The Conundrum of Default Judgment Damages in Credit Card Debt Buyer Lawsuits
By Kim Petrone and Dr. Vernon J. Richardson
I
n the past decade, attorneys, judges, regulators, and scholars across the U.S. have criticized the growth of credit card debt buyer lawsuits leading to high rates of default judgments. This situation prompted an empirical study of the situation in Arkansas.1 Among other things, the study found that 97% of defendants do not have legal counsel in these cases. The study highlighted conundrums and problematic legal questions. This article takes a close look at only one conundrum—when a debt buyer complaint has chain-of-title exhibits disclaiming the accounts sold and an affidavit affirming the account in question. We’ll begin by identifying relevant law. Then, we’ll describe some findings of the study and governmental challenges to debt buying chain of title documents. Finally, we’ll identify a possible way practitioners and judges may address this conundrum.
Kim Petrone, J.D. is an Instructor in the Walton College of Business at the University of Arkansas.
Dr. Vernon J. Richardson is a Distinguished Professor in the Walton College of Business at the University of Arkansas. 34
The Arkansas Lawyer
www.arkbar.com
I. Relevant Law Arkansas Rule of Civil Procedure 55(b) governs default judgments and states in pertinent part: “If, in order to enable the court to enter [default] judgment or to carry it into effect, it is necessary to take an account or to determine the amount of damages or to establish the truth of any averment by evidence or to make an investigation of any other matter, the court may conduct such hearings as it deems necessary and proper and may direct a trial by jury.” Precedent provides guidance on how to determine damages in default judgment. The first precedent involves a default judgment in the personal injury setting. “In Arkansas, a default judgment establishes liability but not the extent of damages. … [I]n Arkansas, unlike some jurisdictions, a hearing is required after default to establish damages, and the plaintiff must introduce evidence to support damages.”2 Default judgment damages in credit card account cases are often proven via an affidavit made pursuant to Arkansas Code Ann. § 16-45-104. That statute allows a plaintiff to “establish the account” with an “affidavit of the plaintiff.” However, if a “defendant denies under oath the correctness of the account,” then plaintiff must provide other evidence. In 2012, the Arkansas Supreme Court stated that an affidavit under § 16-45-104 that “complies with the rules of evidence, might offer proof of the account