SENATE, No. 2818 STATE OF NEW JERSEY 214th LEGISLATURE INTRODUCED APRIL 11, 2011 Sponsored by: Senator JIM WHELAN District 2 (Atlantic) Senator JEFF VAN DREW District 1 (Cape May, Atlantic and Cumberland) SYNOPSIS “Consumer Credit Fairness Act.” CURRENT VERSION OF TEXT As introduced. An Act concerning debt buyers and supplementing P.L.1960, c.39 (C.56:8-1 et seq.). Be It Enacted by the Senate and General Assembly of the State of New Jersey: 1. This act shall be known and may be cited as the “Consumer Credit Fairness Act.” 2. a. As used in this act, “debt buyer” means a person that is engaged in the business of purchasing delinquent or charged-off consumer loans or consumer credit accounts or other delinquent consumer debt for collection purposes, whether it collects the debt itself, hires a third party for collection, or engages an attorney for litigation in order to collect the debt. b. No debt buyer shall collect or attempt to collect any debt by use of any unfair, false, misleading, or deceptive acts or practices, which include, but are not limited to: (1) Seeking or obtaining any written statement or acknowledgment in any form containing an affirmation of any debt by a debtor who has been declared bankrupt, an acknowledgment of any debt barred by the statute of limitations, or a waiver of any legal rights of the debtor without disclosing the nature and consequences of the waiver, acknowledgment, or affirmation and the fact that the debtor is not legally obligated to make the waiver, acknowledgment, or affirmation; (2) Collecting or attempting to collect from the debtor all or part of the debt buyer’s fee or charge for services rendered, or collecting or attempting to collect any interest or other charge, fee or expense incidental to the principal debt unless legally entitled to the fee or charge; (3) Communicating with a debtor if the debt buyer has been notified by the debtor’s attorney that the debtor is represented by the attorney; (4) Bringing suit or initiating an arbitration proceeding against the debtor, or otherwise attempting to collect on a debt, when the debt buyer knows, or reasonably should know, that the collection is barred by the applicable statute of limitations; (5) Bringing suit or initiating an arbitration proceeding against the debtor, or otherwise attempting to collect on a debt, without the following: (a) Valid documentation that the debt buyer is the owner of the specific debt instrument or account at issue; and (b) Reasonable verification of amount of the debt allegedly owed by the debtor. For purposes of this subparagraph, reasonable verification shall include documentation of the name of the original creditor, the name and address of the debtor as it appeared on the original creditor’s records, the debtor’s original account number, a copy of the contract or other document showing evidence of the consumer debt, and an itemized accounting of the amount claimed to be owed, including all fees and charges; and (6) Bringing suit or initiating an arbitration proceeding against the debtor to collect on a debt without first giving the debtor written notice of the intent to file a legal action at least 30 days in advance of filing. The written notice shall include the name, address, and telephone number of the debt buyer, the name of the original creditor and the debtor’s original account number, a copy of the contract or other document showing evidence of the consumer debt, and an itemized accounting of all amounts claimed to be owed. 3. a. In any cause of action initiated by a debt buyer, all of the following materials shall be attached to the complaint or claim: (1) A copy of the contract or other writing showing evidence of the original debt, which shall contain a signature of the defendant. If a claim is based on a credit card debt and no such signed writing showing evidence of the original debt ever existed, then copies of documents generated when the credit card was actually used shall be attached; and (2) A copy of the assignment or other writing establishing that the plaintiff is the owner of the debt. If the debt has been assigned more than once, then each assignment or other writing showing evidence of transfer of ownership shall be attached to establish an unbroken chain of ownership. Each assignment or other writing evidencing transfer of ownership shall contain the original account number of the debt purchased and shall clearly show the debtor’s name associated with that account number. b. (1) Prior to entry of a default judgment or summary judgment against a debtor in a complaint initiated by a debt buyer, the plaintiff shall file evidence with the court to establish the amount and nature of the debt. (2) The only evidence sufficient to establish the amount and nature of the debt shall be properly authenticated business records that contain the following: (a) The original account number; (b) The original creditor; (c) The amount of the original debt; (d) An itemization of charges and fees claimed to be owed; (e) The original charged-off balance, or, if the balance has not been charged off, an explanation of how the balance was calculated; (f) An itemization of post charged-off additions, where applicable; (g) The date of last payment; and (h) The amount of interest claimed and the basis for the interest charged. 4. a. It is an unlawful practice and a violation of P.L.1960, c.39 (C.56:8-1 et seq.) to violate any provision of this act. b. In lieu of the remedies provided by section 7 of P.L.1971, c.247 (C.56:8-19), a debtor aggrieved by a debt buyer who violates any provision of P.L. , c. (C. ) (pending before the Legislature as this bill) shall be entitled to payment from the debt buyer in an amount equal to any actual damages sustained by the debtor as a result of the violation and statutory damages of up to $1,000, together with reasonable attorney’s fees and court costs and such amount of punitive damages as the court may allow pursuant to section 4 of P.L.1995, c.142 (C.2A:15-5.12). This may be recoverable by the debtor in a civil action in a court of competent jurisdiction or as part of a counterclaim by the debtor against the debt buyer who aggrieved the debtor. c. A debt buyer shall not be held liable in any action brought under P.L. , c. (C. ) (pending before the Legislature as this bill) if the debt buyer shows by a preponderance of evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error. d. The court shall consider, in determining the amount of damages to be awarded for a violation of P.L. , c. (C. ) (pending before the Legislature as this bill), the frequency and persistence of non-compliance by the debt buyer, as the case may be, the nature of such non-compliance, and the extent to which such non-compliance was intentional. 5. This act shall take effect on the first day of the seventh month following enactment, but the Director of the Division of Consumer Affairs may take such anticipatory administrative acts in advance of that date as may be necessary for the timely implementation of this act. STATEMENT This bill establishes the “Consumer Credit Fairness Act.” Generally, the bill is intended to eliminate abusive practices in the collection of consumer debts by debt buyers and is to be enforced by the Director of the Division of Consumer Affairs. As defined in the bill, “debt buyer” means a person that is engaged in the business of purchasing delinquent or charged-off consumer loans or consumer credit accounts or other delinquent consumer debt for collection purposes, whether it collects the debt itself, hires a third party for collection, or engages an attorney for litigation in order to collect the debt. The bill stipulates that no debt buyer shall collect or attempt to collect any debt by use of any unfair, false, misleading, or deceptive acts or practices, which include, but are not limited to: · Seeking or obtaining any written statement or acknowledgment in any form containing an affirmation of any debt by a debtor who has been declared bankrupt, an acknowledgment of any debt barred by the statute of limitations, or a waiver of any legal rights of the debtor without disclosing the nature and consequences of the waiver, acknowledgment, or affirmation and the fact that the debtor is not legally obligated to make the waiver, acknowledgment, or affirmation; · Collecting or attempting to collect from the debtor all or part of the debt buyer’s fee or charge for services rendered, or collecting or attempting to collect any interest or other charge, fee or expense incidental to the principal debt unless legally entitled to the fee or charge; · Communicating with a debtor if the debt buyer has been notified by the debtor’s attorney that the debtor is represented by the attorney; · Bringing suit or initiating an arbitration proceeding against the debtor, or otherwise attempting to collect on a debt, when the debt buyer knows, or reasonably should know, that the collection is barred by the applicable statute of limitations; · Bringing suit or initiating an arbitration proceeding against the debtor, or otherwise attempting to collect on a debt, without the following: (1) Valid documentation that the debt buyer is the owner of the specific debt instrument or account at issue; and (2) Reasonable verification of amount of the debt allegedly owed by the debtor. Reasonable verification shall include documentation of the name of the original creditor, the name and address of the debtor as it appeared on the original creditor’s records, the debtor’s original account number, a copy of the contract or other document showing evidence of the consumer debt, and an itemized accounting of the amount claimed to be owed, including all fees and charges; and · Bringing suit or initiating an arbitration proceeding against the debtor to collect on a debt without first giving the debtor written notice of the intent to file a legal action at least 30 days in advance of filing. The written notice shall include the name, address, and telephone number of the debt buyer, the name of the original creditor and the debtor’s original account number, a copy of the contract or other document showing evidence of the consumer debt, and an itemized accounting of all amounts claimed to be owed. The bill also provides that in any cause of action initiated by a debt buyer, all of the following materials shall be attached to the complaint or claim: · A copy of the contract or other writing showing evidence of the original debt, which shall contain a signature of the defendant. If a claim is based on a credit card debt and no such signed writing showing evidence of the original debt ever existed, then copies of documents generated when the credit card was actually used shall be attached; and · A copy of the assignment or other writing establishing that the plaintiff is the owner of the debt. If the debt has been assigned more than once, then each assignment or other writing showing evidence of transfer of ownership shall be attached to establish an unbroken chain of ownership. Each assignment or other writing evidencing transfer of ownership shall contain the original account number of the debt purchased and shall clearly show the debtor’s name associated with that account number. · Prior to entry of a default judgment or summary judgment against a debtor in a complaint initiated by a debt buyer, the plaintiff shall file evidence with the court to establish the amount and nature of the debt. Furthermore, as stated in the bill, the only evidence sufficient to establish the amount and nature of the debt shall be properly authenticated business records that contain the following: · The original account number; · The original creditor; · The amount of the original debt; · An itemization of charges and fees claimed to be owed; · The original charged-off balance, or, if the balance has not been charged off, an explanation of how the balance was calculated; · An itemization of post charged-off additions, where applicable; · The date of last payment; and · The amount of interest claimed and the basis for the interest charged. It is an unlawful practice and a violation of New Jersey’s consumer fraud act to violate any provision of this bill. A debt buyer, however, shall not be held liable in any action brought for a violation of the bill’s provisions if the debt buyer shows by a preponderance of the evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adopted to avoid any such error.