On July 16, the New York State Department of Financial Services (DFS) proposed revised debt collection regulations for third-party debt collectors and debt buyers.  The rules seek to clarify the required initial disclosures by debt collectors, disclosures for debts in which the statute of limitations may be expired, substantiation of consumer debts, debt payment procedures, and e-mail communications.  Last year, the DFS published its initial proposed regulations, and issued the revised rules after a first round of public comments.  The DFS stated that the majority of the comments were “generally supportive” of its initial proposal, but that industry members expressed concern that “the regulations would increase the cost of collecting valid debts.”

The revised rules lay out some specific content and language requirements for what is considered a “clear and conspicuous written notification” to consumers about their rights concerning the debt.  According to the DFS regulation, initial disclosures must include specific information about the nature of the consumer’s debt, including the name of the original creditor and an itemized account of the debt owed.  They also require debt collectors to use specific language about a collector’s right to sue a consumer to collect a debt.  Furthermore, if the statute of limitations may have expired on the debt, then the collector must tell the consumer, in the medium that would normally be used to collect the debt, that the limitations period may be expired.  At that point, the collector is barred from suing to collect the debt.

Other revisions include:

  • Defining a “charge-off” as “the accounting action taken by an original creditor to remove a debt obligation from its financial statements by treating it as a loss or expense.”
  • Requiring the debt collector to substantiate consumer disputes for “charged-off” debts.  A collector now has 60 days to provide written substantiation.
  • Excluding certain collectors from the definition of “debt collector,” including persons involved in a collection action related to or during litigation.
  • Exempting the collector from providing required disclosures if the consumer satisfies the debt within five days of the initial communication.
  • Removing the requirement that a statute of limitations notice warn the consumer that a failure to pay a time-barred debt may adversely affect one’s credit history, credit score, and ability to obtain credit.

DFS has provided a 30-day comment period on the revised proposed regulations.  The regulations will become effective 90 days after publication of notice of adoption in the state register.