Beginning January 1, 2012, if you are being sued by a debt collector, there are new Maryland rules that may help you

The Baltimore Sun reported on September 7, 2011, that Maryland’s Court of Appeals has enacted new rules to protect Maryland debtors-,0,3294034.story .

Reading the new Rules, , at p.4 through 11, it is clear that the Court is reacting to the excesses of debt buyers who have been forced to dismiss thousands of debt collections cases. Just about ten days ago,  LVNV Funding LLC, was forced to write off about $10,000,000, in debt owed by approximately 3,500 people, as part of a class action suit, see article in Baltimore Sun,0,6904431.story

The new Maryland Rules, 3-306, 3-308 and 3-509, apply to all cases filed after December 31, 2011. Given the fact that tens of millions of dollars of debt were sold to debt buyer who did not know about the new Rules, the interesting question, is, “What will happen to all of that debt?” I cannot imagine that the debt buyers required the detailed records necessary now to prove their cases. Particularly, if the debt was sold more than once, the chain of paperwork may well be lacking. Debt buyers who purchase large blocks of debt may not be able to obtain the paperwork on each debt to prove their case. As a bankruptcy attorney who is consulted by debtors on a daily basis, I will recommend to them, even more so than in the past, that they should go to court and demand strict proof of the purchased debt. It will be a brave new world after January 1, 2012.
Many of the new requirements in the overhauled Rules specifically do not apply to original creditors. In contrast, if suit is filed by a plaintiff who is not the original creditor, this debt buyer will have to either show: (1)proof of the original debt with proof of debtor’s signature; (2) a bill with actual purchases; or (3) proof from the original creditor of the debt.
The requirements on the debt buyers will now be extremely high. The new Rules may even discourage many companies from buying debt of Maryland residents.
Here are some of the changes:
If the plaintiff wants to get a judgment by affidavit and is not the original creditor, it will have to show the chain of custody of the debt from the original creditor until plaintiff’s purchase of the debt as well as a bill of sale for each sale in the chain.
If the plaintiff attempts to obtain an Affidavit Judgment, by submitting records without a trial, and is making a claim for interest on the debt and/or attorney fees, the plaintiff will have to submit the following:
1. an interest worksheet that follows a new form to be prescribed by the Chief Judge of the District Court;
2. “sufficient proof evidencing” the claim for attorneys’ fees, and that the fees are “reasonable,” Rule 3-306 (c);
3. an “Assigned Consumer Debt Checklist,” based on another new form to be created by the Chief Judge of the District Court;
4. all necessary documents to comply with the new Checklist (the documents must be “clearly numbered and referenced per Rule 3-306 (d));
5. In addition, the Plaintiff will need to submit one of the following:
a.  a document signed by the defendant evidencing the debt or that the account was opened;
b.  a bill of sale, purchases, payments or other use of the credit card or account; or
c.  an electronic printout of such purchases or payments;
6.  plaintiff will have to submit a “chronological listing of all the prior owners of the debt” and the applicable dates and a certified or “properly authenticating bill of sale” for each transfer;

7.  the Affidavit will have to include the name and last four digits of the account number for the original creditor and the nature of the debt;

8.  if the account was charged off, the Affidavit will need to include information as to when and the amount of the charge-off, as well as an itemization of additional fees and payments made after charge off and the date of last payment; and

9.  (in direct response to companies such as LVNV Funding, who were not licensed properly as a debt collector when they filed suit), the plaintiff must include in the Affidavit their Maryland debt collection licensing numbers and dates issued.

So, if the Debtor files a Notice of Intention to Defend and there is a trial, what does a Plaintiff have to prove? According to the new Rules, if a plaintiff is not the original creditor, the Court “shall consider the requirements” listed in (1) through (9) above before granting a judgment. What does it mean that the Judge should “consider the requirements”? The new Rules give the Judge a certain amount of flexibility, but, clearly, some Plaintiffs, who bought debt that was sold three or four times, will not be able to obtain judgments against the debtors.
So, listen up all Maryland debtors- if you are sued after December 31, 2011, and the plaintiff is a company who bought the debt from your credit card company or store, GO TO COURT and make them prove their case. You nave nothing to lose by going to Court and you just might be surprised to find that that debt buyer cannot prove their case! The devil (and the debt) is in the details.  🙂