A debt buyer plaintiff may face substantial problems in submitting its evidence in admissible form, as debt buyer Palisades Collection, LLC found in the case Palisades v. Kedik.[1] In Kedik, Palisades allegedly purchased a defaulted credit card account from Discover, and attempted to collect on it from the consumer defendant. In the Supreme Court (a trial-level court in New York state), the defendant argued that the plaintiff had failed to prove that it had standing to collect the debt – that is, Palisades had not proved it had ownership of the debt, and the Supreme Court agreed and dismissed the case. Palisades appealed to the Appellate Division (the next highest court), and the Appellate Division affirmed. These are the evidence problems Palisades ran into, as set forth in the Kedik opinion.
In the absence of accompanying testimony by the person who actually wrote or prepared it, documentary evidence (that is, evidence on paper) is inadmissible hearsay unless it falls under one or more exceptions provided for by the rules of evidence set out by New York statute.
In consumer credit cases, most often the hearsay exception a plaintiff uses is the business record exception, which provides that a business record is admissible if the record was made in the regular course of business, it was the regular course of the business to make the record, and the record was made at or near the time of the act, transaction, occurrence or event.
The court's inquiry does not end there, however. A proper foundation must be laid for the admission of the business record – that is, a foundation must be provided by someone with personal knowledge of the business practices of the maker of the record, and the person laying the foundation must be able to testify as to when, why and by whom the specific document submitted was created.
A further level of inquiry is made when the document is maintained in electronic form but submitted to the court on paper. Although this is permissible, the proponent of the document must prove to the court that the paper document is a true and accurate copy of the electronic version.
See our previous blog, "why debt buyers have difficulty enforcing collection lawsuits."
If debt buyers submit anything at all to prove they own a debt, it is usually an assignment document which refers to a purchase of accounts that are listed on another document, which is rarely attached. In lieu of the attachment, the debt buyer will submit a document that is set up like a spreadsheet but shows the details of only one account. Likely, it was such a document that Palisades tried, and failed, to admit into evidence. As a result, it could not prove it had standing to bring its case against the consumer.