One of the main defenses available to consumers when defending a debt buyer lawsuit is to argue that the debt buyer’s evidence is inadmissible hearsay. Most people understand that hearsay is not admissible in court. Simply defined, hearsay is any statement–oral or written–that was made outside of the courtroom. So, for example, credit card billing statements or a credit card contract, which were created outside of court, are considered hearsay.
There is an exception to the general hearsay rule that allows business records to be admitted into evidence, despite being created outside of court. But there’s a catch. Before the court will admit the business records, the party offering them has introduce testimony that the records were created in the ordinary course of business by someone with personal knowledge of the event in question. The reason for this requirement is to create a safeguard that ensures that the business records are authentic.
Providing the required foundational testimony is pretty straightforward for the original creditor to do. Capital One, for example, should have no problem producing a witness testify about the process it uses to create its billing statements. But what happens when the lawsuit is brought by a debt buyer? It’s unlikely that the debt buyer as any knowledge of Capital One’s business practices. And without the required testimony, the business records hearsay exception shouldn’t apply and the court should not consider the billing statements or contract as evidence. Without this evidence, the debt buyer can’t prove its case and the consumer should win.
At least that’s the theory. The problem for consumers is that there’s very little existing case law about this issue because it’s not often that garden-variety debt collection cases end up being appealed. And without black and white appellate case law in front of them, most trial judges are going to have a hard time ignoring a stack of billing statements. So I definitely took notice when a Pennsylvania appeals court recently upheld the dismissal of a debt buyer’s collection lawsuit. The Pennsylvania court held that the credit card agreement and account history could not be admitted under the business records exception to the hearsay rule because the debt buyer could not testify that the credit card account records were made contemporaneously and in the regular course of the issuing bank’s business. Without this testimony, there was no way for the Court to know that the evidence was authentic, which, you know, is pretty important. Because it couldn’t provide any admissible evidence to prove its claim, the Court held that the debt buyer could not prevail as a matter of law.
It would be nice if this type of decision became a trend, rather than a rare occurrence.
Debt Buyer Dismissed | Consumer Law & Policy Blog | February 15, 2011