Senate Bill S6749

                                 
BILL NUMBER: S6749

SPONSOR: BRISPORT
 
TITLE OF BILL:

An act to amend the civil practice law and rules, in relation to the
commencement of an action on a money judgment; and to repeal certain
provisions of such law relating thereto

 
SUMMARY OF PROVISIONS:

Section one of this bill repeals subdivision (b) of section 211 of the
civil practice law and rules.

Section two provides the timeframe for collecting a money judgment under
New York law.

 
JUSTIFICATION:

Collection attorneys file millions of debt collection lawsuits in the
United States each year. After obtaining a judgment against the consum-
er, the entity that brought the lawsuit becomes the "judgment creditor"
              

and has access to specific collection remedies if the consumer does not
pay the judgment. Among other things, a judgment creditor can file a
lien against a home, garnish a person's wages or bank account, or even
seize personal property that will then be sold to pay off a portion of
the debt.

In all fifty states, the ability to collect on a judgment has an expira-
tion date. New York currently has the longest time limit of any state,
allowing judgment creditors twenty years to pursue debtors.  Moreover,
New York law permits the perpetual renewal of this time period, making
the twenty year limitations on such judgments largely theoretical. This
means that New Yorkers can be pursued by entities attempting to collect
on judgments for the rest of their lives. This legislation shortens the
timeframe for the collection of judgments, and ends the practice of
perpetual renewal of old judgments.

It is important to shorten the timeframe available under law because
these judgments will become increasingly more burdensome over time due
to the application of post-judgment interest rates. Under CPLR 5004, New
York imposes an interest rate of nine percent. By permitting judgment
creditors to pursue New Yorkers for twenty years or more, especially
with an interest rate of nine percent, New York law makes it very diffi-
cult for its residents to recover financially.  Judgment creditors are
likely to start wage garnishment as soon as they learn that an unem-
ployed worker has finally found a new job.  These wage garnishment
efforts by debt collectors can keep a worker's family from getting back
on its feet, and prolong financial instability.

Permitting drawn-out enforcement of old judgments, especially when a
debt collector can compound those collections with a nine percent annual
interest rate, also encourages the growth of a nascent and troubling
industry of companies buying, selling, and trading judgments. Several
websites have appeared in recent years, charging a fee to facilitate the
purchase and sale of legal judgments. This kind of online marketplace
for legal, judgments is incentives very troubling, particularly in light
of the financial incentives that exist under New York law. An initial

judgment of $10,000, compounded annually at a rate of 9%, would be worth
more than $56,000 over twenty years.

The existence of markets for legal judgments is dangerous to working
people struggling with debt, particularly with the financial incentives
that exist with compounding interest of nine percent over twenty years,
in several ways. When contacted or pursued, people have typically never
heard of the new judgment creditor, and the judgment buyer is unlikely
to have much information about the underlying debt.  This creates
confusion on multiple levels, which is likely to lead to errors that are
aggressively pursued. As a result, working people are all too often
pursued for debts that are not even owed.

In addition to the difficulties that come with simple mistakes by debt
collectors, the powerful financial incentives that exist have led to
debt collectors using illegal tactics as well, including the high-pro-
file case that State Attorney General Letitia James pursued in recent
years against the "kingpin" of Buffalo debt collectors.  Common tactics
used by debt collectors include "spoofing" phone numbers to pretend to
be calling from a government agency, or otherwise harassing, threatening
and deceiving consumers into paying inflated debts or amounts they do
not owe.

Among other tactics, debt collectors routinely engage in what is called
"sewer service," where they falsely claim to the courts that they have
served people with court papers when they have not. This leaves debtors
to try to navigate New York's complex legal process for disputing
default judgments that have been entered by them.  Because of the
economic incentives that exist under current law, debt buyers will buy
old, charged-off debts for pennies on the dollar, file debt collection
lawsuits in New York, and make false statements to the courts about
their supposed rights to collect.

This legislation provides that the timeframe for collecting a money
judgment under New York law shall be three years, and that such
collection efforts shall not be renewed in perpetuity.

 
PRIOR LEGISLATIVE HISTORY:

New bill.

 
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:

None.

 
EFFECTIVE DATE:
This act shall take effect immediately.