November 29, 2021

Volume XI, Number 333

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New York Enacts Consumer Credit Fairness Act, Impacting Debt Collection Actions

On November 8, New York Governor Kathy Hochul signed into law the Consumer Credit Fairness Act (Act) (S.153/A.2382).  The Act contains a series of amendments to New York’s Civil Practice Law and Rules (CPLR) that significantly impact debt collection lawsuits filed in New York state courts by creditors and third-party debt collectors.  The key amendments to the CPLR include the following:

  • 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.

With the exception of the prohibition on revival or extension of the statute of limitations which becomes effective on April 7, 2022, the other amendments described above become effective on May 7, 2022.

Putting It Into Practice:  While the legislation is meant to target abusive and exploitative debt collection lawsuits that try to take advantage of New York consumers, all creditors and third-party debt collectors should take note of the upcoming amendments that will drastically change the filing and prosecution of debt collection actions.

Copyright © 2021, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume XI, Number 322
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About this Author

Moorari Shah Bankruptcy Lawyer Sheppard Mullin Law Firm
Partner

Moorari Shah is a partner in the Finance and Bankruptcy Practice Group in the firm's Los Angeles and San Francisco offices. 

Areas of Practice

Moorari combines deep in-house and law firm experience to deliver practical, business-minded legal advice. He represents banks, fintechs, mortgage companies, auto lenders, and other nonbank institutions in transactional, licensing, regulatory compliance, and government enforcement matters covering mergers and acquisitions, consumer and commercial lending, equipment finance and leasing, and supervisory examinations,...

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A.J. S. Dhaliwal Bankruptcy Attorney Sheppard Mullin Washington DC
Associate

A.J. is an associate in the Finance and Bankruptcy Practice Group in the firm's Washington, D.C. office. 

A.J. has over a decade of experience helping banks, non-bank financial institutions, and other companies providing financial products and services in a wide range of matters including government enforcement actions, civil litigation, regulatory examinations, and internal investigations.

With a diversified regulatory, compliance, and enforcement background, A.J. counsels financial institutions in matters involving...

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