In a ruling that could cause ripples throughout the debt buying and collection industry, a state Appeals Court in Virginia has overturned a lower court’s decision in favor of a debt buyer, ruling that the debt buyer had “scanty and incomplete” evidence to prove it owned the debt and thus had a right to collect on it, and has ordered the lower court to enter a judgment indicating the plaintiff does not owe the debt.
The Background: The defendant filed a collection lawsuit against the plaintiff in December 2020. To prove it was the owner of the debt, the defendant included the following evidence:
- A February 2020 letter from the defendant to the plaintiff, listing the original creditor as CIT Bank and an “[o]riginal [a]ccount [n]umber” ending in 7068, and demanding payment on a balance due of $8,914.31
- A September 2010 document labeled “bill of sale” from CIT Bank to Webbank
- An August 2013 document labeled “bill of sale” from Webbank to Comenity Capital Bank
- A July 2018 document labeled “bill of sale” from Comenity Capital Bank to Synchrony Bank
- A June 2019 document labeled “bill of sale” from Synchrony Bank to PRA
- A two-column spreadsheet for an account number ending in 7068 with Green’s name, but no creditor name, headings identifying the source or purpose of the document, or means of tying the record to any of the bills of sale
- An August 2020 declaration of James O’Toole, custodian of records for [the defendant], stating: “According to the records transferred to the Account Assignee from Account Seller, and maintained in the ordinary course of business by the Account Assignee, there was due and payable from [the plaintiff] . . . to the Account Seller the sum of $8,914.31 with respect to the account number ending in 7068.” The affidavit stated that this finding was “based upon a review of the business records of the Original Creditor CIT BANK/PAYPAL and those records transferred to [PRA] from SYNCHRONY BANK . . . , which have become a part of and have integrated into [PRA]’s business records, in the ordinary course of business.”
- A Synchrony Bank pricing information addendum for “PayPal credit account ending in 7068”
- Monthly PayPal billing statements, spanning July 2017 to September 2018, listing customer name Mazie Green and an account number ending in 8616.
None of the bills of sale listed the plaintiff’s name or account number.
- The plaintiff filed a response and counterclaims that the defendant violated the Fair Debt Collection Practices Act.
- The state court judge ruled for the defendant and dismissed the plaintiff’s counterclaim.
The Ruling: Looking at a report from the Federal Trade Commission that was published back in 2013, the Appeals Court provides a lengthy backstory about the history of the debt buying industries and the problems that it has had at times with respect to proper documentation. Those were the very same problems raised by the plaintiff when she claimed the defendant did not have standing to sue her because it could not definitely prove it owned her debt.
- None of the bills of sale produced by the defendant had any account numbers or names of the individuals whose accounts were being bought or sold, the Appeals Court noted. The defendant did produce a spreadsheet with data for an account number and the plaintiff’s name, but the spreadsheet lacked a date, creditor name, and any means of tying the spreadsheet to a specific bill of sale.
- Calling it a “jumble” of documents, the Appeals Court ruled there was nothing to prove the plaintiff’s account was part of each transaction that ultimately led to the defendant coming into its possession.
The Last Word: “In sum, we hold that a plaintiff who asserts ownership of a debt by assignment must produce evidence, for each and every assignment, showing the chain of title for the debt passed from the original assignor to the plaintiff. At minimum, such evidence must show that the defendant’s account number, along with other relevant identifying information, was included in the assignment (e.g., an attachment to a bill of sale listing account numbers and other identifying information that traces back to the bill of sale by affidavit). If the claim is based on a written contract, the plaintiff must produce evidence that the defendant signed and dated that agreement, or otherwise follow the lost document affidavit procedures at Code § 8.01-32. If documentary evidence is unavailable for a given assignment, the plaintiff must produce, by witness testimony or an affidavit, evidence from a custodian of record or other qualified individual with personal knowledge that the defendant’s specific account was assigned.”
