Massachusetts attorneys should be aware of two new rules that place new burdens on them and their creditors when seeking default judgments on credit card debt. The rules, which come into effect on January 19, 2019, only apply to consumer revolving credit contracts that are unsecured by real estate. They do not cover personal loans (except revolving loans), auto and other retail installment loans, medical debts, overdraft accounts, or bad checks.
For reference, see Mass. R. Civ. P. Rule 8.1, “Special requirements for certain consumer debts” and Mass. R. Civ. P. Rule 55.1 “Special requirements for defaults and default judgments for certain consumer debts”. In accordance with rule 8.1 (a).
Massachusetts has already enacted laws regulating debt collectors and also has an unfair debt collection law. State debt collection regulations apply to third party and third party collections. Rules 8.1 and 55.1 align Massachusetts’ series of debt collection regulations with many others in regulating the entry of default judgments on credit cards. (See, for example, North Carolina Code 58-70-150 et seq .: California Civil Code 1788.50 et seq .; New York 23 NYCRR 1, and New York Civil Rules Section 208.14-a.)
The new requirements
Rules 8.1 (c) – (e) require affidavits attesting to:
- the identity of the original creditor,
- the amount and date of the defendant’s last payment, the date of the cancellation,
- interest and subsequent charges (if applicable),
- a chronological list of the names of all previous owners of the claim and the date of each transfer of ownership of the claim, starting with the original creditor,
- and each deed of sale, assignment or other document evidencing the transfer of ownership of the debt, beginning with the original obligee.
The documentation should include a specific reference to the defendant or the defendant’s account number. Rule 8.1 (f) requires a “certification” as to the choice of law provision (if any) applicable to the debt, the law establishing the limitation period, and a statement that the applicable limitation period is not applicable. has not expired.
In order to obtain default, rule 55.1 (b) (1) requires that the creditor’s lawyer (or the obligee, if pro se) file an affidavit stating that the lawyer has personally reviewed the material served and filed under Rule 8.1, the documentation satisfies the requirements of Rule 8.1, and the documentation of Rule 8.1 entitles the obligee to a default judgment.
Under Rule 55.1 (c), no judgment by default can be given unless the Registrar finds that the claimants have complied with Rules 8.1 and 55.1 (b) (1). Rule 55.1 (d) requires that the plaintiff serve on the defendant the request for registration in default together with a certificate of service, and the plaintiff must recheck the address of the defendant in accordance with Rule 8.1 (e) if necessary.
Needless to say, the above requirements are a substantial extension of Rule 8 (a) “… short and clear statement of claim…” for credit card cases and impose substantial new charges on credit card applicants. and to their lawyers, especially those who seek payment for obligations which they did not originate. Additional work may also be required of clerks and courts in default cases that previously required little effort, which could delay the entry of default judgments.
However, although the Registrar is now required to determine compliance with Rule 8.1, the rule allows that “… the Registrar is not required to consider the various items that must be filed with the complaint under Rule 8.1 , but may rely on the affidavit of Rule 55 (b) (1). Likewise, rule 55.1 (c), which deals with the recording of judgments by default, allows the registrar “… the opportunity to rely on the applicant’s rule 55.1 (b) (1) affidavit in determining if rule 8.1 has been complied with…. “And“… relieves the Registrar or Court of having to independently review the documents required by Rule 8.1 (c) – (f). “
Presumably, allowing courts and clerks the ability to review new affidavits in detail allows for a streamlined default judgment entry process in credit card cases. Nonetheless, the variations between district courts and judges, some taking the option of carefully reviewing the various affidavits, others relying on the lawyer’s rule 55.1 (b) (1) affidavit , can lead to inconsistent results for complainants.
If the claimant has not complied with the requirements, the Registrar notifies the parties that the court will dismiss the complaint within 30 days, unless the claimant provides reasons for dismissing the complaint. The defendant has the right to be notified of any hearing. The court or the clerk is not required to specify the defect justifying the dismissal.
Assuming that counsel can extract the particular flaw justifying the rejection from the Registrar, this mechanism for correcting flawed affidavits may in practice be no more effective than dismissing the complaint and filing corrected affidavits. Otherwise, upon receipt of a notice of termination under Rule 55.1 (b) (2), counsel shall assess the time required to determine the defect, obtain any corrective material from the client, prepare appropriate documents to correct default and appear in court to argue in what is essentially an uncontested case. Dismissal and reclassification could probably be more effective.
If the lawyer is unable to informally get from the Registrar why the case should be dismissed, she should schedule a show cause hearing and attempt to “… persuade a judge that there is a just cause. the nonconformity … provided that the cause of the nonconformity is consistent for the purposes of the rule. The new rules make no provision for amended or corrected affidavits.
While default judgments are still subject to subsequent attack under Rules 55 (c) and 60 (b), the volume of information required by new Rule 8.1 affidavits would appear to be a much broader target. for aggrieved judgment debtors seeking to set aside default judgments. The new requirements are broad and detailed, and there is no provision allowing affidavits to be substantially, rather than strictly, compliant. A defective affidavit may provide a credit card debtor with a valid defense under Rule 55 (c) and it is possible that any default may satisfy General Rule 60 (6), “… a dispensation from the execution of the judgment. “
Massachusetts 940 CMR 7.00; The elephant in the room
The real elephant in the room for creditors’ attorneys is the liability provisions in the Massachusetts Attorney General’s Fair Debt Collection Regulations, 940 CMR 7.00, and in the Federal Fair Debt Collection Practices Act. (FDCPA). Under 940 CMR 7.07 (2), “… any knowingly false or misleading representation in any communication as to the nature, extent or amount of the debt, or as to its status in any legal proceeding…” is an act unfair and deceptive, and Massachusetts regulations apply not only to debt collectors, but to all attorneys and creditors. And of course, the debt collector’s lawyer can be held strictly liable to the debtor under the FDCPA. These regulations have always been a problem for creditors’ lawyers, but since the new rules require a much larger volume of information and specifically require lawyers, under Rule 55.1 (b) (1), to certify the accuracy of this information, the possibility of incurring liability is much greater.
Obviously, all assertions in all affidavits required by these rules must be carefully considered by the creditor and the lawyer.