New Regulations on Debt Collection in New York
Many consumers are aware that the Fair Debt Collection Practices Act governs the permissible conduct of debt collectors. What many people don’t know if that certain localities provide consumer protections beyond the Federal laws. For example, agents attempting to collect debt from consumers in New York City are regulated by the Department of Consumer Affairs (DCA) and Local Law No. 15.
This past December saw New Yorkers protections grow even further. The New York State Department of Financial Services passed new legislation that expanded on previously existing FDCPA protections. These new rules require specific disclosures and written communication requirements.One of the most significant changes made by these new regulations is with respect to required disclosures when collecting on a consumer debt from someone residing in NYC. Under these new regulations, debt collectors must provide to the debtor a disclaimer if there is a possibility that the debt is past the applicable statute of limitations to maintain a lawsuit.
If a debt is past the applicable statute of limitations (aka “Zombie Debt”), the debtor would be able to assert it as a defense to a lawsuit and may be able to have the action dismissed on the basis. However, if a debtor were to make a payment on a debt that has already passed the SOL, the payment may cause the SOL to be extended.Collection agencies have used this to their advantage by contacting debtors with debts beyond the SOL in an effort to have the debtor agree to making a payment, for the main purpose of extending the Statute of Limitations. Through the implementation of the disclosure regulations, the New York Department of Financial Services hopes to protect debtors from paying debts without first having notice that the debt may be beyond the applicable Statute of Limitations to maintain a lawsuit for breach of contract.
Beyond this there have been new regulations with regards to collection and account specific disclosures. These new rules require that once a debt collector makes first contact with a debtor, they must issue the debtor with a written disclosure that informs them of all restricted debt collection practices outlined in the Fair Debt Collection Practices Act, as well as a list of funds that are exempt from collection.
Under the new regulations, collectors must also provide the debtor with the specific information such as the name of the original debtor, the name of the current creditor, and the balance. The mandatory disclosure of such information is intended to reduce confusion by the recipient as to whether the debt is being collected by the original creditor, or a debt buyer. The new disclosure rules are in effect in New York as of March 3rd 2015.In addition to the new disclosure requirements, new rules were made with respect to Debt Validation requirements. For example, if a consumer disputes a debt, the collector must inform the debtor how to place a written request for substantiation. Beyond this a collector must then additionally send the the debtor that same information within 14 days in writing. If a Debtor elects to go forward with the debt dispute and send out a written request for substantiation , the debt collector must cease collection efforts for 60 days upon receiving the request. Over the course of the 60 days the collector must compile information to substantiate the debt, such as: copy of a court judgement, a copy of the original signed contract, the account of the initial statement from the original creditor, the chain of title of the debt, as well as records of previous settlement offers.
Another regulation update pertains to email communication. The rule allows debtors the option of communicating with debt collectors through a personal email address (work email is strictly prohibited). Once a debtor voluntarily chooses to use a personal email for communication with the collector, they will have the ability to authorize further email communication by consenting through an electronic signature. This rule is designed to protect debtors from being unnecessarily contacted through yet another communication medium. It also prevents any accidental communication with a wrong email that could potentially cause a debtor embarrassment.
It’s important for consumer debtors residing in New York City to know that they have the benefit of protections under both the Federal laws and the local regulations. However, as opposed to the statutory award available for violations to the FDCPA, the NYC local regulations do not provide for a private right of action against the offending party. The Department of Consumer Affairs, or other official department, would have the authority to take appropriate action against the offeding collection agency. All collection agencies operating in NYC are required to be licensed by the NYC DCA, and are required to abide by their regulations.
Now, more than ever before, creditors, debt collectors, and debt buyers must be diligent to train their agents to be aware of the various consumer protection regulations in order to ensure compliance.