A Close Look at the Business Records Exception When You Are Sued for Debt

Does the business records exception to the hearsay rule allow debt collectors to collect on debts that were generated by other businesses?

As I have often pointed out, debt collectors, by their very nature, are not the entities that created the records concerning the debt for which they are suing defendants. Rather, they bought the supposed debt from someone else: another debt collector or the original creditor (who did create any records there might be). This creates a problem for the debt collector when it brings suit: any records it may attempt to use to prove the debt are “hearsay.”

What Is Hearsay?

Hearsay is sometimes referred to as “he said, she said,” but in legal terminology it is simply a statement that was made out of court that is trying to be used in court to prove the thing that was said. For example, Bill overhears Sue say, “Jim’s eyes are green.” If Bill later attempts to prove that Jim’s eyes are green by testifying he heard Sue say so, that would be hearsay.

Business Records Exception to Hearsay

Business records regarding how a debt was created or maintained are obviously hearsay, since they were created outside of court and cannot in any event be subjected to oath. Under certain circumstances, however, they are allowed as evidence because they are considered particularly trustworthy. They are considered trustworthy because the business that created them probably depended upon them to be trustworthy and probably created specific methods of keeping them so that they would remain trustworthy. After all, a business does rely on its records created by various people over time in order to fulfill its obligations and collect money due to it.

Debt collectors take this simple insight and pervert it grotesquely.

Requirements of the Business Records Exception

The business records exception requires that the party seeking to introduce business records have been created during the normal course of business, in known and predictable ways that guarantee accuracy. And it requires that the party seeking to introduce the records be able to prove these “predicates” (requirements) based on personal knowledge.

What Debt Collectors Get

Debt collectors are generally provided electronic records of debt when they buy the debt, and it might be that the records were honestly and accurately made. Of course it might not be, too. That’s the whole point of the business records exception-that someone gets to look the record keeper in the eye and make sure that the business in question was set up to keep the records straight in the first place. Otherwise the debt collector could “launder” bad debts by buying them and their records and simply claiming that the records were good.

Naturally, this fundamental flaw will not stop the debt collector from making the argument that their records (that they got from another business) are business records because they (the debt collector) relied upon them and kept them in the “ordinary course of business.”

Ordinary Course of Business

Some courts have held that debt collectors cannot keep records in the ordinary course of business. That’s because debt collectors have no ordinary course of business in the sense that would make the records reliable. They do not provide any services, and have no obligations to fulfill, for the consumer. Instead, debt collectors exist to collect debts that are either disputed or not being paid for some other reason. And that means that every business purpose they have is promoted by claiming the debts are good, obligations of the original creditor have been made and kept, etc. There is nothing to keep the debt collector from inflating the obligation or claiming it was due from the wrong person.

And in fact debt collectors are notorious for doing just that.

And of course the debt collectors are still not able to testify regarding the integrity of the records before the debt was purchased.


In order to show the business records were legitimate, a debt collector needs to introduce evidence from the original creditor regarding the integrity of the debt. For some reason, they seem unwilling or unable to do this. Perhaps it is because a condition of buying the debt for a few cents on the dollar is that the debt collector not require the original creditor to expend any more of its resources on what it has considered a bad debt. Or perhaps it is because it just isn’t cost-effective to do that. In any event, debt collectors very rarely attempt to use business records from original creditors.

Another Problem the Debt Collectors Have

Another problem the debt collectors have is that they often have mere fragmentary records: (digital) copies of a few statements or the like. Of course these records are nowhere near enough to support the debt that the collector is claiming. Instead, the collector introduces the statement of its record keeper that, “based on a review of its records,” a certain amount of money is due from the consumer. It’s best to break that testimony into its constituent parts for analysis.

  • First, the debt collector doesn’t have records which show that the consumer ever owed the money;
  • Second, it didn’t create the records that came along with the debt in the first place, so it uses its “record custodian” to say that such records as it kept were kept in the ordinary course of business; and
  • Third, its records custodian then testifies to the substance of records that are not there, to wit, the balance of the debt owed and the terms of the debt.

It almost seems surreal, but this is indeed the argument they make. Remember though, that a record custodian testifies about the record keeping, not about the content of the records. That is, the record custodian is supposed to testify (from personal knowledge) that the records were created in the ordinary course of business under circumstances suggesting honesty. Then, if the debt collector is able to do that (which they are not, usually), the records are introduced as evidence. At that point, the records must “speak for themselves,” and there is no point for a records custodian to testify what they say. A records custodian is not allowed to testify as to what records that are not present before the court say. There is obviously nothing about this procedure which suggests that records were made and kept in a way designed to insure their honesty. Rather, they are presented to the court in a way that almost insures their dishonesty.

A Violation of the Fair Debt Collection Practices Act?

I have taken the position that this sort of use of the business records exception is an unfair debt collection practice under the Fair Debt Collection Practices Act because it attempts to cloak non-existent or questionable records with the mantle of a hearsay exception designed to guarantee accuracy. Most people who are not familiar with the rules of evidence would not see through the deception.