Credit Card Collections Face New Hurdles in Pennsylvania (part 1)

Traditional legal pleading rules pose significant obsticles to creditor rights attorneys seeking to pursue debtors whose credit card accounts  have been sold to portfolio purchasers.   Recent case decisions and new rules in the Philadelphia Municipal Court illustrate these problems.

Here is the scenario:  Credit card issuers regularly sell bundles of delinquent accounts to third parties at a significant discount.  These debt buyers often resell portions of the accounts to other debt buyers.  Eventually, a lawsuit may be brought by an account owner who is the second, third or even more distant owner of the debt. 

Often the ultimate owner of the “charged-off” account has little, if any, of the original documentation concerning the debt.  Known in the industry as the “media”, the portfolio owner may obtain a final balance statement, a copy of the example of the contract used by the issuer at the time the account was created and a generic assignment which may or may not refer to a particular account which has been sold. 

There is no industry or regulatory standard regarding what “media” must accompany the sale of a charged-off account.   Sometimes, the issuer agrees to provide some or all of their data, but at an cost which is prohibitive to the portfolio owner.  Other times, the availability of “media” is limited in time or content, and may be available only to the original purchaser of a portfolio, and not to more remote purchasers.

Traditional Court rules were not designed with these transactions in mind.  For example, Pennsylvania is a “fact pleading” state, where the creditor is obliged to provide specifics as to the date, time and amounts of the items giving rise to the claim.  As such, portfolio owners can find themselves in a litigation trap, as courts and consumer attorneys become more sophistacted and require information the portfolio owner does not possess.

In February, 2009, the Philadelphia Municpal Court adopeted rigorous new procedures which require complex verification procedures to be followed in order to bring credit card cases to court.   These regulations are not available on the Court’s website, but can be obtained by contacting the writer directly.

Tomorrow:  Pennsylvania Court Cases Raise the Bar for Creditors

Lee M. Herman, Esquire, is a creditor’s rights attorney with offices in Media, PA and Haddonfield, NJ.  His email address is lherman@lmhlaw.com, and his website is www.lmhlaw.com.  He can be reached at (610) 891-6500.