On December 3, 2014, New York financial regulators announced the adoption of final rules regulating debt collection practices in the state of New York. The new regulations are intended to curb abuse by debt collectors, requiring them to, among other things, advise consumers when the statute of limitations has expired on debts and confirm settlements agreements in writing. Interestingly, both such rules have long been in place in New York City pursuant to City Rules and Regulations. See New York City, N.Y., Rules, Tit. 6, §§ 2-191, 2-192. The regulations are the result of more than a year of meetings and public comments stemming from two earlier published versions of the regulations. The new statewide regulations are far from surprising, considering that more than 20,000 complaints about debt collection practices were filed by New Yorkers in 2014 alone. In announcing the new regulations, New York Governor Andrew M. Cuomo stated that New York “will not tolerate debt collectors who wrongfully take advantage of consumers.”
To address the perceived abuses in the debt collection industry, the new regulations of third-party debt collectors and debt buyers include the following key reforms:
• Improved Disclosures and Debt Information: Enhanced initial disclosures will be required when a debt collector first contacts an alleged debtor. These disclosures go beyond current federal requirements, by requiring that collectors disclose key information about the charged-off debts they collect, including: the amount owed at charge-off, and the total post-charge-off interest, charges, and fees.
• Protection Against “Zombie Debts”: If a collector attempts to collect on a debt for which the statute of limitations has expired, prior to accepting payment, the collector must provide notice that the statute of limitations may be expired and that, if the consumer is sued on such debt, the consumer may be able to prevent a judgment by informing the court that the statute of limitations has expired.
• Substantiation of the Debt Allegedly Owed: These regulations establish groundbreaking protections that require a collector to “substantiate” a debt upon a consumer’s request for same, which may be made at any time during the collection process. This will assist consumers who fail to exercise their right to verification under the 30-day window established by the federal Fair Debt Collection Practices Act.
• Written Confirmation of Settlement Agreements: Collectors must provide consumers with written confirmation of any debt settlement agreement, and must also provide written confirmation upon satisfaction of the debt.
• Email Communications: Consumers may opt to communicate with collectors via their personal email. This is intended to reduce harassing phone calls and allow consumers to maintain better records of their communications with the collector.
The new regulations will take effect on March 3, 2015, with the exception of Sections 1.2(b) (disclosure requirements) and 1.4 (substantiation requirements), which take effect on August 30, 2015. The final regulations are available at: http://www.dfs.ny.gov/legal/regulations/adoptions/dfsf23t.pdf. Debt collectors who collect in the state of New York should examine the new regulations and prepare compliance plans to meet the new requirements.
For more information on the new regulations and/or compliance recommendations, contact Katherine Olson at (312) 334-3444 or firstname.lastname@example.org.