Governor Jan Brewer signed a bill on May 9th that makes life a lot easier in Arizona, at least for credit card companies and debt collection agencies. Passage of House Bill 2664 allows these creditors to pursue credit card debt collection with minimal evidence. Under the new law, collection agencies can streamline their operations and improve their successes by obtaining a final account summary or electronic report issued by the bank or credit card company as uncontested proof of what is owed by the consumer.
Arizona HB 2664 permits creditors and debt collectors to use “final billing statements” or the “electronic record” maintained by the issuer as presumptive proof of the amount owed. That is now the only basis necessary inArizonato establish delinquencies and rates of interest. And it is enough to sue consumers on. These final billing statements and electronic records – regardless of data entry accuracy – will now be admissible as sufficient evidence to establish the debt in court. Enough to support a money judgment followed by garnishment when no evidence is submitted by the defendant to contest the allegations.
Consumers Didn’t Need This Legislation, So Who Does it Help?
Not surprisingly, the national debt buying special interest lobby (made up of mostly out-of-state debt collection agencies) were very much in favor of this legislation. Why wouldn’t they be? HB 2664 just made their jobs much easier and will improve their profit margins. Unlike other ordinary creditors, any “person, business, financial institution or commercial enterprise that owns the credit card account” now carries a lesser standard of proof when alleging a default for nonpayment. Life just got a lot easier for bill collectors.
Unlike other plaintiffs claiming a breach of contract, debt buyers do not need to provide a copy of the credit card agreement to sue on the debt. They do not need to prove that the terms and conditions were provided to the consumer (including rates of interest). They do not need to prove that the credit card company ever sent statements to the consumer. They do not need to prove that the consumer accepted the credit card agreement. Instead, they can sue with an unsubstantiated electronic summary without any substantive evidence of an underlying contract.
The Debt Buyers’ Business Model
Debt buyers, or collection agencies, purchase delinquent accounts from credit card companies that have written off the debts as uncollectible or simply not worth further legal action. When the debt buyer takes over a delinquent obligation, it steps into the shoes of the creditor. To consummate the transfer of account ownership, the credit card company only provides minimal information.
Debt buyers purchase these delinquent accounts for very little, a few cents paid for every dollar to be collected. The collection agency then goes into high gear pursuing consumers and small businesses. This is one of those instances wherein the debt buyer gets what it pays for – a skeletal spreadsheet listing names, account numbers, and alleged debt totals. The collector doesn’t receive copies of the consumers’ files, that would cost too much. Instead, debt buyers pay for the short list and shoot from the hip. That a spreadsheet with the names of a thousand debtors could be full of mistakes is of no concern to collection agencies, this is a robo-signing operation for them.
Among those who opposed the legislation were Arizona bankruptcy attorneys representing consumer debtors, like Lawrence ‘D’ Pew, because of the potential for errors and inaccuracies in final billing statements and electronic records.
What Problems May Haunt Consumers?
When a final statement or electronic record is presented in court to establish the debt, a judgment against the debtor can result in garnishment of money the consumer never owed, interest rates that were never part of the original contract, and fees that were wrongly assessed or never agreed to.
These final statements and electronic reports – mere data summaries – can be loaded with errors. If names are similar, the wrong person could be sued. If there was identity theft, the cardholder could be sued for unauthorized charges on the account. Collection agencies have gone after consumers who already settled their debts with the credit card company, who already paid their debt in full, and who had their debt dismissed or canceled. Debt buyers have been known to bring lawsuits in pursuit of stale obligations long after the statute of limitations period has run on collections.
Lastly, service of process is required to initiate a lawsuit, but many consumers and small businesses are never personally served in these collection actions. Relying on incorrect data in the final billing statement or electronic record and being unable to actually locate the defendant, service is often by publication in a newspaper. Unless they happen to read the right newspaper at the right time, a defendant may never learn of the litigation against them, which results in default judgments.
If you experience any debt collection on an obligation that you do not owe or that is incorrect in amount, contact thePewLawCenter for guidance on how best to proceed under this new law.