITIONAL NOTICE SET FORTH IN SUBDIVISION (A) OF THIS
SECTION. NO DEFAULT JUDGMENT BASED ON THE DEFENDANT'S FAILURE TO ANSWER
SHALL BE ENTERED UNLESS THERE HAS BEEN COMPLIANCE WITH THIS SECTION, AND
AT LEAST TWENTY DAYS HAVE ELAPSED FROM THE DATE OF MAILING BY THE CLERK.
NO DEFAULT JUDGMENT BASED ON THE DEFENDANT'S FAILURE TO ANSWER SHALL BE
ENTERED IF THE ADDITIONAL NOTICE IS RETURNED TO THE COURT AS UNDELIVERA-
BLE. RECEIPT OF THE ADDITIONAL NOTICE BY THE DEFENDANT DOES NOT CONFER
JURISDICTION ON THE COURT IN THE ABSENCE OF PROPER SERVICE OF PROCESS.
(D) THE CHIEF ADMINISTRATIVE JUDGE SHALL ISSUE A SPANISH TRANSLATION
OF THE NOTICE IN SUBDIVISION (A) OF THIS SECTION AND SHALL MAINTAIN AND
PUBLISH THE URL ADDRESS FOR THE WEB PAGE CONTAINING CONSUMER RESOURCES
FOR UNREPRESENTED LITIGANTS.
§ 6. Subdivision (a) of section 3012 of the civil practice law and
rules is amended to read as follows:
(a) Service of pleadings. The complaint may be served with the
summons, EXCEPT THAT IN AN ACTION ARISING OUT OF A CONSUMER CREDIT TRAN-
SACTION, THE COMPLAINT SHALL BE SERVED WITH THE SUMMONS. A subsequent
pleading asserting new or additional claims for relief shall be served
upon a party who has not appeared in the manner provided for service of
a summons. In any other case, a pleading shall be served in the manner
provided for service of papers generally. Service of an answer or reply
shall be made within twenty days after service of the pleading to which
it responds.
§ 7. Rule 3016 of the civil practice law and rules is amended by
adding a new subdivision (j) to read as follows:
(J) CONSUMER CREDIT TRANSACTIONS. IN AN ACTION ARISING OUT OF A
CONSUMER CREDIT TRANSACTION WHERE A PURCHASER, BORROWER OR DEBTOR IS A
DEFENDANT, THE CONTRACT OR OTHER WRITTEN INSTRUMENT ON WHICH THE ACTION
IS BASED SHALL BE ATTACHED TO THE COMPLAINT, HOWEVER, FOR THE PURPOSES
OF THIS SECTION, IF THE ACCOUNT WAS A REVOLVING CREDIT ACCOUNT, THE
CHARGE-OFF STATEMENT MAY BE ATTACHED TO THE COMPLAINT INSTEAD OF THE
CONTRACT OR OTHER WRITTEN INSTRUMENT, AND THE FOLLOWING INFORMATION
SHALL BE SET FORTH IN THE COMPLAINT:
(1) THE NAME OF THE ORIGINAL CREDITOR;
(2) THE LAST FOUR DIGITS OF THE ACCOUNT NUMBER PRINTED ON THE MOST
RECENT MONTHLY STATEMENT RECORDING A PURCHASE TRANSACTION, LAST PAYMENT
OR BALANCE TRANSFER;
(3) THE DATE AND AMOUNT OF THE LAST PAYMENT OR, IF NO PAYMENT WAS
MADE, A STATEMENT THAT THE PURCHASER, BORROWER OR DEBTOR MADE NO PAYMENT
ON THE ACCOUNT;
(4) IF THE COMPLAINT CONTAINS A CAUSE OF ACTION BASED ON AN ACCOUNT
STATED, THE DATE ON OR ABOUT WHICH THE FINAL STATEMENT OF ACCOUNT WAS
PROVIDED TO THE DEFENDANT;
(5) (A) EXCEPT AS PROVIDED IN SUBPARAGRAPH (B) OF THIS PARAGRAPH, AN
ITEMIZATION OF THE AMOUNT SOUGHT, BY (I) PRINCIPAL; (II) FINANCE CHARGE
OR CHARGES; (III) FEES IMPOSED BY THE ORIGINAL CREDITOR; (IV) COLLECTION
A. 2382 4
COSTS; (V) ATTORNEY'S FEES; (VI) INTEREST; AND (VII) ANY OTHER FEES AND
CHARGES.
(B) IF THE ACCOUNT WAS A REVOLVING CREDIT ACCOUNT, AN ITEMIZATION OF
THE AMOUNT SOUGHT, BY: (I) THE TOTAL AMOUNT OF THE DEBT DUE AS OF
CHARGE-OFF; (II) THE TOTAL AMOUNT OF INTEREST ACCRUED SINCE CHARGE-OFF;
(III) THE TOTAL AMOUNT OF NON-INTEREST CHARGES OR FEES ACCRUED SINCE
CHARGE-OFF; AND (IV) THE TOTAL AMOUNT OF PAYMENTS AND/OR CREDITS MADE ON
THE DEBT SINCE CHARGE-OFF;
(6) THE ACCOUNT BALANCE PRINTED ON THE MOST RECENT MONTHLY STATEMENT
RECORDING A PURCHASE TRANSACTION, LAST PAYMENT OR BALANCE TRANSFER;
(7) (A) WHETHER THE PLAINTIFF IS THE ORIGINAL CREDITOR.
(B) IF THE PLAINTIFF IS NOT THE ORIGINAL CREDITOR, THE COMPLAINT SHALL
ALSO STATE (I) THE DATE ON WHICH THE DEBT WAS SOLD OR ASSIGNED TO THE
PLAINTIFF; (II) THE NAME OF EACH PREVIOUS OWNER OF THE ACCOUNT FROM THE
ORIGINAL CREDITOR TO THE PLAINTIFF AND THE DATE ON WHICH THE DEBT WAS
ASSIGNED TO THAT OWNER BY THE ORIGINAL CREDITOR OR SUBSEQUENT OWNER; AND
(III) THE AMOUNT DUE AT THE TIME OF THE SALE OR ASSIGNMENT OF THE DEBT
BY THE ORIGINAL CREDITOR; AND
(8) ANY MATTERS REQUIRED TO BE STATED WITH PARTICULARITY PURSUANT TO
RULE 3015 OF THIS ARTICLE.
§ 8. Subdivision (e) of rule 3211 of the civil practice law and rules,
as amended by chapter 616 of the laws of 2005, is amended to read as
follows:
(e) Number, time and waiver of objections; motion to plead over. At
any time before service of the responsive pleading is required, a party
may move on one or more of the grounds set forth in subdivision (a) OF
THIS RULE, and no more than one such motion shall be permitted. Any
objection or defense based upon a ground set forth in paragraphs one,
three, four, five and six of subdivision (a) OF THIS RULE is waived
unless raised either by such motion or in the responsive pleading. A
motion based upon a ground specified in paragraph two, seven or ten of
subdivision (a) OF THIS RULE may be made at any subsequent time or in a
later pleading, if one is permitted; an objection that the summons and
complaint, summons with notice, or notice of petition and petition was
not properly served is waived if, having raised such an objection in a
pleading, the objecting party does not move for judgment on that ground
within sixty days after serving the pleading, unless the court extends
the time upon the ground of undue hardship. The foregoing sentence shall
not apply in any proceeding TO COLLECT A DEBT ARISING OUT OF A CONSUMER
CREDIT TRANSACTION WHERE A CONSUMER IS A DEFENDANT OR under subdivision
one or two of section seven hundred eleven of the real property actions
and proceedings law. The papers in opposition to a motion based on
improper service shall contain a copy of the proof of service, whether
or not previously filed. An objection based upon a ground specified in
paragraph eight or nine of subdivision (a) OF THIS RULE is waived if a
party moves on any of the grounds set forth in subdivision (a) OF THIS
RULE without raising such objection or if, having made no objection
under subdivision (a) OF THIS RULE, he or she does not raise such
objection in the responsive pleading WHICH, IN ANY ACTION TO COLLECT A
DEBT ARISING OUT OF A CONSUMER CREDIT TRANSACTION WHERE A CONSUMER IS A
DEFENDANT, INCLUDES ANY AMENDED RESPONSIVE PLEADING.
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Jonathan Richards
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