Hot off the presses, the New Jersey Appellate Division has at long last addressed the issue of what is required for a 3rd party debt buyer (“commonly called an “assignee”) to prove ownership of a debt in a Motion for Summary Judgment. This case is GREAT news for defendants who are facing summary judgment motions filed by Pressler or other debt collection firms in the NJ Special Civil Part. The new case is especially good news for those sued by New Century Financial Services, Midland Funding, or other third party debt buyers.
The as-yet unpublished Appellate Division opinion, captioned “New Century Financial Services, Inc. v. Oughla, 2014 NJ Super UNPUBL 448, which was decided on March 5, 2014, goes into great detail in its analysis of the “bad-debt marketplace” and the proofs required to prove that a company such as New Century Financial Services Inc. actually owns the debt they are suing on.
The Court began its opinion with a nice informational overview of the debt buyer’s market, or “zombie debt market” as I like to call it:
“Upon purchase of a portfolio, the debt buyer receives a “data file,” typically one or more electronic spreadsheets containing information such as the name, street address, home telephone number, date of birth, and [18] social security number for each debtor, along with the credit card account number, the amount due at charge-off, the date the debtor opened the account, the date of last payment, and the date of charge-off.
Both plaintiffs in these cases represented that the information they acquired on defendants’ charged-off debts was through the transfer of electronic data files. In addition to the data file, buyers of charged-off accounts also sometimes acquire electronic documentation or “media,” typically account statements, at the time of sale or the right to request such from the seller for a limited period of time, and often for a fee.
The debts within these portfolios are sometimes sold multiple times pursuant to separate purchase and sale agreements in which [19] sellers generally disclaim all representations and warranties regarding the accuracy of the information about the individual debts.
Defendants and amicus contend that because plaintiffs are suing on purchased debt of which they have no personal knowledge, the absence of a warranty leaves plaintiffs unable to prove that they have sued the right defendant for the correct amount. The FTC acknowledges, however, that its study did not permit any conclusions as to the prevalence of errors or inaccuracies in the information about the debts transferred in these portfolios.”
I think that’s a pretty good overview of the bad-debt market as it currently exists.
The Court’s opinion goes on to find a major flaw in the “chain of assignment” of the bad debt from the original creditor (Credit One, a visa credit card) up until New Century Financial’s purchase of the debt:
“We cannot agree that because the [30] credit card accounts are originated by Credit One andassigned to MHC Receivables while the accounts are still active, that no proof of assignment is necessary.New Century’s assertion that Credit One did not own the account appears at direct odds with Mazzoli’s certification that MHC Receivables “purchases and holds” Visa and MasterCard accounts “originated by Credit One.”
Further, we note that Mazzoli’s affidavit discussing MHC Receivables is markedly less clear than the Galic certifications. Instead of explaining his position with MHC Receivables and describing the source of his knowledge, Mazzoli says only that as “authorized representative” for that entity, he has “personal knowledge” of how it “originates, services, owns and manages Visa and MasterCard accounts.” The affidavit neither reveals his position, if any, with MHC Receivables, nor the source ofhis knowledge of this aspect of its operations. The Mazzoli affidavit on behalf of MHC Receivables raises more questions than it answers and thus does not provide sufficient proof of Credit One’s transfer of Oughla’s account to MHC Receivables, the first link in New Century’s chain of assignments. Ibid.
Accordingly, the summary judgment against Oughla must be reversed because New Century did not establish the full chain of ownership of its claim. While Mazzoli’s affidavit is not sufficient to establish the transfer of Oughla’s charged-off Credit One account to MHC Receivables, we note that he asserts that Credit One cardholders are noticed of the transfer of their accounts, thereby suggesting that proof of MHC Receivables’ ownership of Oughla’s account may be established in ways other than production of an assignment. We express no opinion on the method by which New Century may prove MHC Receivables’ ownership of Oughla’s account on remand. It suffices to say that it must be established by admissible evidence presented by affidavit of a witness competent to testify.”
To put the above “legalese” into plain English, the Court is stating that proof of the assignment of your original debt “down the line” to subsequent purchasers of the debt (i.e, collection agents) must meet specific requirements. The Bill of Sale certifying that your account was sold must meet a certain form and be based upon personal knowledge of a record custodian or other account representative.
This stricter requirement laid down above by the Court is excellent news for anyone sued by New Century or another third-party assignee of a credit card debt. The opinion above provides a nice “road map” for a skilled debt New Jersey defense lawyer (such as myself) to “pick apart” the claims of the plaintiff and force the case to a trial or a settlement.
Understand that if you are facing a Motion for Summary Judgment in the NJ Special Civil Part, the stakes are very high. If you lose the motion, you will be liable for the amount demanded in the Complaint and there will be no trial.
Don’t take that chance- call me today at 908-782-5313 for a free consultation about your case.
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