The Consumer Credit Fairness Act

The Consumer Credit Fairness Act of 2021:

The Consumer Credit Fairness Act of 2021 was enacted in order to address various substantive and procedural issues dealing with consumer debt lawsuits. The legislation was enacted in 2021 with an effective date of April 30, 2022. Much of the Consumer Credit Fairness Act (CCFA) was passed to provide debtors with additional protection concerning consumer debt claims brought against them. Highlights of the CCFA include:

New Statute of Limitations: Generally, most actions for breach of contract in New York State may be commenced within six years of the date of breach. Now, the statute of limitations within which to commence an action against a debtor on a consumer debt is three years. Further, the plaintiff-creditor must represent that it believes the statute of limitations has not expired.

Notice Requirements: Additional notices are to be served upon the defendant-debtor, including notice of the lawsuit to be served at the inception of the lawsuit and notice of the motion for summary judgment if and when brought by the plaintiff-creditor.

Detailed Affidavits: The CCFA added stringent requirements regarding affidavits to be filed when the plaintiff-creditor is applying for judgment, including allegations and exhibits required of an original creditor, a debt seller and a debt buyer.

Arbitration: Actions brought to confirm arbitration awards must now include additional proof.

Reduction of Rate of Interest: Deviating from longstanding New York State law in which the rate of interest on a money judgment is computed at nine percent per annum, the CCFA reduced the interest rate on consumer debt cases to two percent per annum.

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Consumer Credit Reform Resources

Overview of Consumer Credit Reform

Additional Notice Forms:

• Additional Notice of Lawsuit [UCS-CCR1]
• Additional Notice of Summary Judgment Motion [UCS-CCR2]

Affidavit Forms:

• Affidavit of Facts by Original Creditor [UCS-CCR3]
• Affidavit of Facts and Sale of Account by Original Creditor [UCS-CCR4]
• Affidavit of Purchase and Sale of Account by Debt Seller [UCS-CCR5]
• Affidavit of Facts and Purchase of Account by Debt Buyer Plaintiff [UCS-CCR6]

Affirmation Form:

• Affirmation of Non-Expiration of Statute of Limitations [UCS-CCR7]0

Confirmation of an Arbitration Award

Rate of Interest Applicable to Money Judgments for Consumer Debt:

• Rate of Interest [CPLR 5004]
• Default Judgment and Judgment by Confession [CPLR 3215 & 3218]
• Execution of Judgment and Income Execution [CPLR 5230 & 5231]
• Restraining Notice [CPLR 5222]

 

Overview of Consumer Credit Reform

On October 1, 2014, the court system adopted major reforms addressing default judgment applications in consumer credit cases, including those commenced by third-party debt buyers. The new rules required original creditor and debt buyer plaintiffs to submit specific affidavits and notices that meet substantive legal and evidentiary standards for entry of a default judgment under New York law. The rules were intended to ensure a fair legal process and address documented abuses, including entry of default judgments despite insufficient or incorrect factual proof, expiration of the applicable statute of limitations and failed service of process. The scope of these rules was limited to default judgment applications in consumer debt cases made to the clerk under CPLR 3215(a), and the rules applied a narrower definition of “consumer debt” than the CPLR, which limited their applicability to default judgment applications for credit card debt only.

On November 8, 2021, the Consumer Credit Fairness Act (CCFA) was signed into law. The provisions of the act take effect on May 7, 2022. The CCFA essentially mirrors the reforms implemented by court rule for credit card debt cases in 2014 and codifies them into the CPLR, thereby, extending them to all consumer debt actions.

On December 31, 2021, legislation amending the CPLR regarding the rate of interest applicable to money judgments for consumer debt was also signed into law. The amendments essentially lower the rate of interest for money judgments entered against a natural person in consumer debt cases from 9% to 2% beginning on April 30, 2022.

• Legislation:
  • Consumer Credit Fairness Act — S153opens PDF file
  • Rate of Interest Applicable to Money Judgments for Consumer Debt — S5724-Aopens PDF file
• Court Rules:
  • New York City Civil Court: 22 NYCRR §§ 208.14-a and 208.6(h)
  • City Courts outside the City of New York: 22 NYCRR §§ 210.14-a and 210.14-b
  • Nassau and Suffolk District Courts: 22 NYCRR §§ 212.14-a and 212.14-b
  • Supreme & County Courts: 22 NYCRR §§ 202.27-a and 202.27-b
• Administrative Orders:
  • Administrative Order dated May 4, 2022opens PDF file
  • Administrative Order dated December 23, 2014opens PDF file
  • Administrative Order dated September 15, 2014opens PDF file

 

Additional Notices

The Consumer Credit Fairness Act requires two additional notices to the consumer defendant.

The Additional Notice of Lawsuit [UCS-CCR1] is required when proof of service of the summons & complaint is filed with the clerk. The plaintiff must submit the Additional Notice of Lawsuit, in both English and Spanish, with a stamped, unsealed envelope addressed to the defendant. The envelope must be addressed to the same address where the summons & complaint was served, including apartment number, if any, and must have the applicable court clerk’s office as the return address. The Additional Notice of Lawsuit must be mailed promptly by the court clerk to the defendant, and no default judgment may be entered unless at least 20 days have elapsed from the date of mailing, or if returned to the court as undeliverable, unless the address matches the defendant’s address on record with the New York State Department of Motor Vehicles. It is the plaintiff’s responsibility to obtain and submit such proof of address to the court clerk.

• Additional Notice of Lawsuit [UCS-CCR1]

The Additional Notice of Summary Judgment Motion [UCS-CCR2] is required when a Summary Judgment motion or a Summary Judgment in Lieu of Complaint motion is filed by the plaintiff and the consumer defendant is not represented by an attorney. The plaintiff must submit the Additional Notice of Summary Judgment Motion, in both English and Spanish, with a stamped, unsealed envelope addressed to the defendant. The Additional Notice of Summary Judgment Motion must be mailed promptly by the court clerk to the defendant, and summary judgment based upon the defendant’s failure to oppose the motion may not be entered unless at least 14 days have elapsed from the date of mailing, or at least 19 days have elapsed from the date of mailing if the plaintiff’s motion demands additional time for service of responsive papers per CPLR §2214(b).

• Additional Notice of Summary Judgment Motion [UCS-CCR2]

 

Affidavits

The Consumer Credit Fairness Act requires plaintiffs to file certain affidavits when seeking a default judgment in any consumer debt case as follows:

• If the plaintiff is the original creditor, the application MUST include an Affidavit of Facts by Original Creditor [UCS-CCR3].
• If the plaintiff is not the original creditor (AKA a debt buyer), the application MUST include:
  • Affidavit of Facts and Sale of Account by Original Creditor [UCS-CCR4] constituting the:
    • Debt;
    • Default in payment;
    • Sale or assignment of the debt; and
    • Amount due at time of sale or assignment;
  • Affidavit of Purchase and Sale of Account by Debt Seller [UCS-CCR5] completed by each subsequent debt seller if the account was re-sold and purchased by subsequent debt buyer(s); and
  • Affidavit of Facts and Purchase of Account by Debt Buyer Plaintiff [UCS-CCR6], which includes a chain of title of the debt completed by the plaintiff or plaintiff’s witness.

The required affidavit forms are provided in both fillable PDF and Word formats as follows:

Affidavit of Facts by Original Creditor [UCS-CCR3]

The following exhibits must be attached to the Affidavit of Facts by Original Creditor [UCS-CCR3]:

1. Agreement: Contract/Invoice or Charge-off Statement if the consumer debt is from a revolving credit account
2. Most recent Account Statement with a charge, payment and/or balance transfer
3. Additional books and records evidencing:
   • Defendant’s full name
   • Balance due and last 4 digits of account number printed on the most recent monthly statement reflecting a charge, payment and/or balance transfer
   • Last payment date and amount
   • Charge-off date and amount
   • Delinquency date and amount
   • Post charge-off/delinquency interest and/or fees
   • Post charge-off/delinquency credits

     Note: A Certificate of Conformity is only required for affidavits specific to real property transactions.

Affidavit of Facts and Sale of Account by Original Creditor [UCS-CCR4]

The following exhibits must be attached to the Affidavit of Facts and Sale of Account by Original Creditor [UCS-CCR4]:

1. Bill of sale from original creditor to debt buyer
2. Agreement: Contract/Invoice or Charge-off Statement if the consumer debt is from a revolving credit account
3. Most recent Account Statement with a charge, payment and/or balance transfer
4. Additional books and records evidencing:
   • Debtor’s full name
   • Balance due and last 4 digits of account number printed on the most recent monthly statement reflecting a charge, payment and/or balance transfer
   • Last payment date and amount
   • Charge-off date and amount
   • Delinquency date and amount
   • Post charge-off/delinquency interest and/or fees
   • Post charge-off/delinquency credits
   • Total balance at time of sale

     Note: A Certificate of Conformity is only required for affidavits specific to real property transactions.

Affidavit of Purchase and Sale of Account by Debt Seller [UCS-CCR5]

The following exhibits must be attached to the Affidavit of Purchase and Sale of Account by Debt Seller [UCS-CCR5]:

1. Bill of sale from debt seller to debt buyer
2. Additional business records evidencing:
   • Debtor’s full name
   • Total balance and last 4 digits of account number at time of sale

     Note: A Certificate of Conformity is only required for affidavits specific to real property transactions.

Affidavit of Facts and Purchase of Account by Debt Buyer Plaintiff [UCS-CCR6]

The following exhibits must be attached to the Affidavit of Facts and Purchase of Account by Debt Buyer Plaintiff [UCS-CCR6]:

1. Bill of sale from debt seller to plaintiff
2. Most recent Account Statement with a charge, payment and/or balance transfer
3. Additional books and records evidencing:
   • Defendant’s full name
   • Balance due and last 4 digits of account number printed on the most recent monthly statement reflecting a charge, payment and/or balance transfer
   • Last payment date and amount
   • Charge-off date and amount
   • Delinquency date and amount
   • Post charge-off/delinquency interest and/or fees
   • Post charge-off/delinquency credits

     Note: A Certificate of Conformity is only required for affidavits specific to real property transactions.

 

Affirmation

When applying to the clerk of the court for a default judgment for a sum certain in a consumer debt case, the plaintiff must include an affirmation stating that, after reasonable inquiry, he or she believes that the applicable statute of limitations has not expired.

• Affirmation of Non-Expiration of Statute of Limitations [UCS-CCR7]

 

Confirmation of an Arbitration Award

Under CPLR 7516, the court shall not grant a motion to confirm an arbitration award that is based upon a consumer credit transaction unless the moving party:

1. Pleads the actual terms and conditions of the arbitration agreement; and
2. Attaches the following to the petition:
   • Arbitration Agreement;
   • Demand for Arbitration or Notice of Intention to Arbitrate with proof of service; and
   • Arbitration Award with proof of service.
3. If the arbitration award does not contain a statement of:
   • Claims submitted for arbitration;
   • Claims ruled upon by the arbitrator; and
   • Figures used by the arbitrator to calculate the award;

     then the petition MUST contain such a statement.

 

Rate of Interest Applicable to Money Judgments for Consumer Debt

Rate of Interest [CPLR 5004]

Effective April 30, 2022, the rate of interest for money judgments in consumer debt cases against a natural person (i.e., a human being) is 2% per year. For consumer debt judgments against a natural person entered before April 30th, the rate of interest for any unpaid balances becomes 2% per year beginning on April 30, 2022. For consumer debt judgments entered against a defendant that is not a natural person (i.e., a business or organization), the annual rate of interest remains at 9% per year irrespective of whether the judgment was entered before or after April 30th. The annual rate of interest remains at 9% per year for all other judgments, except for consumer debt judgments against a natural person.

For the purpose of money judgments in consumer debt cases against a natural person, “consumer debt” means 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 with 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 CPLR §105(f) [cited below].

• CPLR § 105(f) Consumer credit transaction. The term “consumer credit transaction” means a transaction wherein credit is extended to an individual and the money, property, or service which is the subject of the transaction is primarily for personal, family or household purposes.

For consumer debt judgments against a natural person entered before April 30th, a defendant is not entitled to a reduction of interest accrued or to a refund of interest or fee payments that were made at the higher 9% interest rate prior to April 30, 2022.

Default Judgment and Judgment by Confession [CPLR 3215 & 3218]

As of April 30, 2022, litigants in consumer debt cases against a natural person must now include an affidavit with a statement that the new 2% interest rate applies when filing a:

• Default Judgment
• Default Judgment for failure to comply with a Stipulation of Settlement
• Judgment by Confession
• Execution of Judgment

Execution of Judgment and Income Execution [CPLR 5230 & 5231]

Under CPLR 5230(a), an Execution of Judgment form must specify the applicable interest rate and the date as of which it applies. For consumer credit judgments against a natural person where the applicable interest rate changes as of April 30th from 9% to 2% while an Execution of Judgment is ongoing, the judgment creditor is responsible to provide an amended Execution of Judgment form.

Under CPLR 5230(b), issuance of an amended Execution of Judgment form must be affected by:

• The judgment creditor, as an officer of the court, within 60 days of the effective date (i.e., by June 29, 2022) for judgments entered in Local Civil Courts.
• Either the clerk of the court in the county where the judgment was first docketed OR the judgment creditor, as an officer of the court, within 60 days of the effective date (i.e., by June 29, 2022) for judgments entered in Supreme, County or Family Courts.

The sheriff must serve the amended execution within 45 days after it is delivered to him/her.

The above provisions of CPLR §5230 regarding Executions of Judgment also apply to Income Executions under CPLR §5231.

Restraining Notice [CPLR 5222]

For consumer credit judgments against a natural person where the applicable interest rate changes as of April 30th from 9% to 2% while a Restraining Notice is in effect, the judgment creditor, without leave of the court, must issue an amended restraining notice that includes the date as of which the new interest rate applies.

State of New York Department of Financial Services Industry Guidance, Subject: Compliance with 23 N.Y.C.R.R. §1.3(b) and the new Consumer Credit Fairness Act. See attached.

 

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