August 14, 2018

by Julie Moran
Orlans PC – USFN Member (Delaware, Massachusetts, Michigan)

Over the past year, collection practices of the consumer credit card industry have been the target of considerable action by virtually all branches of the government of the Commonwealth of Massachusetts, a state whose history of aggressive protection of consumer rights is well documented. With the leadership change at the CFPB and recent actions by the Bureau appearing to embrace a less strident approach to enforcement, states such as Massachusetts are stepping in to fill a perceived void.

Senate Bill 120
Legislatively, Senate Bill 120 (An Act Relative to Fairness in Debt Collection) is pending before the Senate Ways and Means Committee. S.120 — one of several bills focused on debt collection practices — applies to most types of consumer debt, creditors including debt buyers, and the attorneys who represent them. The bill further restricts the income available for wage garnishment; reduces both the time and method of calculating the applicable statute of limitations and the duration of judgments on debts; allows a consumer to avoid a court appearance and examination under oath in a supplementary proceeding by submitting an affidavit of no assets; and liberalizes the attorney’s fees awarded to a successful consumer while restricting those awarded to a successful creditor.

Rules of Civil Procedure
The judicial branch of the Commonwealth has also focused on credit card debt collection. In 2016, an Ad Hoc Committee of the MA Court Standing Advisory Committee on the Rules of Civil Procedure was formed to study alleged abuses in revolving credit agreement cases, including credit card matters, filed in courts of the Commonwealth. Described abuses included inadequate verification of the address of the consumer and difficulties that the consumer encountered in determining the identity of the original creditor.

On May 23, 2018 the committee issued amendments to the Massachusetts Rules of Civil Procedure (Mass. R. Civ. P.) in the form of two new rules, effective January 1, 2019. The press release can be viewed here. Mass. R. Civ. P. Rule 8.1 and Rule 55.1 apply to any “Action” in which the plaintiff seeks to collect a debt relative to a transaction primarily for personal, family, or household purposes pursuant to a revolving credit agreement. Many of the requirements under the new rules originated from requirements under rules in other states surveyed by the committee and appear to be particularly aimed at large volume debt buyers. View the new rules here.

Rule 8.1 — Under this rule, any complaint filed in an action must be accompanied by one or more affidavits, a statute of limitations certification, and relevant supporting documentation. There is no specific requirement that the information be produced in separate affidavits, although, given the expansive information required, several affidavits may be necessary. It can be expected that the process of assembling and producing the requisite documents will be laborious and involve careful and thorough redaction. The entire complaint package must be served on the defendant.

The party executing the affidavits must attest to having acquired the requisite personal knowledge in making the affirmations. The “affidavit regarding debt” must recite the identity of the current owner of the debt, including the identity of any retailer sponsor; a chronological listing of all prior owners, including the dates of transfer, the date and amount of the last payment, date of charge-off, and the amount of debt at such time. For the portion of the debt incurred after charge-off, a detailed itemization of the amount, terms, and the method of calculating the debt owed must be included. The “affidavit providing documentation of debt” must include legible copies of the notice of charge-off sent to the consumer; proof that the debt was incurred; the applicable terms and conditions; and evidence of signing or acceptance of the same; or, if absent, the most recent monthly statement showing a purchase, payment, or balance transfer. The most arduous requirement, particularly where the debt may have been transferred multiple times, will be proof of virtually every transfer of the ownership of the debt (including the bill of sale, assignment, etc.) specifically referring to the consumer or his/her account.

The “address verification affidavit” must include supporting documentation showing that the defendant’s residential address has been verified within three months prior to filing the complaint by a variety of means and, in most cases, by multiple means. The affidavit must describe the verification methods selected and the dates of the same. If the applicable database or municipal records show more than one address in the last twelve months, the affiant must explain why that address was chosen and include the verification documents.

The plaintiff or its counsel must execute a certification that the statute of limitations (SOL) has not expired, a description of any choice of law/limitations provisions, and the statute relied upon in establishing the SOL.

Rule 55.1 — The affidavit to be submitted at the time of entry of a default judgment under new Rule 55.1 requires counsel for the plaintiff to sign, serve, and file an affidavit affirming that — based on a personal review of the documentation filed and served under Rule 8.1 — it complies with the requirements with any exceptions noted and that plaintiff is entitled to judgment as claimed. The request for entry must be served on the defendant in accordance with existing rules and in compliance with Rule 8.1 at his/her residential address. The clerk must be satisfied that the plaintiff has fully complied with Rule 8.1 and Rule 55.1 before entering a default judgment. Otherwise, the clerk must notify the parties and dismiss the action without prejudice unless (within 30 days of the notice) the plaintiff shows cause why the action should not be dismissed.

© Copyright 2018 USFN. All rights reserved.
July/August e-Update

Note for consideration of the USFN Award of Excellence: This article is not a "Feature."