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7 Powerful Lawsuit Defenses for New York Debtors in 2023 (Consumer Credit Fairness Act)

7 Powerful Lawsuit Defenses for New York Debtors in 2023 (Consumer Credit Fairness Act)

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What is the New York Consumer Credit Fairness Act?

On November 8, 2021, New York State enacted the Consumer Credit Fairness Act (“CCFA”), which implements comprehensive changes to New York’s Civil Practice Law and Rules ("CPLR").

In lawsuits over “consumer credit,” in which credit was used for "personal" reasons, New York State amended several important statutes to provide consumer defendants with the following protections:

1) A Shorter, 3-Year Statute of Limitations

The Statute of Limitations (time in which to sue) was shortened to three years from six years. CPLR § 214-i.[1] This became effective on April 7, 2022.

Also, when the applicable statute of limitations expires, any subsequent payment or affirmation of the debt does not revive or extend the statute of limitations. When seeking a default judgment, a plaintiff is required to submit an affidavit stating a reasonable belief that the statute of limitations hasn't expired. CPLR § 3215.

Quiz: New York Consumer Credit Fairness Act

2) More Evidence with the Complaint (Contract or Charge-Off Statement + More Facts)

As required under CPLR § 3016(j) (below), effective on May 7, 2022, the underlying contact or charge-off statement must accompany the complaint. Additionally, the following pieces of information must be included:

  1. The name of the original creditor;
  2. The last four digits of the account number printed on the most recent monthly statement recording a purchase transaction, last payment, or balance transfer;
  3. The date and amount of the last payment or, if no payment was made, a statement that the purchaser, borrower, or debtor made no payment on the account;
  4. If the complaint contains a cause of action based on an account stated, the date on or about which the final statement of account was provided to the defendant;
  5. (A) Except as provided in subparagraph (B) of this paragraph, an itemization of the amount sought by (i) principal; (ii) finance charge or charges; (iii) fees imposed by the original creditor; (iv) collection costs; (v) attorney's fees; (vi) interest; and (vii) any other fees and charges.                                                                                                          (B) If the account was a revolving credit account, an itemization of the amount sought by: (i) the total amount of the debt due as of charge-off, (ii) the total amount of interest accrued since charge-off, (iii) the total amount of non-interest charges or fees accrued since charge-off; and (iv) the total amount of payments and/or credits made on the debt since charge-off;
  6. The account balance printed on the most recent monthly statement recording a purchase transaction, last payment, or balance transfer;
  7. (A) Whether the plaintiff is the original creditor.                                                                                                                                                                                                        (B) If the plaintiff is not the original creditor, the complaint shall also state (i) the date on which the debt was sold or assigned to the plaintiff, (ii) the name of each previous owner of the account from the original creditor to the plaintiff and the date on which the debt was assigned to that owner by the original creditor or subsequent owner; and (iii) the amount due at the time of the sale or assignment of the debt by the original creditor; and
  8. Any matters required to be stated with particularity pursuant to rule 3015 of this article.

3) A Better Chain of Custody if a Debt Buyer Brought Suit

As we saw in Two Basic Ways to Obtain a Default Judgment in New York: Clerk & Judge, debt buyers must include the following affidavits and assignments to get default judgments:

  • an affidavit by the original creditor setting forth facts about the underlying debt, the default, the amount due, the sale or assignment of the debt, and the amount due at the time of sale or assignment
  • for each subsequent assignment or sale of the debt to another entity, an affidavit of sale of the debt by the debt seller, completed by the seller or assignor, and
  • an affidavit of a witness of the plaintiff, which includes a chain of title of the debt, completed by the plaintiff or plaintiff's witness. CPLR § 3215.

4) Additional Notice About the Collection Lawsuit is Required

Aside from proper service of the Summons and Complaint, a creditor must provide an extra notice, which must detail, among other things:

  • The consequences of not responding to the pending lawsuit and
  • resources that are available to help you defend against the action, such as seeking assistance from a private attorney, a legal aid office, or a free legal assistance computer program that you can use online to help you represent yourself in the lawsuit. CPLR § 306-d.

If this mailed notice is returned to the clerk as undeliverable, creditors may not obtain a default judgment (an automatic win). The Consumer Credit Fairness Act clarifies that even if you receive the notice, you have a defense to the suit if it was improper. The statute (§ 306-d) is set forth in this footnote.[2]

The plaintiff (the party that filed the suit) has to provide a similar notice if it files a motion for summary judgment under CPLR § 3212).[3]

The Langel Firm Intake Form for Consumer Debt Defense​

5) Forms and Templates for the Consumer Credit Fair Fairness Act

Here is a list of resources, such as Affidavits and rates of interest. The Consumer Credit Reform overview presents guidelines and resources related to the court system's reforms on default judgment applications in consumer credit cases. Introduced on October 1, 2014, these reforms mandated specific affidavits and notices from original creditor and debt buyer plaintiffs, ensuring adherence to legal and evidentiary standards. This was expanded by the Consumer Credit Fairness Act on November 8, 2021, which extended these regulations to all consumer debt actions, and was followed by legislation on December 31, 2021, that reduced the interest rate for consumer debt judgments against natural persons from 9% to 2%.

6) What is the Rate of Interest Applied to Judgments for Consumer Debts under the Act? [Bonus] 

  • As of April 30, 2022, the interest rate is 2% per year for judgments against natural persons (i.e., human beings).
  • For judgments against natural persons entered before April 30th, the rate changes to 2% from that date onwards.
  • For judgments against non-natural entities (businesses or organizations), the interest rate remains 9%, regardless of the entry date.
  • All other judgments (excluding consumer debt judgments against natural persons) also retain a 9% interest rate.

7) Don't Forget About Regulatory Complaints [Bonus]

For instances of serious deception or mistreatment, consumers have powerful regulatory resources that could compel a resolution outside of court. For example, an aggrieved consumer could file a complaint with the Bureau of Consumer Frauds and Protection. Additionally, an aggrieved consumer could file a complaint with the Consumer Financial Protection Bureau. Most companies respond within 15 days. 

Contact us right away if you need help defending a case or interpreting this law.

More information to help with wage garnishment:

Here is a list of New York City’s Marshals who enforce wage garnishments:

Understanding Your Rights: A Quiz on New York's Consumer Credit Fairness Act (CCFA) Defenses

  1. When was the New York Consumer Credit Fairness Act (CCFA) enacted?
    1. November 8, 2020
    2. November 8, 2021
    3. April 7, 2022
    4. May 7, 2022
  1. What is the new statute of limitations for consumer credit lawsuits in New York as per CCFA?
    1. 2 years
    2. 3 years
    3. 4 years
    4. 6 years
  1. What must a plaintiff submit when seeking a default judgment under the CCFA?
    1. An affidavit of the amount due
    2. An affidavit of the statute of limitations status
    3. Proof of the original contract
    4. Evidence of the defendant's payment history
  1. What additional documents are now required with a complaint under the CCFA?
    1. Proof of debt purchase
    2. Credit card statements
    3. Contract or charge-off statement
    4. Defendant's credit report
  1. What information about the original creditor must be included in the complaint?
    1. Name and address
    2. Name and account number
    3. Name and amount of last payment
    4. Name and date of last transaction
  1. For debt buyer lawsuits, what is required for default judgments under the CCFA?
    1. Affidavit of debt amount only
    2. Affidavit by original creditor and chain of title
    3. Proof of defendant's income
    4. Confirmation of debt from the defendant
  1. What additional notice must creditors provide under the CCFA?
    1. Notice of legal representation
    2. Notice of lawsuit consequences and legal resources
    3. Notice of debt amount
    4. Notice of credit reporting
  1. What happens if the mailed notice about the collection lawsuit is returned as undeliverable?
    1. The lawsuit is dismissed
    2. The creditor must re-send the notice
    3. Creditors cannot obtain a default judgment
    4. The statute of limitations is extended
  1. Under the CCFA, what must be itemized in the complaint for revolving credit accounts?
    1. Total debt at charge-off and post-charge-off interest
    2. Total amount of principal and finance charges
    3. Total amount of attorney's fees and collection costs
    4. Total payments made since charge-off
  1. What happens if a debtor does not submit a claim of exemption within 25 days of receiving notice?
    1. Their funds are released
    2. Their funds remain restricted
    3. The debt is forgiven
    4. The statute of limitations is reset

Answer Key:

  1. b) November 8, 2021
  2. b) 3 years
  3. b) An affidavit of the statute of limitations status
  4. c) Contract or charge-off statement
  5. b) Name and account number
  6. b) Affidavit by original creditor and chain of title
  7. b) Notice of lawsuit consequences and legal resources
  8. c) Creditors cannot obtain a default judgment
  9. a) Total debt at charge-off and post-charge-off interest
  10. b) Their funds remain restricted

[1] § 214-i. Certain actions arising out of consumer credit transactions to be commenced within three years

An action arising out of a consumer credit transaction where a purchaser, borrower or debtor is a defendant must be commenced within three years, except as provided in section two hundred thirteen-a of this article or article 2 of the uniform commercial code or article 36-B of the general business law. Notwithstanding any other provision of law, when the applicable limitations period expires, any subsequent payment toward, written or oral affirmation of or other activity on the debt does not revive or extend the limitations period.

[2] § 306-d. Additional mailing of notice in an action arising out of a consumer credit transaction

(a) At the time of filing with the clerk of the proof of service of the summons and complaint in an action arising out of a consumer credit transaction, the plaintiff shall submit to the clerk a stamped, unsealed envelope addressed to the defendant together with a written notice in clear type of no less than twelve-point in size, in both English and Spanish, and containing the following language:

ADDITIONAL NOTICE OF LAWSUIT

(NAME OF COURT)

(COUNTY)

(STREET ADDRESS, ROOM NUMBER)

(CITY, STATE, ZIP CODE)

(NAME OF DEFENDANT)

(ADDRESS OF DEFENDANT)

Plaintiff:

Defendant:

Name of original creditor, unless same:

Index number:

Attention: a lawsuit has been filed against you claiming that you owe money for an unpaid consumer debt.

You may wish to contact an attorney.

You should respond to the lawsuit as soon as possible by filing an “answer” which may be done at the court clerk's office listed above.

If you do not respond to the lawsuit, the court may enter a money judgment against you. Once entered, a judgment is good and can be used against you for twenty years, and your personal property and money, including a portion of your paycheck and/or bank account, may be taken from you. Also, a judgment may affect your credit score and can affect your ability to rent a home, find a job, or take out a loan.

You CANNOT be arrested or sent to jail for owing a debt.

Additional information can be found at the New York state court system website.

Sources of information and assistance:

The court encourages you to inform yourself about your options as a defendant in this lawsuit. In addition to seeking assistance from a private attorney or legal aid office, there are free legal assistance computer programs that you can use online to help you represent yourself in this lawsuit.

For further information, or to locate a legal aid program near you, you may visit the LawHelpNY website or the New York state court system website, which has information for representing yourself and links to other resources at: ____________________.

(b) The face of the envelope shall be addressed to the defendant at the address at which process was served, and shall contain the defendant's name, address (including apartment number) and zip code. The face of the envelope also shall state the appropriate clerk's office as its return address.

(c) The clerk promptly shall mail to the defendant the envelope containing the additional notice set forth in subdivision (a) of this section. No default judgment based on the defendant's failure to answer shall be entered unless there has been compliance with this section, and at least twenty days have elapsed from the date of mailing by the clerk. No default judgment based on the defendant's failure to answer shall be entered if the additional notice is returned to the court as undeliverable. Receipt of the additional notice by the defendant does not confer jurisdiction on the court in the absence of proper service of process.

(d) The chief administrative judge shall issue a Spanish translation of the notice in subdivision (a) of this section and shall maintain and publish the URL address for the web page containing consumer resources for unrepresented litigants.

[3] CPLR § 3212(j) Additional notice in any action to collect a debt arising out of a consumer credit transaction where a consumer is a defendant.

1. At the time of service of a notice of motion, any part of which requests summary judgment in whole or in part, where the moving party is a plaintiff and the respondent is a consumer defendant in an action to collect a debt arising out of a consumer credit transaction, and where the consumer defendant against whom summary judgment is sought is not represented by an attorney, the plaintiff shall submit to the clerk a stamped, unsealed envelope addressed to the defendant together with the following additional notice in English and Spanish to be printed in clear type no less than twelve-point in size:

IMPORTANT NOTICE

The Plaintiff has asked the Court to enter judgment against you by making a Motion for Summary Judgment. Keep this Notice and the envelope it came in. The Motion for Summary Judgment was separately served on you. To avoid entry of judgment:

(1) You must appear in court as directed below:

WHERE: Name of Court, Street Address, Room Number

WHEN: Date and time

(2) You should oppose the motion IN WRITING.

HOW TO OPPOSE THE MOTION:

(1) State the legal reasons why the court should not enter judgment against you, including your defenses.

(2) State the facts that support your defenses.

(3) Attach affidavits and/or exhibits to support the facts you assert.

(a) Affidavits are sworn statements of witnesses (including you) who state facts they know to be true. The affidavit should state the facts and how the witness knows them. Also, the affidavit should explain any exhibits. An affidavit of service is an affidavit that states how and when papers were served. An affidavit must be signed in front of a notary. Free forms are available on the New York State Court system website at: ____________________.

(b) Exhibits are copies of documents. Exhibits are usually attached to affidavits.

(4) Have someone (not you or another defendant in the lawsuit) mail a copy of your opposition to the plaintiff's attorney before your court date and have them prepare an affidavit of service by mail.

(5) Bring a copy of your opposition and the affidavit of service to your court date.

(6) Attend your court date.

IF YOU NEED MORE TIME:

If you need more time to prepare your written response, you should appear at your court date and ask the judge for more time. You can also ask the judge to refer you for legal help.

IF YOU NEED LEGAL HELP:

You may seek legal help from a private attorney or a legal aid office.

Some courts have free legal assistance programs for people without lawyers. You can find resources on the New York State court system website at: ____________________.

2. The clerk promptly shall mail to the defendant the envelope containing the additional notice set forth in paragraph one of this subdivision and note the date of mailing in the case record. Summary judgment shall not be entered based on defendant's failure to oppose the motion unless there has been compliance with this section and at least fourteen days have elapsed from the date of mailing by the clerk or nineteen days if the plaintiff's notice of motion demands additional time under subdivision (b) of rule 2214 of this chapter.

3. The chief administrative judge shall issue a Spanish translation of the notice in paragraph one of this subdivision and shall maintain and publish the URL address for the web page containing consumer credit resources for unrepresented litigants.

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