Proving Ownership of a Purchased Debt: Chain of Title

Why ownership has to be proven

In a lawsuit, the plaintiff carries the burden of proving its claim. When the plaintiff is not the original creditor, part of that proof is showing that the right to collect passed to it. A collection letter, a summary affidavit or a computer printout that simply names the plaintiff as owner may not be enough, depending on the court and the rules of evidence.

The documents in a typical chain

• The original credit agreement or account terms, and account statements.
• Charge-off records from the original creditor.
• The purchase and sale agreement or forward flow agreement for each sale.
• A bill of sale or assignment for each transfer, from the original creditor to each later buyer.
• The account schedule or data file that lists the specific account in each sale.
• Affidavits or certifications from a records custodian that authenticate the business records.

Bill of sale versus forward flow agreement

A bill of sale shows that a sale happened. However, it often says the sale was made “pursuant to” a separate purchase agreement or forward flow agreement. That agreement is the rulebook. It can decide which accounts were eligible, when title passed, whether payment or other conditions came first and what documents the seller had to deliver.

Also, a bill of sale often does not list individual accounts. The account-level detail is usually in a schedule or data file. Without it, a bill of sale may show that some accounts were sold, but not that your account was one of them.

Every link has to connect

If an account passed from the original creditor to Buyer A, then to Buyer B and then to the plaintiff, each transfer should show who sold, who bought, when, and which accounts were included. A missing or unsupported link can raise a question about whether the plaintiff owns the debt.

Getting the documents into evidence

Documents must also be admissible. In federal court, Federal Rule of Evidence 803(6) allows business records into evidence when a custodian or other qualified witness lays the foundation, and Rule 902(11) allows that foundation by certification. States have similar rules.

Courts disagree about whether a debt buyer’s employee can authenticate records that the original creditor created. Some courts allow it when the buyer incorporated the records into its own files and relied on them. Others require testimony from someone with knowledge of the original creditor’s record-keeping. Check the decisions in your state.

Asking for the documents

Outside court, a consumer can ask for these documents in a validation letter, although the collector may not be required to send all of them. In a lawsuit, the formal tools are requests for production and other discovery.

Debt collection is governed by federal law and state law. State statutes of limitations, licensing rules and court procedures differ, so check your state’s rules and talk to a licensed attorney about an active case.

Researching proving ownership of a purchased debt: chain of title in your state

First, find the statute or rule that governs proving ownership of a purchased debt: chain of title where you live. State law controls most of these questions, so the answer can change from one state to the next. Next, read recent decisions from the appellate courts in your state. They show how judges apply the law today. Also, check the local rules of the court that would hear your case. Our state procedures guide links to each state’s official rules. In addition, the Research Center explains how to confirm a source is still good law.

Sources and further reading

Official sources used on this page:

• law.cornell.edu
• law.cornell.edu
• law.cornell.edu

Related reading on Lawtopolis:

• Forward Flow Agreements
• Assignments of Notes, Mortgages and Receivables
• Standing
• Defending a Debt Collection Lawsuit