The recently passed Consumer Credit Fairness Act (“CCFA”) instituted some wide-sweeping, and much needed, reforms in the debt collection practice in New York State. First and foremost, the New York Statute of Limitations (“SOL”) for commencing a debt collection lawsuit was reduced from 6 years to 3 years, effective April 7, 2022. Other portions of the CCFA went into effect on May 7, 2022. The Statute of Limitations is the time period during which a creditor is authorized by statute to commence a debt collection lawsuit. Any such lawsuit brought after the statutorily authorized time frame is considered to be “time barred”. However, this new law does nothing to change the fact that if you are served with a Summons and Complaint seeking recovery on a time-barred debt you still must serve and file an Answer in the case, and it is in your Answer that you will plead the SOL as an affirmative defense.
Of almost equal importance, the CCFA makes it much harder for creditors to revive, or restart, an already expired SOL. Prior to the CCFA, even if a SOL had already expired it could be revived, or restarted, by the occurrence of: the debtor making a new payment on the account; the debtor incurring a new charge on the account; or the debtor signing a written acknowledgement that the debt was theirs. The CCFA brings an end to most of these “revival” events. Once the SOL is expired it cannot be revived or restarted even if the debtor is tricked or coerced into making a new payment or signing a written acknowledgment of the debt.
The CCFA also creates some much-needed procedural guardrails to protect debtors from having judgments entered against them without their knowledge, or without their understanding why they are being sued, or by whom. The days of debt collection creditors filing one-page complaints devoid of any details or proof of the debt owed have ended. The contract or written instrument forming the basis of the lawsuit must be attached to the Complaint. If a debt collection lawsuit is brought by a Junk Debt Buyer (i.e., Midland Funding, LVNV Funding, etc.), proof of the assignment of the debt from the original creditor must be provided, along with a “chain of title” from creditor to creditor. Junk Debt Buyers buy charged off debts from original creditors who no longer intend to pursue them, often paying only pennies on a dollar for them, and it is not unusual for such Junk Debts to already be time-barred. The account balance printed on the most recent monthly statement showing a purchase transaction, last payment or balance transfer must be provided, along with the date and amount of the last payment. To further protect debtor’s from having suspect judgments entered against them via “sewer service”, once a collection lawsuit is filed the Court must send an additional notice to the debtor, advising them of the lawsuit, before a default judgment can be entered can be entered against them.
The CCFA also establishes additional protections before a default judgment can be entered in a debt collection case, particularly one brought by a Junk Debt Buyer. In addition, the request for a default judgment must include an affidavit by the creditor’s attorney setting forth their belief that the SOL has not expired. Likewise, additional protections are established before a motion for summary judgment can be granted against a debtor, particularly when the debtor is not represented by an attorney.