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Debt Buyer’s Burden of Proof Regarding an Original Creditor’s Documents

March 1, 2019

A third-party debt buyer cannot lay the foundation for the business records of the original creditor. (Midland Funding, LLC v. Romero (2016) 5 Cal.App.5th Supp. 1, accord Sierra Managed Asset Plan, LLC v. Hale (2015) 240 Cal.App.4th Supp. 1.)


What does that mean?  It means that debt buyer companies that buy debt from financial institutions (commonly credit cards) and then sue on them cannot necessarily testify regarding the actions and documents by the original creditor.


For example, debt buyer company “DBC” purchases a credit card account allegedly in default from “Bank” to collect on it.  They later sue to collect on the account from the cardholder.  The cases cited above hold that DBC cannot testify as to Bank’s documents at trial.  The legal reason is that DBC lacks what the law calls “foundation.”


The court in Hale, above, held that “it was incumbent upon [the debt buyer] to produce a qualified witness to lay the business records foundation required by Evidence Code, section 1271, based upon personal knowledge of the identity and mode of preparation of the documents. This could have been done by the identified Citibank custodian or another qualified person, including non-Citibank witnesses with the requisite personal knowledge of Citibank’s business record creation and maintenance practices. The declaration was inadmissible hearsay. It should have been excluded.”


The debt buyer in Hale attempted to obtain a judgment based on a declaration in lieu of live testimony without having a witness from original creditor, Citibank, testify.  The Hale court on appeal determined the trial court should not have allowed the declaration’s testimony into evidence since it was prepared by a non-Citibank witness. 


The long-standing law on foundation in California can be found in the Evidence Code at section 1271, which holds:


“Evidence of a writing made as a record of an act, condition, or event is not made inadmissible by the hearsay rule when offered to prove the act, condition, or event if:

   (a) The writing was made in the regular course of a business;

   (b) The writing was made at or near the time of the act, condition, or event;

   (c) The custodian or other qualified witness testifies to its identity and the mode of its preparation; and

   (d) The sources of information and method and time of preparation were such as to indicate its trustworthiness.”

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