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Unifund CCR Partners was founded in 1986 and was one of the first companies to purchase defaulted consumer receivables. Unifund's founder and chief executive officer, David G. Rosenberg, founded Unifund to purchase and collect returned checks. In 1989, Unifund began buying distressed loan portfolios on a national scale from small banks and retailers. One year later, the company began purchasing portfolios from large financial institutions. Unifund CCR is headquartered in Cincinnati, Ohio, and it is one of the largest buyers and operators of consumer debt in the nation.
Unifund is a debt buyer. Debt buying is the practice of purchasing charged-off debts from debt originators, or other debt buyers. These debts are purchased in bulk and are usually credit card debts.
Debts sold by original creditors to Unifund are typically bundled into portfolios because bundling accounts into portfolios reduces the transactions costs of exchange. See Federal Trade Commission, The Structure and Practices of the Debt Buying Industry, January 2013. When purchased, these bundled account portfolios are transferred via electronic data files that contain only a few data elements from the original account records. When printed out, the electronic evidence of the sale, or data file, consists of one line per debtor.
The typical data file contains the original account number, the name of the consumer, the address of the consumer, the last balance purportedly owed, the date of the last payment, and the date that the account was charged-off. Debt buyers, like Unifund, generally do not obtain the original account records (the day-to-day transactions on the account that are generally made at or near the time of each transaction, in the normal course of business) related to the purchased debts. For most portfolios, buyers do not receive any documents at the time of purchase. Only a small percentage of portfolios include documents such as account statements or the terms and conditions of credit.
The data files obtained by debt buyers are not the original account records that were created in the regular course of business by the credit originator—they are created prior to the sale of a portfolio of charged off debts. They are created for sale to a third party, and are not created in the regular course of servicing the credit card account. Furthermore, debt sales are typically “as-is,” with limited or no ability to obtain additional information from the original creditor. Where different debt buyers enter into purchase and sale agreements with the same seller, the structure, organization, and phrasing of these agreements are virtually identical.
However, Unifund had absolutely no assurance that the information it received was accurate because, on information and belief, Citi allegedly sold its debts to Unifund in “as-is” condition. The information on which Unifund typically relies when filing in state court would not be considered satisfactory evidence if submitted to court. A document is not admissible as a “business record” under Florida law if “the source of information or the method or circumstances of preparation indicate lack of trustworthiness …”
It is common practice in the industry to purchase debts without obtaining original account information due to the time and cost of obtaining such documentation. Unifund routinely files state court collection actions with no more evidence of the debt in question than the single line data file described above. Unifund knows that the information on which it relies to file the state court collection actions will not be supported with adequate evidence, yet Unifund is not willing or not able to obtain such evidence.
Usually when Unifund files a collection action it obtains a default judgment against the consumer. It has been estimated that the default rate in such lawsuits may be as high as ninety percent.
Allegations in a federal court action have been made that Unifund does not conduct a reasonable investigation into a debt’s existence in the collection actions it files; rather Unifund intends to obtain a default judgment against the consumer by representing to the consumer and the court, through the filing of its complaint and affidavit, that it has evidence to support the claims stated therein. This practice, the lawsuit contends, amounts to an unfair, deceptive and improper use of the court system in connection with the collection of a debt. Once the default judgment is entered Unifund can proceed to garnishment regardless of whether it could have proven its case at trial. Unifund routinely voluntarily dismisses cases where the consumer appears before the court to defend the action in order to protect its business model and avoid losing at trial.
In Unifund CCR Partners vs. Youngman, the court reversed a lower court order granting Unifund CCR Partner's motion for summary judgment. Unifund CCR alleged that it was the assignee of Chase Bank, and sued the consumer for breach of contract and account stated, seeking to recover attorneys' fees and the balance owed on a credit card issued to the consumer. The lower court granted Unifund CCR's motion for summary judgment, but the appellate court held that the consumer's cross motion for summary judgment should have been granted instead. The Appellate Court concluded that, to establish standing, Unifund CCR was required to "submit evidence in admissible form establishing that Chase had assigned its interest in [the consumer's] debt to [Unifund CCR]," but it failed to do so. Unifund CCR submitted an affidavit of its agent, a "Legal Liaison" employed by Unifund CCR rather than Chase, as well as credit card statements and account balance documents. The Court found that Unifund CCR did not submit the "requisite business records to establish its standing." The "Legal Liaison" employed by Unifund CCR did not establish personal knowledge of Chase's business practices or procedures, and failed to establish "when, how, or by whom the credit card statements and account balance documents were made and kept." Because Unifund CCR did not establish a proper foundation for the admission of the credit card statements and account balance documents under the business record exception to the hearsay rule, the appellate court held that Unifund CCR did not establish its standing as assignee of Chase Bank. Thus, the consumer's motion for summary judgment against Unifund CCR was granted.
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