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Credit cards can be defended in court and judgments vacated.

Credit Card Defense

Signed application, terms. Signed receipts. Accounting. Predatory Terms. Original agreement. Violation of Fair Debt Collection Act.

5. Regulating Judgment Interest Rates

Please see the attached amendment added to CPLR 5004 with regard to Consumer Debt judgments.  All interest accrued on judgments for consumer debt is now at 2%, a significant decrease from the original 9%.

This new interest rate applies to all consumer debt judgments after 9/15/21.  If a judgement was entered before that date, the interest a creditor may collect is 9% up to 9/15/21, and any interest collected after 9/15/22 is now only 2%.

New York will lower its interest rate on money judgments in actions involving consumer debt for the first time since 1981 after Gov. Kathy Hochul signed the Fair Consumer Judgment Interest Act (FCJIA) on Dec. 31, 2021.

The goal of the law is to remedy hardships on consumers caused by the statutory judgment interest rate, which have increased during the COVID-19 pandemic.

The new law is one of three from New York’s legislative session that impacts the accounts receivable management (ARM) industry.

With the governor’s signature on the FCJIA, Section 5004 of the civil practice law and rules is amended to read as follows:

“[The] interest shall be at the rate of [9%] per annum, except where otherwise provided by statute; provided the annual rate of interest to be paid in an action arising out of a consumer debt where a natural person is a defendant shall be [2%] per annum on a judgment or accrued claim for judgments entered on or after the effective date of the chapter of the laws of [2021], which amended this section, and for interest upon a judgment pursuant to [S]ection [5003] of this article from the date of the entry of judgment on any part of a judgment entered before the effective date of the chapter of the laws [2021], which amended this section that is unpaid as of such effective date.”

Consumer debt is defined in the law as “any obligation or alleged obligation of any natural person to pay money arising out of a transaction in which the money, property, insurance or services which are the subject of the transaction are primarily for personal, family or household purposes, whether or not such obligation has been reduced to judgment, including, but not limited to, a consumer credit transaction, as defined in [S]ubdivision (f) of [S]ection [105] of this chapter.”

6. Laws regulating SOL in NYS 

Please see the below link showing a new amendment being added to CPLR 214 with regard to Consumer Credit Transaction (credit card debt).

The new Statute of Limitations for these actions are now 3 years, not 6, and require additional notices to the defendant.  These are some GREAT defenses here that will be very helpful in LIT and NEG.  The amendment takes effect 9/5/2022https://legislation.nysenate.gov/pdf/bills/2021/S153

ALL – we now have a HUGE potential help in negotiating and litigating consumer debt as follows: 

1. SOL INITIATION –  I believe that unlike with foreclosures litigation,  the statute of limitations (“SOL”) for consumer debt litigation starts upon default. {PLS VERIFY}. Therefore I believe that any debt where the default was older than 3 years is vulnerable if there is ANY possible question about service of process AND the date of default. {PLS VERIFY}.  We can argue client did not live where served  (unless very accurate personal service) AND/OR  that default date was earlier than alleged by the creditor (unless very accurate statements kept as records by the creditors). Typically consumer debt creditors don’t have accurate records of supporting proof for either issue, residency of the D or the default date.  We can BOTH litigate and negotiate and/or threaten litigation based on this new 3 year SOL rule and accompanying amended laws.

2. EASIER TO VACATE JUDGMENTS – If our clients who are often transient and unstable as to where they live have ANY proof of an alternate address/residency during the time of the past alleged service (due to a move, separation/divorce) we can contest service and if we win we can not only vacate the judgment but also potentially prevent a new action with an SOL action or motion. 

3, NEW NOTICE REQUIREMENT – This accompanying rule as to a new notice requirement for consumer actions resembles the 90 Day Notices in foreclosure actions in that it may be going forward the source of controversy and litigation. It may be that Ps going forward  will have to show that this notice was actually mailed/given to the D and without that accurate/solid showing, an action may be dismissed and/or a judgment vacated. Exactly how/when to give this notice and the extent of the proof of doing so may end up making consumer debt collection much more litigious. 

4.  IMPORTANT QUESTIONS?  – Is this new 3 year SOL rule retroactive? Apparently it goes into effect in September 2022, but does it go back to transactions and/or cases started/decided before the amendment/rule? If it possibly does go back, that will be very useful because we can potentially get many judgments vacated and cases dismissed based on SOL and because the 3 year rule being much tighter/shorter than the than the former 6 year rule, the P may be barred from starting a new legal action if their first action was dismissed ( ie., based on SOL).  But if it’s just a rule going forward than we might have to wait for the full effect of this rule. 

**4. IMPORTANT QUESTIONS CONTINUED  – the last section of this amendment is VERY interesting. It says:

  “§ 15. This act shall take effect immediately; provided, however,  that

sections  two,  three,  five,  six,  seven, eight, nine, ten, eleven and

 twelve shall take effect on the one hundred eightieth day after it shall

 have become a law and shall apply to actions and  proceedings  commenced

 on  or after such date; and provided, further, that section four of this

 act shall take effect on the one hundred fiftieth  day  after  this  act

shall have become a law.”

It is section four (4) which contains the main change which is a reduction of the SOL from 6 years to 3 years. A close reading shows that section four will NOT ONLY take effect earlier (within 150 as opposed to 180 days) BUT section four also impliedly (unlike the other sections) is NOT applicable ONLY to actions commenced ON/AFTER it becomes law. Therefore, unlike the other sections section four impliedly is presumably not just limited to NEW actions/proceedings started after the law took effect and could potentially apply to actions  started earlier and judgments rendered earlier. Until this is clarified by amendments/court decisions this may be a real game changer in that creditors in the past have often started actions AFTER  three years of default have passed. Assuming the debt may go into collection and be sold several times for several years before litigation starts, older judgments may be subject to this rule and  may be now be litigated to a much larger extent if the original litigation leading to the judgment commenced more than three years after the default. It seems that this SOL is NOT subject to waiver and presumably a judgment rendered in violation of the SOL may now be questioned. 

5. OTHER POTENTIAL GAME CHANGERS IN THE AMENDMENT – 

a. No Waiver of SOL –  Section four also SPECIFICALLY states that payment or non-insistence on SOL does NOT waive the SOL. Therefore we could potentially counter claim and/or move and/or sue for : over-payments made in violation of the SOL and potentially under the Fair Debt Collection Act for the violation of the Ds rights with the violation of the SOL. 

b. Many New Requirements in the Complaint and Limitations on the Right to Amend the Complaint – There are many new aspects to the Complaint which will be regulated much more heavily to state information like the original creditor, the chain of assignment, a break down of what’s owed by principal, interest and fees and the Complaint needs to also include a copy of the contract or charge off. The Amendment also limits the rights to amend the complaint; presumably creditors may often need to amend to comply correctly but this appears to be a limited right. 

c. Many New Requirements for The Motion for a Default Judgment – There are also Many New Requirements for the Motion for a Default Judgment including its OWN separate NOTICE. 

7. Laws regulating length of enforceability of a judgment in NYS – how is a debt extended after 10 years
8. Laws Regulating Going After Debt Collectors for Violations – damages, SOL