What do you do when your client acquires assets in a transaction where such assets are summarized in computer records or otherwise stored in formats not particularly suited for presentation in Court? How do you demonstrate ownership of the assets, and a borrower's obligation to repay it? On March 5, 2014, approved for publication September 2, 2014, the Appellate Division in New Century Financial Services, Inc. v. Oughla, and MSW Capital, Inc. v. Zaidi, consolidated for appeal, provided guidance on just that.
New Century and MSW concerned debt buyers trying to collect on charged-off credit card accounts they had purchased from other debt buyers in a chain of debt buyers eventually leading back to the credit card companies with whom the defendant consumers allegedly had accounts. The debt buyers had been granted summary judgment at the trial level, and on appeal the Appellate Division affirmed MSW but reversed New Century.
The Court ruled that parties suing on assigned, charged- off credit card debts must prove two things: 1. ownership of the allegedly charged-off debt; and, 2. the amount due the credit card company at the time of the charge-off. In laying out the proofs needed to establish a prima facie claim, the Court disposed of a number of arguments commonly made by debtor defendants in such matters, holding that: the lack of notice of the assignment does not affect the validity of the assignment; the assignment need not reference the cardholder's name or account number but could instead reference an electronic file containing that information; and, no affidavit need be produced from each transferring debt buyer in the chain of debt buyers. Furthermore, the Court held that an electronic copy of the periodic credit card statement for the last billing cycle prior to the charge-off is prima facie evidence of the amount due. The Court also rejected defendants' arguments that standing must be shown, i.e., that ownership of the debt need be demonstrated, prior to a defendant having to participate in discovery.
More broadly, the case clarified the law of assignments, the business records exception to the hearsay rule, and certification requirements when seeking summary judgment. The Court noted that the law does not require a precise form of assignment; rather, that all that need be shown is "evidence of the intent to transfer one's rights and a description of the intangible right being assigned sufficient to make it readily identifiable." Intent is determined from the document itself and surrounding circumstances. Where there is a "chain" of assignments, the purported assignee must provide evidence of each link in the chain.
To establish the chain of assignments an affiant may utilize business records. Such records must be made in the regular course of business, prepared within a short time of the condition being described, and the "source of the information and the method and circumstances of the preparation of the writing must justify allowing it into evidence." There is no requirement that the affiant "possess any personal knowledge of the act or event recorded" in those business records. However, affiants must generally aver that the facts they are presenting are on "personal knowledge, identify the source of such knowledge, and must properly authenticate any certified copies of documents referred to therein and attached to the affidavit or certification." An affiant is required to "satisfactorily attest" to the circumstances under which the business records were acquired. The Court presented a detailed analysis of the affidavits offered in support of summary judgment in the consolidated matters, leading to the reversal/affirmance noted above.
Finally, no special evidentiary requirements are needed for records stored in electronic, as opposed to paper, format. A party claiming that computerized business records are untrustworthy must come forward with some evidence to support the claim.
Although the New Century/MSW decision appears at first blush to be relevant to debt collectors, the decision is also useful for understanding evidentiary burdens when faced with complex financial computerized records and other business records, offered via affiants and/or other foundational witnesses who lack personal knowledge of the documents' creation. A thorough review of the decision is suggested under such circumstances.