It Is a Hard Business

"Is it a bigger crime to rob a bank or to open one?" Ted Allan

  The New Mexico Attorney General's  war on the consumer retail , credit and financial services industries continues.    I am using the term "financial service" in the broadest scope to include everything from "pay-day" lenders to banks and credit unions.

In late March 2014 the N.M. Supreme Court circulated a proposed rule which would  add detailed new provisions for the contents of consumer collection complaints for district courts and magistrate courts   in consumer debt collections.  The N.M. Attorney General's Consumer Protection Division Chief, Karen Meyers, has proposed  the new rules to correct what the Division's Chief views as creditors' filing  bad faith claims and then getting default judgments which are not  supported by evidence.    

Under the AG's proposed new rule the complaint in a consumer collection action would have to include substantial additional allegations beyond the present rule requirements to enable a creditor to gain a default judgement.  The requirements include the name of the creditor, how the creditor became creditor (assignment details, etc.),    due date and detailed interest calculations, statute of limitations and details on when the statute commenced to run, proof that the named debtor is the debtor,  and copies of all documents used in interest and amounts due calculations.  Third party credit collection agencies must furnish licensure information. In order to get a default judgment against the debtor, the creditor must certify compliance with the new rule.

Karen Meyers was interviewed by Dennis Domrzalski of the Albuquerque Business First weekly and said that the new rule " requires that the original contract be attached [to the lawsuit] and information that shows a good-faith basis for the suit and allows the person who has been sued to defend themselves."  She added, " In many instances you have collectors filing lawsuits based on insufficient evidence, filing suits when they don’t have a good-faith basis for the claim and failing to notify consumers” .

The proposed rule is not targeted toward any specific type of creditor or type of consumer transaction: it covers banks, credit unions, "payday"lenders, automobile dealer credit services, ad infinitum.  It will require detailed and careful attorney involvement in the minutiae of the credit transaction.  Although "designed" to police the entry of default judgments, it will furnish grounds for motions to dismiss in contested cases in which the parties know all details of the  obligation.

If the proposed rule is adopted, the impact on foreclosures times is unknown.  Now even the simplest foreclosures take nine months to a year in most judicial districts. Default judgement or not, the added attorney fee costadded to the judgment is ignored by the rule's sponsor.

Whether the Supreme Court will adopt the new consumer rule is unknown.  The Court will send the proposed rule to its Rules Committee, a collection of experienced attorneys.  It may be sometime before a decision is made.  However, it is one more step in what appears to be an offensive against banks--and not bank robbers.

Ed O'Leary, a former New Mexico banker,  writes a Blog for the
American Bankers Association.  I mentioned to Ed my surprise at Bank of America's embarrassing accounting snafu which interfered with  its stock buyback.  He referred me to his current Blog--"Do We Take Financial Statements Too Seriously"--which you can find at http://www.ababj.com/Blogs > Blogs > Talking Credit.  I recommend it with all due respects to my accountant friends and my deep reverence for GAAP.

Do good,

MARSHALL G. MARTIN
mgm@marshallgmartin.com
(505) 228-8506