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The Federal Debt Collection Practices Act (FDCPA) requires debt collectors to provide consumers with a validation notice that includes the name of the creditor, the amount of the debt, and the disclosure of statutorily prescribed consumer protection rights.  The Rule significantly expands the requirements of the FDCPA by requiring significantly more information and strong disclosures.  These disclosures fall into three general categories: (i) information to help consumers identify the debt; (ii) information about consumer protections; and (iii) information to help consumers exercise their rights, including a tear-off dispute form with prescribed prompts.  Additionally, the Rule allows for certain optional disclosures.  The Rule also includes an optional model form and a safe harbor for those that wish to use the model form. Deviations are allowed, provided that the content, format, and placement of information remains substantially like the model form.

The Rule introduces a new concept to debt validation which will have an indirect impact on creditors—the “itemization date.”  Subject to a narrow exception for certain residential mortgage debt, the Rule now requires the debt collector to include in the validation notice an itemization of the account balance from a specified “itemization date” through the date of the validation notice.  Section 1006.34(b) allows debt collectors to choose as their “itemization date” one of five specified reference dates:

• the date of the last periodic statement or written account statement or invoice provided to the consumer by the creditor;
• the charge-off date;
• the last payment date;
• the transaction date; or
• the judgment date.

As to the residential mortgage debt exception,  for residential mortgage debt, subject to Regulation Z, 12 CFR 1026.41, a debt collector may comply with the requirement to provide the current amount of the debt by providing the consumer the total balance of the outstanding mortgage, including principal, interest, fees, and other charges.

Because of the nature of the “itemization date,” its point of origin is necessarily the creditor.  Banks and financial service providers will need to coordinate with their third-party debt collectors to provide the requisite documentation to support the itemization date the debt collector is using, the amount of the debt as of that date, and an itemization of any charges and fees accruing after the itemization date.

Additionally, while the FDCPA provides a consumer with thirty days to exercise its consumer protections, including disputing and requesting validation of the debt, the Rule defines the validation period to include an additional five business days by stating that a debt collector “may assume” that the consumer receives the validation notice on any date that is five days (excluding federal legal public holidays, Saturdays and Sundays) after the debt collector sent the notice.

Section 1006.34 requires the debt collector include in the validation notice the following information to help the consumer identify the debt: the debt collector’s name and mailing address at which they accept disputes and requests for original creditor information; the consumer’s name and mailing address; the identity of the creditor as of the itemization date; the current creditor; the account number or a truncated version of the same; the itemization date and amount of the debt on that date; an itemization of the debt from the itemization date forward; and the current amount of the debt.

The Rule additionally requires that the validation notice contain certain information about consumer protections, including the disclosures set forth in section 1692g(a)(3)-(5).  The debt collector additionally is required to include the end date of the validation period.

The validation notice expands on the provisions of section 1692g(a) of the FDCPA by requiring the validation notice to include certain prescribed prompts, which must be conveyed in a prescribed order using the specified phrasing or substantially similar phrasing. Such prompts include dispute prompts, as well as prompts for original creditor information.

The validation notice may include certain optional disclosures, including the debt collector’s telephone contact information, availability, and reference code. Certain prescribed payment disclosures also are allowed so long as they do not overshadow the validation notice.  The Rule allows for, but does not require:  (i) validation notices to be sent electronically consistent with section 1006.42 of the Rule; and (ii) Spanish-language disclosures.  Additionally, the Rule permits the inclusion of certain disclosures that are specifically required or that provide a safe harbor under applicable law.

For purposes of debt validation, the Rule  makes clear that if the debt collector knows or should know that the consumer is deceased, and if the debt collector has not previously provided the validation notice to the deceased consumer, the debt collector must provide the debt validation notice to a person authorized to act on behalf of the deceased consumer’s estate.  The Rule requires the validation notice to identify the estate’s representative by name.

The Rule interprets the FDCPA’s prohibition of false or misleading representations to prohibit legal actions or threats of legal actions against a consumer to collect time-barred debts.

Banks and other financial service providers that rely on third-party debt collectors to furnish credit reporting information should be aware of the Rule’s restrictions on credit reporting.  Section 1006.30(a) generally prohibits debt collectors from furnishing information to a consumer reporting agency about a debt before the debt collector either speaks to the consumer about the debt in person or by telephone or sends its validation notice and then waits for a reasonable period of time (presumptively 14 consecutive days) to receive a notice of undeliverability.

For more information regarding the upcoming changes, please contact Deborah Gallo, Esq. at dgallo@friedmanvartolo.com.

In recent case Reginald Hall & another V. Federal Nation Mortgage Association, Appeals Court of Massachusetts, October 1, 2021,  2021 WL 4483742,  the plaintiff appealed from the judgment dismissing their complaint on res judicata grounds, as well as from the order denying their motion to reconsider.  The Appellate Court affirmed the decision. 

The plaintiffs bought a property located at 52 Ash Street, New Bedford in 2004, with the proceeds of a loan from Santander Bank, N.A. (FKA Sovereign Bank). The note and mortgage subsequently passed to the Federal National Mortgage Association, with Santander continuing to act as administrator as Fannie Mae’s agent. The plaintiffs stopped making payments on the note. This caused Santander to send a notice of default on August 13, 2013.  The plaintiffs then filed an action against Santander in the Superior Court seeking a declaratory judgment that Santander did not have authority to foreclose.

While the Superior Court action was pending, Santander conducted a public foreclosure auction. The winning bid was assigned to Fannie Mae, which then took title pursuant to a foreclosure deed. Judgment entered in the Superior Court in Santander’s favor on May 26, 2015. That foreclosure judgment was affirmed on appeal by a panel of this court. Hall v. Santander, N.A., 89 Mass. App. Ct. 1134 (2016). The plaintiffs acknowledge that the foreclosure judgment became final in 2015.

In 2015, Fannie Mae filed a summary process action in the Housing Court seeking possession of the property and to evict the plaintiffs (summary process action). Judgment entered in Fannie’s Mae’s favor in 2017. The plaintiffs did not appeal that judgment, and they acknowledged that it has become final.

The complaint underlying the current appeal was filed by the plaintiffs in Housing Court on November 2, 2017 (second Housing Court action). The complaint alleged violation of the Fair Housing Act, 42 U.S.C. §§ 3605 & 3617, breach of contract, fraud, and violation of G. L. c. 93A. As relief, the plaintiffs sought to have the court enjoin the defendants from evicting the plaintiffs from the property, enjoin the defendants from selling the property to anyone other than the plaintiffs, order that ownership of the property revert to the plaintiffs, and order the defendants to act upon the plaintiffs’ loan modification applications nunc pro tunc. The plaintiffs also sought $1 million in compensatory damages and $5 million in punitive damages. After a hearing, the Housing Court judge allowed the defendants’ motion to dismiss on the ground that the claims were barred by the doctrine of res judicata.

The question on appeal was as follows:  Are the claims they have asserted in the second Housing Court action are barred by either the prohibition on collateral attacks of prior judgments, or by the doctrine of res judicata, or both.

The prohibition on collateral attacks prevents litigants from attempting to undermine one court’s ruling in a different court. See Commonwealth v. Wallace, 431 Mass. 705, 707 (2000) (“defendant improperly challenge[d] the validity of the [Superior Court] injunction in his motion to dismiss the [District Court] contempt proceeding”. Except in a few limited circumstances, collateral attacks are prohibited because they “substantially impair[ ]” “the finality of judgments.” Cohen v. Cohen, 470 Mass. 708, 717 (2015), quoting Harker v. Holyoke, 390 Mass. 555, 558 (1983). If the Court were to permit these actions, the finality of judgments would be substantially impaired. This would not be in the best interests of litigants or the public.

Claim preclusion and res judicata prevent relitigation of an issue determined in an earlier action where the same issue arises in a later action, based on a different claim, between the same parties or their privies. Before precluding a party from relitigating an issue, a court must determine that (1) there was a final judgment on the merits in the prior adjudication; (2) the party against whom preclusion is asserted was a party (or in privity with a party) to the prior adjudication; and (3) the issue in the prior adjudication was identical to the issue in the current adjudication. Additionally, the issue decided in the prior adjudication must have been essential to the earlier judgment. Issue preclusion can be used only to prevent relitigation of issues actually litigated in the prior action” (quotations and citations omitted). Kobrin, supra at 843-844.

As to the case herein, the Court applied the 3 steps above – as to (1) there was no dispute that the judgment was filed.  As to (2) there is no dispute that the plaintiffs and Santander were parties in both the foreclosure action and the Second Housing Court action. Finally (3) was applied – claims that Santander did not have authority to foreclose on the property were encompassed by the Superior Court action, which specifically sought a declaration to that effect. In addition, claims relating to (1) Santander’s alleged refusal to modify or refinance the loan, (2) Santander’s alleged representations on which the plaintiffs allegedly relied to stop making timely payments on the loan, and (3) alleged discrimination against the plaintiffs due to their race given the historic nature of their home (which was associated with the underground railroad), were all based on acts or events preceding the Superior Court action and on facts that were known or knowable to the plaintiffs at that time. Thus, all the claims could have been brought by the plaintiffs in the Superior Court action. 

The Appellate Court affirmed the judgment dismissing the plaintiffs’ complaint and the order denying the plaintiffs’ motion for reconsideration.  For more information regarding this case, please contact Deborah Gallo, Esq. at dgallo@friedmanvartolo.com.

A recent appeal presented an issue of first impression before this Court as to whether a plaintiff in a foreclosure action may satisfy the requirements of RPAPL 1304 by mailing a 90-day notice jointly addressed to two or more borrowers.  In Wells Fargo Bank, N.A. v. Yapkowitz decided September 29, 2021, the Court held that this practice was insufficient to satisfy the requirements of RPAPL 1304, and that the plaintiff is required to mail a 90-day notice addressed to each borrower in separate envelopes as a condition precedent to commencing the foreclosure action.

On or about January 1, 2009, the defendants defaulted on their mortgage payments. On January 22, 2009, Wilshire Credit Corporation mailed separate 30-day notices of default to each of the defendants. The 30-day notices advised each of the defendants that they were obligated to pay the sum of $6,189.30 by February 26, 2009, and that the failure to make payment by that date could result in acceleration of the entire indebtedness of the loan and the commencement of a foreclosure action.  The file was then service transferred several times, Wilshire to BAC Home Loans Servicing, LP. ; from BAC to Bank of America, N.A.;  BANA to Nationstar Mortgage, LLC.  Argent assigned the mortgage to the plaintiff.

The plaintiff commenced this foreclosure action against the defendants. In their answer, the defendants asserted affirmative defenses. In June 2017, the plaintiff moved for summary judgment on the complaint. In support of the motion, the plaintiff submitted, a copy of a 90-day notice pursuant to RPAPL 1304 sent by BANA via certified and first-class mail to the defendants’ address, and a certified mail receipt for the 90-day notice signed for by “F. Yapkowitz.” The 90-day notice was jointly addressed to both of the defendants. The plaintiff also submitted an affidavit from Edward Hyne, a litigation resolution analyst for Nationstar. Hyne’s affidavit affirmed that Nationstar’s business records, which incorporated the records of the prior loan servicer, BANA, reflected that “90-day pre-foreclosure notices . . . were sent, via certified and first class mail, to Defendants,” that “each 90-Day Notice was sent in a separate envelope from any other mailing,” and that “F. Yapkowitz” “signed for and accepted the delivery of the . . . 90-DayNotice.” Hyne also indicated that “each 90-DayNotice listed in the upper left-hand corner the name of the recipients (the Borrowers), the recipient’s address . . . and the specific Mortgage Loan number.” In opposition to the plaintiff’s motion, the defendants submitted, an affidavit from both of them, that “[n]either of us remembers receiving and reading any 90-day notice of default,” or “whether the 90-day notice . . . addressed to both of us, . . . and signed for by Fred [Yapkowitz,] . . . was ever shown to Elaine [Yapkowitz].” The defendants’ attorney argued, that the plaintiff failed to establish its strict compliance with RPAPL 1304, a condition precedent to the commencement of the foreclosure action, since the 90-day notice submitted by the plaintiff was addressed to both defendants jointly, and the plaintiff only presented a certified mail receipt signed by “F. Yapkowitz.” Thus, the defendants’ attorney asserted that apparently “only one 90-day notice was mailed, rather than single notices addressed to each of the defendants individually and in separate envelopes, as required by RPAPL 1304.”  On September 26, 2017, the Supreme Court denied the plaintiff’s motion and found that the plaintiff failed to establish its prima facie entitlement to judgment as a matter of law by relying on the affidavit of Hyne, who had no personal knowledge of the mailing of the 90-day notice, and relied on inadmissible hearsay. At a pretrial conference on February 7, 2018, the parties stipulated to the submission of papers in lieu of testimony on the issue of whether the plaintiff complied with RPAPL 1304. Thereafter, the plaintiff submitted, an affidavit from Jamie Turner, assistant vice president of BANA, the former loan servicer. Turner attested that BANA’s business records reflected that “BANA sent 90-day pre-foreclosure notices . . . via certified and first class mail to Defendants . . . in accordance with BANA’s established and routinely followed business practices and procedures designed to ensure that documents are properly addressed and mailed,” and that the 90-day notice was signed for by “F. Yapkowitz.” Turner added that “each 90-Day Notice listed in the upper left-hand corner the names of the recipients (Defendants), the recipients’ mailing address . . . and the specific Mortgage Loan number.”

By decision dated May 21, 2018, the Supreme Court determined, that “Turner possesse[d] the requisite knowledge of BANA’s standard office practices and procedures to attest that BANA properly sent the 1304 Notice and . . . substantiate[d] the mailing with documentary proof” (Wells Fargo Bank, N.A. v Yapkowitz, 59 Misc 3d 1227[A], 2018 NY Slip Op 50726[U],  [Sup Ct, Rockland County]). Nevertheless, the court determined that the plaintiff failed to establish its strict compliance with RPAPL 1304, which “requires a separate notice to each borrower in a separate envelope” (Wells Fargo Bank, N.A. v Yapkowitz, 59 Misc 3d 1227[A], 2018 NY Slip Op 50726[U], and thus, the foreclosure action must be dismissed. The court rejected the plaintiff’s contention that it could be presumed that Fred J. Yapkowitz informed his wife, Elaine M. Yapkowitz, of his receipt of the RPAPL 1304 notice, since the lender cannot “shift[ ] its responsibility to provide the 1304 Notice to both borrowers from itself . . . [to] the borrower who signed for the certified mailing or opened the first-class mailing” (Wells Fargo Bank, N.A. v Yapkowitz, 59 Misc 3d 1227[A], 2018 NY Slip Op 50726[U].  

The plaintiff moved pursuant to CPLR 4404(b) to set aside the decision. On July 23, 2018, the Supreme Court denied the plaintiff’s motion. In a judgment dated July 23, 2018, upon the decision, the Supreme Court dismissed the complaint insofar as asserted against the defendants based upon the plaintiff’s failure to establish its strict compliance with RPAPL 1304.  

The plaintiff appealed from (1) the order dated September 26, 2017; (2) the decision dated May 21, 2018; (3) the order dated July 23, 2018; and (4) the judgment dated July 23, 2018.  The appeals from the orders dated September 26, 2017, and July 23, 2018, must be dismissed because the right of direct appeal therefrom terminated with the entry of the judgment.

An RPAPL 1304 notice is a notice pursuant to the Home Equity Theft Prevention Act (Real Property Law § 265-a), “the underlying purpose of which is ‘to afford greater protections to homeowners confronted with foreclosure’” Since RPAPL 1304 notice must be sent at least 90 days prior to the commencement of an anticipated foreclosure action, its manifest purpose is to aid the homeowner in an attempt to avoid litigation.  Strict compliance with RPAPL 1304 notice to the borrower or borrowers is a condition precedent to the commencement of a foreclosure action and the plaintiff has the burden of establishing satisfaction of this condition (Aurora Loan Servs., LLC v Weisblum, 85 AD3d at 106). The statute requires,  that (1) the 90-day notice be sent by registered or certified mail, and also by first-class mail, to both (a) “the last known address of the borrower” and (b) “the residence that is the subject of the mortgage”; and that (2) “[t]he notices required by this section” be sent “in a separate envelope from any other mailing or notice” (RPAPL 1304[2]).

In Aurora Loan Servs., LLC v Weisblum (85 AD3d 95), the Appellate Court addressed the issue of whether each of the married borrowers was entitled to a 90-day notice pursuant to RPAPL 1304. In that case, the plaintiff addressed the 90-day notice to only one of the two individuals who agreed to pay the amounts due under a consolidated note. The Court determined that since each of those individuals was a “borrower” (Aurora Loan Servs., LLC v Weisblum, 85 AD3d at 105) each was “entitled to receive notice 90 days prior to commencement of the action”.  The Court rejected that contention that failure to serve the 90 day was inconsequential because the spouse would notify the other, holding that the purpose of RPAPL 1304 was to provide notice to the borrowers prior to the commencement of the foreclosure action “in an attempt to avoid litigation” Moreover, this Court determined that the failure to send a RPAPL 1304 notice to each of the borrowers was not a “minor irregularity” that could be disregarded in the absence of prejudice, but rather “the condition sought to be disregarded [by the plaintiff] is a mandatory condition precedent”

While it was apparent from this Court’s decision in Weisblum that each borrower is entitled to be sent notice at least 90 days prior to the commencement of the foreclosure action pursuant to RPAPL 1304, no appellate court in New York had  determined whether each borrower is entitled to receive an individually addressed 90-day notice in a separate envelope from a 90-day notice sent to the other borrower(s).  The issue has been addressed by the Supreme Court in several decisions, there is some disagreement among those decisions as to whether RPAPL 1304 requires a separate 90-day notice to be mailed to each borrower. In U.S. Bank Natl. Assn. v Diaz (2018 NY Slip Op 30436[U] [Sup Ct, Queens County]), the plaintiff’s submissions indicated that only one 90-day notice, addressed to both of the defendant borrowers, was mailed to them. The Supreme Court determined that such notice was insufficient to establish “proper service of the RPAPL 1304 notice on each of the borrowers”. Similarly, in Deutsche Bank Natl. Trust Co. v Jimenez(62 Misc 3d 811, 812 [Sup Ct, Suffolk County]), the Supreme Court determined that a single “joint notice” sent to two borrowers was insufficient to satisfy the requirements of RPAPL 1304 . In that case, the Supreme Court noted that RPAPL 1304(1) was amended to add a plural reference to “borrowers” with respect to the commencement of a foreclosure action, whereas RPAPL 1304(2) continued to refer to a “borrower” in the singular with respect to mailing requirements, reflecting a recognition that “there is often more than one borrower/defendant” (Deutsche Bank Natl. Trust Co. v Jimenez, 62 Misc 3d at 828), but that “each borrower”  must individually receive the RPAPL 1304 notice. Further, in HSBC Bank, USA N.A. v Patricola (62 Misc 3d 1209[A], 2019 NY Slip Op 50076[U] [Sup Ct, Suffolk County]), the Supreme Court again determined that each is entitled to a separate RPAPL 1304 notice, since it would be improper for the court to essentially rewrite the statute to substitute “borrowers” in the plural for “borrower” in the singular under RPAPL 1304(2). Likewise, in HSBC Bank USA v Hoffman (2019 WL 7559637,  2019 NY Misc LEXIS 6193, [Sup Ct, Westchester County]), the Supreme Court reiterated the principle that “not mailing notices to individual borrowers violates the mailing requirements of RPAPL § 1304.” However, in Hudson City Sav. Bank, FSB v D’Ancona (2017 NY Slip Op 31917[U], [Sup Ct, Suffolk County]), the Supreme Court determined that the mere fact that 90-day notices “were addressed to both borrowers” in a single mailing “does not violate the requirements of [RPAPL 1304]” since the mailing was signed for by one of the borrowers and “the post office does not require two signatures to serve such documents”. Similarly, in HSBC Bank USA, N.A. v Schneider (2020 NY Slip Op 30182[U] [Sup Ct, Suffolk County]), the Supreme Court, while determining that the plaintiff failed to establish, prima facie, its mailing of a RPAPL 1304 notice, stated in dicta that there was no basis to find “the notice is facially defective just because [the borrowers] are listed jointly as addressees” (HSBC Bank USA, N.A. v Schneider, 2020 NY Slip Op 30182[U]).   

In this case, the Court held that the mailing of a 90-day notice jointly addressed to two or more borrowers in a single envelope is not sufficient to satisfy the requirements of RPAPL 1304, and that the plaintiff must separately mail a 90-day notice to each borrower as a condition precedent to commencing the foreclosure action. RPAPL 1304(1) provides that giving “notice to the borrower”, in the singular, at least 90 days prior to the commencement of the foreclosure action, is a prerequisite to commencement of the action “against the borrower, or borrowers”. By contrast, RPAPL 1304(2), which sets forth the mailing requirements for the 90-day notice, contains no reference to “borrowers” in the plural. RPAPL 1304(2) requires the 90-day notice to be sent by registered or certified mail, and also by first-class mail, to both (1) “the last known address of the borrower” and (2) “the residence that is the subject of the mortgage” (id.). Further, RPAPL 1304(2) provides that “[t]he notices required by this section shall be sent . . . in a separate envelope from any other mailing or notice.” While mailing a notice jointly addressed to multiple borrowers at the property which is the subject of the mortgage would clearly be sufficient to satisfy the requirement of sending the 90-day notice to “the residence that is the subject of the mortgage” such mailing would not also satisfy the separate requirement under RPAPL1304(2) to mail “[t]he notices required by this section . . . to the last known address of the borrower” (and to mail each such notice in a separate envelope from any other required notice).

Further, had the Legislature intended the mailing of a notice jointly addressed to two or more borrowers to satisfy the requirements of RPAPL 1304(2), it would have stated, as it did in RPAPL 1304(1) with regard to the commencement of a foreclosure action, that the 90-day notice must be mailed to “the last known address of the borrower or borrowers.” Ideally, when one of the borrowers receives a 90-day notice jointly addressed to two or more borrowers, he or she will inform the other borrower(s). However, this ideal scenario clearly will not always occur, and even a matter as urgently pressing as the receipt of a 90- day notice of foreclosure proceedings might not be communicated if, for instance, there is a breakdown of communication between the borrowers. Since the Legislature imposed strict mailing requirements aimed at ensuring notice and documenting the delivery of the 90-day notice, it would be difficult to imagine why the Legislature would not also require the simple measure of separately addressing a 90-day notice to each of the borrowers. To permit a single notice jointly addressed to two or more borrowers and mailed in a single envelope to serve in lieu of a separately mailed notice to each borrower would transform the requisite standard of compliance from “strict compliance” to “substantial compliance.”

In the matter at hand, it was undisputed that the 90-day notice to each of the borrowers was sent in the same envelope, thus the Appellate Court found that the plaintiff failed to establish its compliance with RPAPL 1304, a condition precedent to the commencement of the action. Accordingly, the Supreme Court properly denied the plaintiff’s motion for summary judgment on the complaint and properly dismissed the complaint.  Thus, appeals from the decision and the orders were dismissed, and the judgment was affirmed.

Banks and servicers should be guided accordingly when reviewing their internal processes regarding the 90 day notice mandated under RPAP 1304. Should you have any questions, please contact Deborah Gallo, Esq., at dgallo@friedmanvartolo.com.

In recent case, Citibank, N.A.  v. Yanling Wu, Supreme Court, Appellate Division, Second Department NY, September 1, 2021,  2021 WL 3889872, 2021 NY Slip Op 04902, The Appellate Court was asked to answer whether the Administrative Code of New York City Section 20-490 license (“debt collection agency”) applied to the mortgage Plaintiff.   Appeal by defendants Yanling Wu and Perry Sing, in a mortgage foreclosure from an order for Judgment of foreclosure and sale in Queens County entered October 29, 2019.

In 2016, plaintiff acquire the note after the defendants had allegedly defaulted in making payment and commenced an action to foreclose the mortgage.  The defendant’s filed an answer with affirmative defenses including lack of standing and that plaintiff alleged it had obtained a license to act as a “debt collection agency” pursuant to Administrative Code Section 20-490.

In response the plaintiff filed a motion for summary judgment and to strike defendant’s answer. Defendant cross moved to dismiss under CPLR 3015(e) based on lack of standing, lack of compliance with RPAPL 1303, and failure to demonstrate default.  The Plaintiff argued it was not required to be licensed as a “debt collection agency” under the NYC Administrative Code. 

The Supreme Court granted plaintiff’s motion for summary judgment and denied defendant’s cross motion in an order entered July 18, 2018. Thereafter, the Court granted the Judgment of foreclosure and sale. 

The Appellate Court, then went on to define a “debt collection agency” under the Administrative Code.    The decision reflects that the language of Administrative Code § 20–489(a) is ambiguous in the sense that it is unclear whether the requirement that the “principal purpose” of the business be the collection of debt is intended to apply to the entire, expanded definition of “debt collection agency,” or only to the first part of the definition pertaining to the collection of debts owed to another. To the extent the “principal purpose” requirement also applies to the expanded definition of “a buyer of delinquent debt who seeks to collect such debt,” the defendants did not show, or even attempt to argue, that it is the “principal purpose” of the plaintiff, Citibank, N.A., to buy and collect delinquent debt. Thus, to the extent that the “principal purpose” requirement modifies the entire definition of “debt collection agency,” the plaintiff would not fit within that definition.

Further, the Appellate Court found that the legislative declaration accompanying the relevant Administrative Code provisions explains that the New York City Council was concerned with “unscrupulous collection agencies in operation that practice[d] abusive tactics”—“tactics which would shock the conscience of ordinary people”—such as “threatening delinquent debtors, or calling such people at outrageous times of the night” (Administrative Code § 20–488).   This is not in line with a judicial foreclosure action where the foreclosure process does not include tactics “shocking to conscience of ordinary people” – such as abusive calls at varied time of the night. 

In fact, there are statutory requirements in the foreclosure process like 90 day notices, notices annexed to the complaint, and settlement conferences which specifically are set up to protect the homeowners in residential foreclosure.   Thus, the Court concluded that it was not the intention to consider a judicial foreclosure within the definition of “debt collection agency” in the Administrative Code. 

The Court went on to find that the endorsed note in blank was included in the complaint when the action was commenced – supporting standing, as well as affidavits of service for the required notices. 

However, it was found that plaintiff first submitted business records within its reply papers and that plaintiff must submit evidence of default as the moving party.  Thus, order and Judgment was reversed, motion for summary judgment denied, and orders modified accordingly.

For any questions regarding this decision, please contact Deborah Gallo, Esq.  at dgallo@friedmanvartolo.com. 

The New York Senate and Assembly passed a bill extending the hardship declaration stay in New York for evictions and foreclosures in both residential and commercial matters until January 15, 2022.  The bill mirrors previous bills creating and extending these hardship declaration related stays in nearly all ways except that a lender/landlord may now challenge the validity of the hardship in court.

In order to address the U.S. Supreme Court’s decision in Chrysafis v Marks, the bill now allows lenders or landlords to challenge the validity of the alleged hardship by serving a motion alleging their good faith belief that the filer has not, in fact, experienced a COVID-related hardship.  If movants are successful in establishing the lack of a hardship, the matter will be permitted to proceed without further stay.  The motion must be made on notice to the tenant/borrower who will then be permitted to submit evidence confirming their hardship.  The Bill notes that the hardship declaration creates “a rebuttable presumption” that the borrower indeed has faced a COVID-related hardship which prevents them from paying the amounts due and owing.  Functionally this means that any party challenging a hardship will have to establish that the borrower’s allegations made under “penalty of law” are untrue.

Should you have any questions, please contact Deborah Gallo, Esq. at dgallo@friedmanvartolo.com.