Archive for the ‘Collections’ Category

A New Obstacle to Debt Collection in New York State

On November 8, 2021, New York Governor Kathy Hochul signed into law the Consumer Credit Fairness Act (the “Act”).  How does the Act change consumer debt collection?

  • With some exceptions, the Act shortens a creditor’s time to file suit based on a consumer credit transaction, from 6 years to 3 years.
  • After that 3 year period expires, a payment or affirmation of the debt will not revive or extend the time to sue.
  • A collection lawsuit based on a consumer credit transaction must include:
    • a copy of the agreement for the debt, or a copy of the charge-off statement for a revolving credit account;
    • an “Additional Notice of Lawsuit” provided by the Act; and
    • a stamped, unsealed envelope addressed to the defendant at the same address where he is served.  The court will mail that notice.  If that notice is returned to the court as undeliverable and the defendant does not respond to the lawsuit, default judgment will not be entered.
  • As a result:
    • Creditors willing to settle still may need to file a lawsuit to preserve their claims.
    • A debtor who does not receive mail where he can be served, and who cannot be served where he receives mail, could become judgment-proof.

Who does the Act affect?  In addition to collection agencies and banks, the Act affects small businesses like home improvement contractors and others who sell on credit to consumers.

            In light of these and other legal developments, creditors need competent counsel to pursue their claims effectively.


Getting Paid Promptly In the Construction Business

If you are a construction contractor, you probably worry about getting paid on time.  After all, you need cash-flow to cover ongoing labor and material costs.

Under New Jersey’s Prompt Payment Act (N.J.S.A. 2A:30A-1 & -2) (the “Act”), in addition to the amount owed under the contract, a prime contractor may be entitled to interest at a rate of prime plus 1%, and reasonable attorneys’ fees and costs, if:

•  the contractor performs (in New Jersey) according to its contract with the owner (such as a landlord, developer, or homeowner);

•  the contractor provides written notice to the owner of the work performed and requests payment pursuant to what the contract entitles the contractor;

•  within 30 days after the agreed upon billing date, and if the owner has “approved and certified” the billing for the work, the owner does not pay the amount due under the contract

(with the exception of certain public entities, the owner is deemed to have “approved and certified” the billing for the work if, after 20 days after the owner receives the contractor’s written notice, the owner does not respond with a written statement of the amount withheld from payment and why);

•  the contract permits a party to resort to alternative dispute resolution (such as arbitration) to resolve a payment dispute; and

•  the contractor successfully prosecutes a lawsuit in New Jersey to collect the amount owed under the Act.

The Act also may permit the contractor, after giving 7 days’ written notice, to suspend performance under the contract if the owner (1) has not made the payment required by the Act, (2) has not provided the required written response, and (3) is not engaged in a good faith effort to resolve the reason for the withholding.

But beware: the Act will not restrict the rights and remedies of a residential homeowner or purchaser with respect to the property being improved.  A homeowner facing a lawsuit under the Act might try to assert a counterclaim under the many consumer protection laws, including the Consumer Fraud Act (a topic I will cover in a future article).