MEMORANDUM OF SUPPORT: CONSUMER DEBT UNIFORMITY ACT
BILL TITLE: Relates to actions arising out of consumer debt
BILL NUMBER: S.9760 (Gounardes)/A.10182A (Taylor)
STATEMENT OF SUPPORT: The Center for Elder Law and Justice supports the Consumer Debt Uniformity Act (CDUA), which would expand protections already in place for consumers in lawsuits involving consumer credit transactions to all forms of consumer debt.
The Center for Elder Law and Justice is a non-profit, legal services organization with a mission of improving the quality of life for elderly, disabled, and low-income persons through the provision of free civil legal services throughout Western New York. We seek to utilize the legal system to ensure that our clients may live independently and with dignity. A large part of our work involves assisting clients in dealing with creditors pursuing them for a variety of consumer debts, including medical debt, nursing home debt, credit card debt, etc. Many of our clients have incurred these debts as a result of scams or identity theft. Those with medical debt issues often incur debt as a result of an inability to navigate complicated insurance billing processes or Medicaid/Medicare applications or appeals as well as through extended stays at nursing facilities when unable to find suitable, alternate arrangements.
New York has long recognized and sought to remedy the myriad injustices that often arise in debt collection lawsuits against consumers. These problems include lack of notice, lawsuits brought in inconvenient forums or years after evidence and memories have faded, vague pleadings, and meritless claims. For these reasons, the legislature has enacted laws, including the Consumer Credit Fairness Act (CCFA) in 2021,1 to level the playing field for consumers. However, these measures only afford protections to consumers facing the narrow category of debts that arise from “consumer credit transactions.”2 That means consumers facing collection of many common forms of consumer debt, including medical debt, rent arrears, and higher education debt, do not receive these basic safeguards.
The CDUA would remedy this problem by expanding consumer protections already on the books to all consumer debts, regardless of the type. Such protections include:
Requirement that debt collection cases be filed in the county in which the consumer resides
Requirement that basic information regarding the debt be included in the complaint
Additional time to tell the court about improper service
Application of a consistent statute of limitation of three years to all consumer debts
Mailing of additional notices in English and Spanish when filing a lawsuit or moving for summary judgment
Consumer protections are essential in all collection lawsuits, not just in cases for credit card debt.
In our experience as advocates, consumers sued by hospitals, nursing homes, landlords, colleges, and other creditors face the same challenges and obstacles that exist in cases seeking to collect credit card debt, and those consumers are just as likely to be unrepresented by counsel. Ensuring that basic, commonsense guardrails are in place to protect vulnerable consumers from known abuses and exploitation in the law is necessary to ensure that they have a fair shot at defending themselves. In examining medical debt, Pew Charitable Trusts, came to the same conclusion, recommending that policymakers consider reforms to the debt litigation process for all forms of consumer debt, including by strengthening service requirements, helping consumers understand who is suing them and for what, and removing barriers that prevent people from participating in their cases – all of which the CDUA accomplishes.3
Here are examples of former clients who would benefit from passage of S.4750B/A.57B:
A client was being sued for a medical debt that allegedly was incurred due to a stay at a rehabilitation facility. The Plaintiff failed to attach any documentation of the agreement between itself and the client on the terms of payment. The client was very ill at the time of admission to the facility and does not have a recollection of the terms of payment. It is difficult to know, under the current state of the law, whether a written agreement governing the terms of payment even exits or whether Plaintiff merely failed to attach it to the Complaint. Without this, it is difficult to assess the proper amount owing, the obligations the parties had regarding who should be responsible for applying for additional insurance benefits to cover the stay, and other factors important to the proper defense of the lawsuit. If the protections that apply to other types of consumer debt were extended to medical debt, the Plaintiff would be required to furnish a copy of the written agreement that governs the terms of payment if one is in existence, which would greatly help the client in being able to defend the lawsuit.
The CDUA would create consistency for courts, pro se litigants, and industry
Having a consistent definition of consumer debt would reduce confusion for all interested parties and ensure the proper application of existing laws to all similar cases. For example, currently, many court rules regarding consumer debt lawsuits are tied to the CPLR definition of “consumer credit transaction.” However, in 2014, the Office of Court Administration issued rules that constrained the CPLR’s definition of “consumer credit transaction” to mean only a “revolving or open-end credit transaction” and specifically excluded “debt incurred in connection with, among others, medical services, student loans, auto loans or retail installment contracts.”4 But the CCFA, which went into effect in 2022, applies to all consumer credit transactions;5 however, there is judicial uncertainty as to whether it applies to debts such as student loans because of the OCA rules.6 Further, the statute of limitations under the CCFA for consumer credit transactions was reduced to three years,7 consistent with the statute of limitations for medical debt, which was reduced from six years to three years in 2020.8 Meanwhile, the Fair Consumer Judgment Interest Act, which also went into effect in 2022, lowered the judgment interest rate from nine percent to two percent for all “consumer debt,”9 not just consumer credit transactions. Attorneys are required to prominently display “consumer credit transaction” on summonses issued in lawsuits that arise from consumer credit transactions, but there is no similar requirement for general consumer debts. Therefore, it is left to court clerks to scrutinize complaints and determine whether to apply the reduced interest rate on judgments. It also makes it impossible for courts to accurately track data about consumer debt litigation.
As such, rules regarding pleading and default judgments apply to consumer credit transactions, but not consumer debt; the three-year statute of limitations applies to consumer credit transactions and medical debt, but not other types of consumer debt; and the consumer judgment interest rate applies to all forms of consumer debt.
The CDUA would reduce confusion by ensuring that all consumer protection provisions regarding lawsuits in New York would apply uniformly to all forms of consumer debt. The definition of consumer debt is well established under existing laws, and was adopted from federal statutes, including the Fair Debt Collection Practices Act10 and the U.S. Bankruptcy Code,11 as well as New York State law.12 There is long-standing precedent of what constitutes a “consumer debt,” which the debt collection industry has been complying with for decades.
New York has laws on the books meant to help consumers have a fair shot when they are sued. The CDUA ensures that all consumers, not just those with credit card debt, benefit from New York’s robust, consumer protection laws. Center for Elder Law and Justice strongly urges you to support the Consumer Debt Uniformity Act S.4750B/ A.57B.
For more information, contact Amy Gathings, 716-853-3087 x247.
