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 email@example.com.