Connecticut Seal

General Assembly

 

Committee Bill No. 6173

January Session, 2013

 

LCO No. 3740

 

*03740HB06173BA_*

Referred to Committee on BANKS

 

Introduced by:

 

(BA)

 

AN ACT CONCERNING THE REFORM OF DEBT COLLECTION PRACTICES.

Be it enacted by the Senate and House of Representatives in General Assembly convened:

Section 1. Section 36a-645 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2013):

As used in sections 36a-645 to 36a-647, inclusive, as amended by this act, unless the context otherwise requires:

(1) "Consumer debtor" means any natural person residing in this state who owes a debt to a creditor.

(2) "Creditor" means (A) any person to whom a debt is owed by a consumer debtor and such debt results from a transaction occurring in the ordinary course of such person's business, or (B) any person to whom such debt is assigned. "Creditor" includes a debt buyer, as defined in subdivision (4) of this section, but shall not include a consumer collection agency, as defined in section 36a-800, or any department or agency of the United States, this state, any other state, or any political subdivision thereof.

(3) "Debt" means an obligation or alleged obligation arising out of a transaction in which the money, property, goods or services which are the subject of the transaction are for personal, family or household purposes, whether or not such obligation has been reduced to judgment.

(4) "Debt buyer" means a person or entity that (A) is engaged in the business of purchasing delinquent consumer debt, including, but not limited to, delinquent or charged-off consumer loans or consumer credit accounts, for collection purposes, or (B) receives assignments of claims for collection purposes from a person or entity that purchased delinquent debt, including, but not limited to, delinquent or charged-off consumer loans or consumer credit accounts, whether it collects the debt itself or hires a third party for collection or an attorney for representation in a cause of action to collect such debt.

(5) "Original creditor" means the last person or entity, identified by the name it uses in its dealings with a consumer, that extended credit to the consumer for the purchase of goods or services, for the lease of goods, or as a loan of money.

Sec. 2. Section 36a-646 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2013):

(a) No creditor shall use any abusive, harassing, fraudulent, deceptive or misleading representation, device or practice to collect or attempt to collect any debt.

(b) No debt buyer shall bring suit or initiate an arbitration proceeding against a consumer debtor or otherwise attempt to collect on a debt:

(1) When the debt buyer knows or reasonably should know that such collection is barred by the applicable statute of limitations;

(2) Without (A) proof that the debt buyer is the owner of the specific debt instrument or account at issue, and (B) verification of the amount of the debt allegedly owed by the debtor. For purposes of this subdivision, "verification" includes documentation of the name of the original creditor, the name and address of the debtor as appearing on the original creditor's records, the original creditor's account number for the debtor, a copy of the contract or other document evidencing the consumer debt and an itemized accounting of the amount claimed to be owed, including all fees and charges; or

(3) Without first giving the consumer debtor written notice of the intent to file a legal action not less than thirty days in advance of filing such action. The written notice shall include the name, address and telephone number of the debt buyer, the name of the original creditor, the original creditor's account number for the debtor, a copy of the contract or other document evidencing the consumer debt and an itemized accounting of all amounts claimed to be owed.

Sec. 3. (NEW) (Effective October 1, 2013) (a) In any cause of action initiated by a debt buyer against a consumer debtor, the debt buyer shall attach all of the following materials to its complaint or claim:

(1) A copy of the contract or other writing evidencing the original debt, which shall contain a signature of the consumer debtor. If a claim is based on credit card debt and no such signed writing evidencing the original debt ever existed, then the debt buyer shall attach copies of documents generated when the credit card was used;

(2) A copy of the assignment or other writing establishing that the debt buyer is the owner of the debt. If the debt has been assigned more than once, the debt buyer shall attach each assignment or other writing evidencing the transfer of ownership and establishing an unbroken chain of ownership. Each assignment or other writing evidencing transfer of ownership shall contain the original account number of the debt purchased and clearly show the debtor's name associated with such account number; and

(3) An itemization of the amount of damages sought, including:

(A) The amount owed for the purchase of goods or services or for the lease of goods or the amount of credit extended;

(B) Interest, fees and charges imposed by the original creditor;

(C) Any interest, fees or charges imposed by any debt buyer or other assignee of the debt;

(D) Attorney's fees;

(E) Any other fees, costs or charges sought or imposed;

(F) The amount and date of the last payment before default or charge-off, whichever is later;

(G) Each payment credited to the debt after default or charge-off; and

(H) The amount the debt buyer paid for the account.

(b) If the consumer debtor appears for trial on the scheduled trial date, the debt buyer either fails to appear or is not prepared to proceed to trial and the court does not find good cause for a continuance, the court shall enter judgment for the debtor and dismiss the debt buyer's action with prejudice. Notwithstanding any other law to the contrary, the court may award the debtor costs and attorney's fees, including lost wages and other related expenses.

Sec. 4. (NEW) (Effective October 1, 2013) (a) Prior to entry of a judgment or order against a consumer debtor in a cause of action initiated by a debt buyer, the debt buyer shall file:

(1) An authenticated copy of the contract or other writing evidencing the original debt, which shall contain the debt buyer's signature. If a claim is based on credit card debt and no such signed writing evidencing the original debt ever existed, then the debt buyer shall attach authenticated copies of documents generated when the credit card was used;

(2) Evidence sufficient to establish the amount and nature of the debt by business records that satisfy the requirements of section 52-180 of the general statutes, which shall include:

(A) The original creditor's name;

(B) The original creditor's account number for the debtor;

(C) The amount of the original debt;

(D) An itemization of charges and fees claimed to be owed;

(E) The original charge-off balance or, if the balance has not been charged off, an explanation of how the balance was calculated;

(F) An itemization of post charge-off additions, if applicable;

(G) The date of the last payment;

(H) The amount of interest claimed and the basis for the interest charged;

(I) The amount the debt buyer paid for the debtor's account; and

(J) A statement of the applicable statute of limitations period and the filing date of the cause of action;

(3) An affidavit containing a statement that the debt buyer is the sole current owner of the debt, which shall include or be accompanied by (A) a chronological listing of the name of all prior owners of the debt and the date of each transfer or ownership of the debt, beginning with the name of the original creditor and (B) a contract of sale and exhibits that transferred ownership of the debt to the debt buyer;

(4) Evidence sufficient to establish an unbroken chain of ownership by business records that satisfy the requirements of section 52-180 of the general statutes. Such evidence shall include (A) an affidavit by the original creditor of the facts constituting the debt, the default in payment, the sale or assignment of the debt, authenticated contract of sale and exhibits and the amount due at the time of sale or assignment; (B) for each subsequent assignment or sale of the debt to another entity, including an entity related by common ownership or affiliated by corporate control, an affidavit authenticating the attached contract of sale and exhibits of the debt by the debt seller, completed by the seller or assignor; and (C) proof that each assignment or other writing evidencing transfer of ownership contains the original account number of the debt purchased and clearly shows the debtor's name associated with such account number; and

(5) An affidavit that states that the time period during which the debt buyer may bring suit or initiate an arbitration proceeding to collect the debt under the applicable statute of limitations, or any extension of the time period available under the statute of limitations, has not expired.

(b) In any action on a consumer debt, if a debt buyer seeks a judgment or an order against the debtor and has not complied with the requirements of this section, the court shall not enter a judgment for the debt buyer and shall dismiss the action with prejudice.

(c) If the debt buyer is the prevailing party in any action to collect on a consumer debt, any interest on the judgment shall be at a maximum rate of interest equal to the weekly average one-year constant maturity yield of United States Treasury securities, as published by the Board of Governors of the Federal Reserve System, for the calendar week preceding the date of the judgment. No other rate of interest on the judgment shall be permitted, including the rate provided for in the contract or other writing evidencing the original debt.

Sec. 5. (NEW) (Effective October 1, 2013) (a) On and after October 1, 2013, a debt buyer shall commence any action for the collection of consumer debt, including, but not limited to, a cause of action for breach of contract, account stated or open account, not later than three years from the date of the accrual of the cause of action, which shall be the earlier of the date of charge-off or placement for collection of the debt or one hundred eighty days after the last regular payment on the debt, notwithstanding the provisions of any applicable statute of limitations, unless such statute of limitations provides for a shorter limitations period.

(b) Notwithstanding any other provisions of any other law, if a consumer debt has been charged-off or placed for collection or if there has not been any payment on a consumer debt for more than one hundred eighty days, any subsequent payment toward such debt shall not extend the three-year limitations period set forth in subsection (a) of this section or bar the consumer debtor from asserting any defenses to the collection of such debt.

(c) When the three-year limitations period set forth in subsection (a) of this section has expired, the right to collect the consumer debt is extinguished along with any remedies available to the debt buyer pursuant to a cause of action for the collection of such debt.

Sec. 6. Section 36a-647 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2013):

(a) The commissioner may adopt such regulations in accordance with the provisions of chapter 54 as may be necessary to carry out the purposes of sections 36a-645 to 36a-647, inclusive, as amended by this act, and sections 3 to 5, inclusive, of this act, including, but not limited to, specifying those acts which are deemed to be in violation of section 36a-646.

(b) The commissioner may receive and investigate complaints and may receive assurances of voluntary compliance with the provisions of sections 36a-645 to 36a-647, inclusive, as amended by this act, and sections 3 to 5, inclusive, of this act, or forward such complaints to the appropriate prosecuting officials at the commissioner's discretion. No action taken by the commissioner against a creditor in accordance with section 36a-50 relieves the creditor from civil liability.

(c) Whenever the commissioner has reason to believe that any person has violated, is violating or is about to violate any provision of sections 36a-645 to 36a-647, inclusive, as amended by this act, or sections 3 to 5, inclusive, of this act, or any regulation adopted under this section, the commissioner may take action against such person in accordance with sections 36a-50 and 36a-52.

(d) Nothing contained in sections 36a-645 to 36a-647, inclusive, as amended by this act, shall be construed as a limitation upon the power or authority of the state, the Attorney General or the commissioner to seek administrative, legal or equitable relief as provided by other statutes or at common law.

Sec. 7. Section 36a-648 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2013):

(a) A creditor, as defined in section 36a-645, who [uses any abusive, harassing, fraudulent, deceptive or misleading representation, device or practice to collect or attempt] violates section 36a-646, as amended by this act, or the regulations adopted pursuant to section 36a-647, as amended by this act, while collecting or attempting to collect a debt [in violation of section 36a-646 or the regulations adopted pursuant to section 36a-647] shall be liable to a person who is harmed by such conduct in an amount equal to the sum of: (1) Any actual damages sustained by such person, (2) if such person is an individual, such additional damages as the court may award, not less than five hundred dollars per violation and not to exceed [one] five thousand dollars per violation, [and] (3) in the case of a class action, the amount for each named plaintiff as could be recovered under subdivision (2) of this subsection and an amount as the court may determine for each other class member, not exceeding the amount per person that could be recovered under subdivision (2) of this subsection, and (4) in the case of any successful action to enforce liability under the provisions of this subsection, the costs of the action and [, in the discretion of the court,] a reasonable attorney's fee as determined by the court.

(b) If a creditor violates section 36a-646, as amended by this act, or the regulations adopted pursuant to section 36a-647, as amended by this act, neither the creditor nor any other person who may legally seek to collect on a claim brought pursuant to subsection (a) of this section shall be allowed to collect any interest, service charge, attorney's fees, collection costs, delinquency charge or any other fees or charges otherwise legally chargeable to the consumer debtor on such claim. A creditor who is not a debt buyer may recover from the consumer debtor the amount of the original claim or obligation.

[(b)] (c) In determining the amount of liability in an action brought pursuant to subsection (a) of this section, the trier of fact shall consider, among other relevant factors, the frequency and persistence of noncompliance by the creditor, the nature of such noncompliance and the extent to which such noncompliance was intentional. In any class action brought pursuant to subsection (a) of this section, the trier of fact shall also consider the resources of the creditor and the number of persons adversely affected by such noncompliance.

[(c)] (d) A creditor may not be held liable in an action brought under this section if the creditor shows by a preponderance of the evidence that the violation was not intentional and resulted from a bona fide error, notwithstanding the maintenance of procedures reasonably adopted by the creditor to avoid any such error.

[(d)] (e) An action to enforce liability under this section may be brought in any court of competent jurisdiction not later than one year after the date on which the violation occurs.

Sec. 8. Subsection (a) of section 37-3a of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2013):

(a) Except as provided in sections 37-3b, 37-3c, [and] 52-192a and section 4 of this act, interest at the rate of ten per cent a year, and no more, may be recovered and allowed in civil actions or arbitration proceedings under chapter 909, including actions to recover money loaned at a greater rate, as damages for the detention of money after it becomes payable. Judgment may be given for the recovery of taxes assessed and paid upon the loan, and the insurance upon the estate mortgaged to secure the loan, whenever the borrower has agreed in writing to pay such taxes or insurance or both. Whenever the maker of any contract is a resident of another state or the mortgage security is located in another state, any obligee or holder of such contract, residing in this state, may lawfully recover any agreed rate of interest or damages on such contract until it is fully performed, not exceeding the legal rate of interest in the state where such contract purports to have been made or such mortgage security is located.

Sec. 9. Section 42-150aa of the general statutes is amended by adding subsection (c) as follows (Effective October 1, 2013):

(NEW) (c) If the attorney's fees sought pursuant to subsection (b) of this section are for services rendered to an assignee or a debt buyer, as defined in section 36a-645, as amended by this act, the holder of a contract or lease subject to the provisions of this section shall provide all of the following materials setting forth the party's obligation to pay attorney's fees to the court before the court may enforce such provisions:

(1) A copy of the contract or other writing evidencing the original debt, which shall contain a signature of the defendant. If a claim is based on credit card debt and no such signed writing evidencing the original debt ever existed, then the holder shall attach copies of documents generated when the credit card was used; and

(2) A copy of the assignment or other writing establishing that the plaintiff is the owner of the debt. If the debt has been assigned more than once, the holder shall attach each assignment or other writing evidencing transfer of ownership and establishing an unbroken chain of ownership. Each assignment or other writing evidencing transfer of ownership shall contain the original account number of the debt purchased and shall clearly show the debtor's name associated with such account number.

Sec. 10. Subsection (c) of section 52-352a of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2013):

(c) "Exempt" means, unless otherwise specified, not subject to any dispossession or taking, including any form of process or court order for the purpose of debt collection;

Sec. 11. Subsection (a) of section 52-576 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2013):

(a) No action for an account, or on any simple or implied contract, or on any contract in writing, shall be brought but within six years after the right of action accrues, except as provided in subsection (b) of this section and section 5 of this act.

This act shall take effect as follows and shall amend the following sections:

Section 1

October 1, 2013

36a-645

Sec. 2

October 1, 2013

36a-646

Sec. 3

October 1, 2013

New section

Sec. 4

October 1, 2013

New section

Sec. 5

October 1, 2013

New section

Sec. 6

October 1, 2013

36a-647

Sec. 7

October 1, 2013

36a-648

Sec. 8

October 1, 2013

37-3a(a)

Sec. 9

October 1, 2013

42-150aa

Sec. 10

October 1, 2013

52-352a(c)

Sec. 11

October 1, 2013

52-576(a)

Statement of Purpose:

To reform debt collection practices in this state.

[Proposed deletions are enclosed in brackets. Proposed additions are indicated by underline, except that when the entire text of a bill or resolution or a section of a bill or resolution is new, it is not underlined.]

Co-Sponsors:

REP. ORANGE, 48th Dist.

H.B. 6173