On Wednesday, December 3, 2014, New York Governor, Andrew Cuomo, announced new regulations aimed at “protect[ing] consumers against abusive and deceptive debt collection practices.” The press release issued by Governor Cuomo can be found here.
These regulations come from the New York Department of Financial Services and were first proposed in July 2013 and subsequently put out for a second comment period. They take effect on March 3, 2015 with the exception of sections dealing with disclosure requirements and substantiation of debts which will take effect on August 30, 2015 in order to give debt collectors time to gather documentation required by those sections.
According to Cuomo’s office, the state received more than 20,000 complaints about the debt collection industry in 2014 alone. The regulations seek to combat the issues raised in the consumer complaints and only impact third party debt collectors and debt buyers for now. The regulations are notable for the following reasons (a copy of the full regulations is attached here):
• Enhanced initial disclosures by debt collectors: The regulations outline specific disclosures that must be made to consumers within 5 days after the initial communication. These disclosures include an itemized accounting of the debt and go further than current federal requirements.
• Disclosure of potential “Zombie Debts”: The regulations require that a debt collector “maintain reasonable procedures” for determining when the statute of limitations on a debt has expired. If the debt collector has reason to know that the statute of limitations has expired, the debt collector must provide the consumer notice that the statute of limitations may have expired. This has been a recurring area of interest for state and federal regulators. For example, New York City has a similar set of notoriously stringent regulations.
• Substantiation of consumer debts: The regulations require a debt collector to “substantiate” that a debt is actually owed in response to a consumer’s oral or written dispute of a debt. The regulations allow the consumer to request a “substantiation” of the debt at any time during the collection process.
• Confirmation of settlement: Debt collectors must provide written confirmation within 5 days of establishing a debt payment schedule or other agreement to settle a debt. Debt collectors must also provide consumer accountings and confirmation of a payment satisfying a consumer’s debt.
• Communication through Email: The regulations provide that a consumer is free to communicate with a debt collector via email. This regulation is aimed at reducing “harassing phone calls” and allowing consumers to maintain better records of communications with debt collectors.
Benjamin Lawsky, Superintendent of Financial Services, stated, “[t]he debt collection industry is filled with far too many unscrupulous actors willing to deceive and abuse consumers just to make a quick buck. These important reforms will provide significant, new protections for financially struggling New Yorkers from harassment and fraud, and help us root out these predatory practices.”
It is important for debt collectors to carefully review the new regulations as they represent an ongoing focus on the debt collection industry in New York, and the Department of Financial Services has the authority to impose civil penalties on collectors that violate these regulations. Additionally, these regulations could prove to be somewhat or a roadmap for future regulation by the Consumer Financial Protection Bureau (“CFPB”). As we discussed last week, the CFPB has delayed proposed rulemaking on several of these issues.