The Appellate Division of the Superior Court of New Jersey recently reversed and remanded one judgment, but affirmed another, in a consolidated appeal involving the collection of assigned debts on defaulted credit card accounts, holding that under New Jersey law:
1. Lack of notice to the debtor of the sale of the debt does not affect the validity of the assignment;
2. The assignment need not specifically reference defendant’s name or account number and instead may refer to an electronic data file containing that information;
3. A plaintiff need not procure an affidavit from each transferor in its chain of assignments, and may instead establish prima facie proof of ownership on the basis of business records documenting its ownership; and
4. An electronic copy of the periodic billing statement for the last billing cycle is prima facie proof of the amount due on the account.
A copy of the opinion is available at: Link to Opinion
This consolidated appeal involved debt buyers that purchased charged-off credit card debts from the card issuers or other debt buyers to attempt to collect the debt. In order to sue on assigned credit card debts in New Jersey, the plaintiff must prove: (1) ownership of the defendant’s charged-off debt, and (2) the amount due on the card issuer when it charged off the account.
Case 1:
The debt buyer (“DB 1”) sued the debtor (“Debtor 1”) alleging that it was the owner of Debtor 1’s account following multiple assignments. DB 1 moved for summary judgment, and stated in its statement of material facts that its predecessor in interest extended credit to Debtor 1. DB 1 provided a bill of sale and an assignment of debtor’s debt, as well as several documents relating to several prior transfers of the account.
Specifically, four executed assignment documents memorializing the sale and assignment of certain charged-off credit card account receivables, purportedly described on computer files transferred therewith. Only one of the assignments referenced a portfolio number and none referenced the account of Debtor 1. DB 1 also provided an electronic copy of the final periodic account statement from original card issuer addressed to Debtor 1 with the same address noted on Debtor 1’s answer.
Based on this evidence, the lower court granted summary judgment in favor of DB 1. Thereafter, Debtor 1 moved for reconsideration, arguing that DB 1 did not establish its ownership of the debt or provide a proper foundation for the final periodic account statement.
DB 1 responded with additional proof of its ownership of the debt. Its business development manager certified that he participated in the transaction in which DB 1 acquired Debtor 1’s debt, and that he had personal knowledge of the records DB 1 obtained in that sale, including: the assignments, a copy of the electronically transmitted spreadsheet showing information relating to Debtor 1’s account, and the final period statement the original card issuer issued to Debtor 1.
DB 1 also provided evidence of the transfers that preceded its acquisition, from the original card issuer to assignee A. It also provided an affidavit from an “authorized representative” of assignee A, stating that he had personal knowledge of the manner which assignee A manages and services credit accounts.
The lower court denied the motion for reconsideration and affirmed the entry of summary judgment.
Case 2:
The debt buyer (“DB 2”) sued the debtor (“Debtor 2”) alleging that it was owner of Debtor 2’s account following multiple assignments. DB 2 moved for summary judgment, and stated in its statement of material facts that its predecessor in interest extended credit to Debtor 2. DB 2 provided certification showing it was the current owner of the account, and attached copies of eighteen monthly billing statements for Debtor 2’s account addressed to the same address in Debtor 2’s answer.
DB 2 supported its motion with a certification of its managing director, who claimed both personal knowledge of DB 2’s books and business, and his authority to make the certification on its behalf. The director further certified that he personally participated in the acquisition of Debtor 2’s account by bill of sale and assignment, and attached a true copy to his certification, as well electronic payment records and eighteen periodic statements pertaining to Debtor 2’s account.
Based on this evidence, the lower court determined that the billing statements and the certification were sufficient proof to establish that Debtor 2’s charged-off credit card had been transferred to DB 2.
Debtor 1 and Debtor 2 (collectively, “Debtors”) appealed, arguing that because DB 1 and DB 2 (collectively, “DBs”) are suing on purchased debt of which they have no personal knowledge, the evidence offered were insufficient to establish ownership of the debt.
First, the Appellate Court rejected the Debtors’ argument that lack of notice of assignments to the account holder is fatal to the DBs’ claims. The Court also rejected the contention that the assignments provided by DB 1 did not specifically refer to Debtor 1’s account.
The New Jersey Appellate Court held that all that is required under New Jersey law is evidence of intent to transfer one’s rights and a description of the intangible right being assigned. The DBs submitted sufficient evidence of their standing to bring suit. However, while the evidence was sufficient to bring suit, summary judgment requires facts contained in affidavits made on personal knowledge and other admissible evidence.
The Court was satisfied with the evidence submitted by DB 2 but not in the case of DB 1. Specifically, the Court felt that the evidence produced by DB 1 for the first link in the assignment chain from the original card issuer to the first assignee was insufficient. Unlike DB 2, DB 1’s evidence came from an “authorized representative” whom neither revealed his position with the company nor the source of his personal knowledge. In short, the evidence produced by DB 1 was “markedly less clear” than that produced by DB 2. Therefore, the Court determined that DB 1 did not sufficiently establish the full chain of ownership to sustain summary judgment.
Second, the Court rejected Debtor 2’s argument that DB 2 had to produce an affidavit from each of its predecessors authenticating the assignment each provided to its transferee for the entire assignment chain. As explained by the Court, “[t]hird-party documents evidencing ownership, such as those represented by these assignments, are examples of business records” and under appropriate circumstances be admissible as business records pursuant to New Jersey law.
Lastly, the Court rejected the Debtors’ argument that even if the DBs proved their ownership of the debts, the account statements relied upon to establish the amounts due were inadmissible hearsay statements without proper foundation. The Court considered the account statements to be business records, which were admissible under N.J.R.E. 803(c)(6). Employees of the DBs with knowledge of the books and records certified that the account statements were part of the purchase of the charged-off debts. Moreover, the employees certified that the account statements were true copies and reflected amounts due their predecessors as of the final billing cycle.
Most importantly, the Court noted that New Jersey law specifically provides that in suits on credit accounts subject to TILA, if the plaintiff attaches to the affidavit a copy of the periodic statement for the last billing cycle or a computer-generated report setting forth the financial information required to be in that statement, that information shall be sufficient proof for entry of default judgment. See Rule 6:6-3(a); 1992 Report of the Supreme Court Committee on Special Civil Practice at 33-35.
In sum, the Appellate Court concluded that the account statements submitted by DBs were admissible as business records and provided prima facie proof of the amount due on the debts. DB2 submitted sufficient evidence of its ownership of the debt and Debtor 2 failed to come forward with evidence to starve off summary judgment. In contrast, DB1 failed to adequately authenticate the documents attached to its affidavit in support of summary judgment.
Accordingly, the Court affirmed the judgment in favor of DB2, and reversed judgment in favor of DB1, and remanded for further proceedings.
Ralph T. Wutscher
McGinnis Wutscher Beiramee LLP
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