Know Your Rights When Your Loan or Account Is Sold

In recent years loans and retail accounts have been bought and sold much like any other product. Most of us know that our mortgage is rarely owned by the company who originally executed the loan documents. Today, a “book” of loans are placed on the market by a bank or retail loan company hoping to reap instant cash. The originator’s profits are made from origination fees and loan document fees that are added to the mortgage. The same can be said for credit card accounts. The card producer packages a “book” of accounts for sale, eventually selling them to a liquidation company at a discounted fee.

Ordinarily, you pay on these loans and accounts not knowing that you are actually paying a third party who, by assignment, has become your creditor. But what happens when these loans become overdue? Collection procedures become very complicated due to the assignment of these “securities.”

A recent Third District case highlights the problems inherent to purchasers of these accounts. The case, Retail Recovery Serv. of NJ v. Conley, 2010 Ohio 1256, involved the attempted recovery by the Plaintiff of monies owed on a credit card. The balance included interest, and “recovery” and other fees that were added to the account.

Retail Recovery Services is a company who purchases accounts at discount and then liquidates the account seeking to recover the discount it paid the retailer plus other interest and fees. In this case it attempted to recover an account owed by the Defendant.

Pertinent facts included the following:

1. Although the Plaintiff attached bills of sale and assignments detailing a chain of custody to it, none of these documents itemized the Defendant’s account as part of those sales, and

2. The Plaintiff failed to produce a signed contract showing the Defendant agreed to the terms of interest and other fees the Retail Recovery was attempting to collect.

The court’s opinion stated, “In Natl. Check. Bur. v. Ruth, 9th Dist. No. 24241, 2009 Ohio 4171, the Ninth Appellate District reversed a trial court's grant of summary judgment to a creditor on the basis that it had failed to establish a clear chain of title, partly based on the fact that the bill of sale purporting to demonstrate chain of title indicated the seller bank was conveying to the purchaser bank "accounts described [an exhibit] attached hereto,” where no such exhibit was attached to the bill of sale in the record.”

Further, citing Minster Farmers Coop. Exchange Co., Inc. v. Meyer, 117 Ohio St.3d 459, 2008 Ohio 1259, the court opined, “a plaintiff-creditor cannot prove an interest rate merely by producing account statements reciting an interest rate, where it does not demonstrate that the interest rate was a term assented to by the parties in the written contract, such as by producing the terms of the underlying cardholder agreement.”

The court went on, and “[found] that the plaintiff-creditor had not shown that the specific fees were terms of a contract between it and the defendant-debtor.”

The court reversed and remanded the case ordering the lower court to review its findings in light of the appellate court’s decision.