New York enacts new state-wide regulations on debt collection
The New York State Department of Financial Services announced on Wednesday that it has formally adopted new collection regulations that impose new specific disclosure and written communication requirements on third party debtors and debtors. In addition to new requirements, the rules also create a structure for the use of e-mail in debt collection.
Many of the rules originally proposed in mid-2013, will go into effect March 2015, while some debt review, disclosure, and communication requirements will go into effect August 2015.
The rules initially only affect third-party debtors and debtors; Lawyers are expressly excluded as long as they act legally competent. Additionally, creditors, process servers, and government officials are exempt from the new rules.
“We are introducing tough new regulations that protect borrowers and help tackle unlawful collection practices,” said New York Governor Andrew Cuomo. “These new tools and disclosures will protect New Yorkers across the state, and I am pleased that our government is leading the way on this issue.”
Benjamin M. Lawsky, Superintendent of Financial Services, added, “The debt collection industry is full of far too many unscrupulous actors willing to deceive and abuse consumers just to make a quick buck. These important reforms will provide the financially troubled New Yorkers with significant new levels of protection from harassment and fraud and will help us stamp out these predatory practices. “
The new rules focus on pre-disclosure and debt validation requirements.
Statute of limitations
Most importantly, collection agencies must provide the consumer with disclaimers if the debt is believed to have passed the statute of limitations. The disclosure must show that the obligee and / or the collector is of the opinion that the SoL has expired, that the consumer can discontinue any collection claim filed on a statute-barred account and that the consumer is not obliged to pay, but if he does does, the SoL can be restarted, exposing the consumer to legal liability.
The rule text includes a sample four-paragraph language that meets the requirement. A passage from this language reads:
Even when the statute of limitations has expired, you can still make payments on the debt. Note, however, that if you settle the debt, acknowledge the debt, promise to pay, or waive the statute of limitations on the debt, the debt enforceability period may begin again.
The disclosure requirements for limitation periods come into force on March 3, 2015.
General survey and account-specific information
Under the new rules, a debt collection agency must provide written disclosures informing the consumer of restricted behavior under the FDCPA, a list of exempt funds (such as social security payments) and enumerated information about the funds within five days of first communicating with a consumer, within five days of the first communication with a consumer Debt, in particular:
- The name of the original creditor; and
- A detailed record of the debt, including:
- the total amount of the claim due at the time of the debit;
- the total amount of interest accrued since the withdrawal;
- the total amount of interest-free charges or fees that have accrued since the withdrawal;
- the total amount of payments made since the debit was withdrawn
The debt collection agent has the option of fulfilling this requirement in the initial notification.
Debt Validation Requirements
If a consumer verbally disputes a claim, the debt collection agent must make reasonable efforts to inform the consumer in the conversation in which the dispute was communicated how the consumer and the consumer can make a written “written request for justification” of the claim with such an instruction within 14 days in writing.
After receipt of a request for evidence of claims, the debt collection agent has 60 days to submit a written confirmation. During this time, all debt collection efforts must be stopped. The written justification must include a copy of a judgment against the consumer or the original – or a copy of the – signed contract, a bank statement from the original creditor, a statement describing the full chain of ownership of the account and any records pertaining to previous settlement offers.
In order to give the debt collection agencies time to compile the necessary documents, the requirements for the justification of the debt and the account-specific disclosures will come into force on 08/30/2015.
Use email to communicate about a debt
Consumers have the right to communicate with collectors via their personal email if they so choose. The new rules specifically disqualify business email accounts. A collector can only use email in future communications if the consumer voluntarily provides a non-business email account and agrees in writing to receive email communications. A consumer’s electronic signature constitutes written consent in accordance with this section.
The full text of the new rules can be found at http://www.dfs.ny.gov/legal/regulations/adoptions/dfsf23t.pdf.