Changes In Georgia Law

Written by Associate Attorney Matthew Dickinson


2014 was a busy year in Georgia for debt collection activities. Both consumer and commercial collections increased in volume but a significant amount of pushback from consumer protection agencies and attorneys has created a gauntlet that has already taken a toll on the industry. With the lawsuits filed by the Consumer Financial Protection Bureau (“CFPB”) against Frederick J. Hanna & Associates among other agencies, it has become quite clear that volume debt collectors will face increased scrutiny for their practices and methods as enforcement is ramped up to new levels previously unseen since the enactment of the FDCPA.


On March 5, 2015 the Georgia Governor’s Office of Consumer Protection announced a $13 million dollar settlement with a Georgia firm for actions that allegedly violated the FDCPA along with the Georgia Fair Business Practices Act. As a result of this, RSB Equity Group, LLC (“RSB”) was barred from being able to collect on debt owed from over 11,000 accounts. This is a sobering reminder of the punishments that collectors face for violations of the law; both interstate and intrastate.


Georgia’s recent implementation of the federal rules of evidence has created difficulties for lawyers and judges alike to keep up with the new standards and exceptions in the integrated new Georgia code. Thankfully, many decisions recently in Georgia are clarifying these discrepancies and providing guidance to collectors in a dynamic landscape.


The Georgia Court of Appeals decided in River Forest Inc. v. Multibank 2009-1 RES-ADC Venture LLC[1] that the holder of a UCC Article 3 negotiable instrument did not need to produce the note modification in order to prevail on a motion for summary judgment. The Court of Appeals relying on persuasive authorities from other jurisdictions, ruled that so long as a note modification is not a novation, then a person seeking to recover the outstanding debt can bring suit as the “holder” of the original note.[2] Since the modification effectively only counts as a renewal of the original note, summary judgment was proper for the Plaintiffs on the suit for the underlying debt. Assuming that this decision will stand, collectors now have the option of proceeding with the original note despite being unable to produce a modification.


In another Case decided by the Georgia Court of Appeals, Hildebrand v. Bank of America, N.A.[3], the defendants argued that two separate promissory notes executed at a closing with separate deeds were “inextricably intertwined” and that the failure of the Plaintiff to confirm the amounts outstanding on the second loan after foreclosure precluded recovery.[4] Under O.C.G.A. § 44-14-161(a), if the foreclosure sale does not bring the amount secured by the mortgage then within thirty (30) days, the sale should be reported to the superior court in which the property lies for confirmation and approval of the sale so that a deficiency may be sought.[5] The Court ruled that because the loans were transferred to separate entities when the foreclosure on the first loan occurred and because there was no “dragnet clause” in the deed that was intended to secure the payment of the note and any other debt owing to the grantee either then or later, that summary judgment was proper to Bank of America, N.A. This decision will protect subsequent purchasers of notes and liens from being out of luck when it comes to the requirement of confirmation after a foreclosure sale even when the originator of the note and the note being foreclosed upon are the same party at the time of closing.


The last case that bears mentioning was also decided by the Georgia Court of Appeals in Roberts v. Community & S. Bank[6], which held that a guarantor that waives the rights to challenge the enforceability of the underlying debt and note in the personal guaranty agreement cannot attack the underlying obligation. [7] The evidentiary finding by the court was that the loan history report that was provided to prove the bank’s damages can be considered a part of the business records rather than just a summary. Even though the bank’s loan history report contained information from the bank’s predecessor in interest, these previous records may be introduced as evidence through the business records exception since the reports may be fairly considered to be data compilations. So long as a proper foundation is laid for the admissibility of these compilations, debt buyers may have more breathing room to collect on notes that have changed hands throughout the life of the loan using the business records exception to the hearsay rule. Proving damages is key to obtaining a judgment, and this common hurdle now has a demonstrable path to admit key evidence to sustain a motion for summary judgment.


Georgia is also enacting new laws which will provide more guidance to the banking and finance industry to assist creditors in determining how to effectively calculate what may be considered interest, fees, and principal on bank accounts. House bill 824 in the 2013-2014 regular session amends O.C.G.A. § 7-4-2 to remove charges on accounts from being considered interest. This legislative action will assist in preventing smaller size loans from being usurious due to default charges and overdraft charges (among others) from being applied to the interest on an account.


While the current situation has made collectors vulnerable in Georgia, there remains a very open market for those which remain compliant to obtain favorable judgments for their clients. The adoption of the revised evidence code has opened the flood gates for evidence which would be ruled inadmissible under the old Georgia Evidence Code. These recent decisions above exemplify that debt collection is still alive and well in Georgia and creditor’s collection options have not been overlooked in an increasingly debtor friendly landscape.


Note that not all of these opinions are subject to change upon reconsideration or upon the Court’s own motion. Rules of the Supreme Court of Georgia, Rule 48(h), (i) & Rules of the Court of Appeals, Rule 37(f), (g).

[1] River Forest, Inc. et al v. Multibank 2009-1 RES-ADC Venture, LLC. A14A2204. Ga. Court of App. (2015)

[2] Id.

[3] Hildebrand v. Bank of America, N.A. A14A1956. Ga. Court of App. (2015).

[4] Id.

[5] Official Code of Georgia Annotated § 44-14-161(a)-(c)

[6] Roberts v. Community & Southern Bank. A14A2258. Ga. Court of App. (2015).

[7] Id.