INDIANA COURT DISCUSSES HEARSAY EXCEPTION AS IT PERTAINS TO THE ADMISSIBILITY OF PRIOR SERVICERS’ LOAN RECORDS

Indiana’s Court of Appeals rendered a helpful opinion in a consumer debt case wherein it found loan records proffered in support of summary judgment were admissible under the hearsay exception. King v. Nat’l Collegiate Student Loan Tr. 2006-4, 232 N.E.3d 646, 648 (Ind. Ct. App. 2024)[i]. In King, creditor National Collegiate Student Loan Trust (Creditor) obtained student loans from JPMorgan Chase Bank, N.A. (“Chase”). Chase originated the loans for the benefit of Bridget King.

King defaulted on her student loans and the Creditor sued[ii] her. In anticipation of moving for summary judgment, the Creditor filed a supporting affidavit executed by an employee (“Motin”) of its servicer, Transworld Systems Inc. (“TSI”). Motin authenticated several of King’s loan documents, including origination documents, payment histories, and documents which established the chain of ownership. Generally, these documents constituted hearsay since they contained statements “not made by the declarant while testifying…[which were] offered in evidence to prove the truth of the matter asserted.”[iii]

In addition to constituting hearsay, the Creditor, nor TSI, created the loan records. Relying on an exception to the hearsay rule[iv], TSI proffered the documents as business records and filed an affidavit that included the following foundational information[v]:

• King’s loan records were received from the prior servicer (American Education Services – “AES”) and boarded into TSI’s system; and
• Motin was familiar with the boarding process and how the loan records were “transmitted and incorporated” into the records of TSI; and
• King’s loan records were incorporated into TSI’s records as part of TSI’s regularly conducted business and Motin had access to the loan documents; and
• TSI routinely relied on loan records from other servicers, including King’s loan records, to conduct its business; and
• Motin was trained on AES’ document management system and was familiar with AES’ transaction codes and how data was input into AES’ system; and
• Motin knew that the loan records were made at or near the time of the event by a person “who had a business duty to accurately report the information.”

King argued that TSI’s affidavit was insufficient to overcome the rule against hearsay because Motin lacked “personal knowledge of the regular business practices or record keeping of Chase” so he could not authenticate “the initial contracts.”[vi] The Court rejected this argument and distinguished the cases relied upon by King finding TSI’s affidavit was based on Motin’s personal knowledge and the affidavit “maps onto the foundational requirements of Evidence Rule 803(6).”[vii] The Court concluded that TSI’s affidavit demonstrated that the proffered records were reliable, authentic and trustworthy.[viii]

By contrast, the Court found tax documents, relied upon by King to oppose the Creditor’s summary judgment, to be unauthenticated and therefore inadmissible.[ix] The Court concluded that the “Creditor’s designated evidence indicated that [King] was liable, and [King’s] affidavit [did] not create a genuine issue of material fact as to liability.”[x] Although not novel issues, the Court’s detailed analysis and evaluation of the specific allegations within the Creditor’s affidavit needed to admit hearsay evidence provides a helpful blueprint for future cases.

[i] References to this case are to this citation unless indicated otherwise.

[ii] The creditor filed seven lawsuits against King which were all consolidated into this case. King, at 648.

[iii] King, at 650 (quoting Ind. Evidence Rule 801(c)).

[iv] Indiana Evidence Rule 802 is commonly referred to as “the hearsay rule” and “generally prohibits the admission of hearsay evidence” unless it falls under an exception. King, at 650.

[v] King, at 648-49.

[vi] King, at 651.

[vii] King, at 653.

[viii] King, at 652.

[ix] King, at 653.

[x] King, at 654.