A recent Missouri decision in a credit card collection case illustrates the kind of documentation attacks that are increasingly being lodged against the non-mortgage consumer lending industry.

In its January 17, 2012, opinion in Cach, LLC v. Askew, the Missouri Supreme Court ruled that a debt collector was not entitled to judgment in its favor because the collector had not properly established that it had been assigned the debt in question. Following the card issuer’s acquisition by another bank, the consumer’s credit card account was assigned to a purchaser that subsequently assigned the account to the debt collector.

At trial, the collector submitted a document purporting to be a bill of sale transferring the account from the acquirer bank to the purchaser.

The Missouri Supreme Court held that the trial court erred by admitting the bill of sale into evidence based on testimony of the debt collector’s records custodian. More specifically, the court found that the custodian was not a “qualified witness” to lay the foundation for the document to qualify for the business records exception to the hearsay rule.

According to the court, the custodian failed to show that she had any personal knowledge of how or when the bill of sale was prepared. Without the bill of sale, the debt collector had no competent evidence of the first assignment and therefore failed to show it had standing to bring the collection action, the court found.

In light of the criticism that has been directed at mortgage foreclosure documentation, it is not surprising that consumer groups are now calling for increased attention to the quality of collection-related documentation used in various areas of non-mortgage lending.

Reprinted with permission from Ballard Spahr.

Ballard Spahr’s Consumer Financial Services Group has substantial regulatory and litigation experience in dealing with documentation  challenges. The group has conducted two webinars concerning preventive measures and best practices for non-mortgage collection activity, with a particular focus on how the lessons learned in the mortgage context can be applied to credit cards, student loans, and other types of consumer debt.

Ballard Spahr’s CFS Group produces the CFPB Monitor, a blog that focuses exclusively on important Consumer Financial Protection Bureau developments. To subscribe, use the link provided to the right. The group is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws throughout the country, and its skill in litigation defense and avoidance (including pioneering work in pre-dispute arbitration programs.)

For more information, please contact Practice Leader Alan S. Kaplinsky, 215.864.8544 or kaplinsky@ballardspahr.com; Practice Leader Jeremy T. Rosenblum, 215.864.8505 or rosenblum@ballardspahr.com; Martin C. Bryce, Jr., 215.864.8238 or bryce@ballardspahr.com; John L. Culhane, Jr., 215.864.8535 or culhane@ballardspahr.com; Barbara S. Mishkin, 215.864.8528 or mishkinb@ballardspahr.com;  Mercedes K. Tunstall, 202.661.2221 or tunstallm@ballardspahr.com; Michael S. Waldron, 202.661.2234 or waldronm@ballardspahr.com; or Christopher J. Willis, 678.420.9436 or willisc@ballardspahr.com.

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