New York City’s Department of Consumer and Worker Protection (NYC DCWP) recently released a notice of proposed amendments to its debt collection rules. The proposed amendments are detailed, lengthy, and include expanded recordkeeping and reporting requirements, specific provisions relating to collection of time-barred debt and medical debt, and significant revisions to existing rules governing validation and verification procedures and consumer communications. NYC DCWP is currently accepting comments on the proposed amendments through November 29, 2023 and a public hearing is also scheduled for that same day. Highlights of the proposed amendments are summarized below.
Recordkeeping and Reporting Requirements
The proposed amendments substantially expand the record retention requirements applicable to debt collection agencies set forth in § 2-193 of Subchapter S of Chapter 2 of Title 6 of the NYC Rules. For each NYC consumer debt, a collection agency will be required to maintain a separate file, including the following:
- Records of communications and attempted communications in searchable form that must easily identify the time and duration, medium, and participants in any communication along with a contemporaneous “plain language” summary of the communication or attempted communication;
- Monthly logs or a record, in a form and format to be designated by the NYC DCWP, of all complaints, disputes, and cease-and-desist demands filed by NYC consumers against the debt collection agency;
- Records indicating the medium(s) of electronic communication permitted or not permitted by each consumer and, if known, the consumer’s preferred medium of communication for debt collection communications;
- Records of all information furnished to consumer reporting agencies for each NYC consumer debt; and
- Copies of all policies in place addressing procedures for verification of debts and all policies “addressing hospital financial assistance programs related to medical debt.”
Debt collection agencies must maintain most of these records for a period of three years after the “date of the debt collection agency’s last activity on the debt.” Required policies must be maintained for six years “after the date the record was created.”
The proposed amendments also include several provisions specific to medical debt, including newly required disclosures regarding financial assistance policies offered by medical providers and prescribed methods for handling consumer disputes. As for the latter, if a consumer states that an insurance plan, third-party payer, or financial assistance policy should have covered the debt balance, or that the debt was the result of a “lack of price transparency” or incurred in violation of federal, state, or local law, the debt collection agency must treat such statements as a request for verification. Further, when verifying medical debt, a debt collection agency will be required to “verify that the covered medical entity met its obligations under federal, state, or local law and [its] financial assistance policy.”
Under the proposed amendments, a debt collector must “maintain reasonable procedures for determining the statute of limitations” applicable to a given debt. If a debt collector knows, or has reason to know, that the statute of limitations has expired on a given debt, it must inform the consumer in writing of the time-barred status of the debt in language prescribed by NYC DCWP. Absent prior written consent from the consumer, a debt collector is prohibited from contacting that consumer about a time-barred debt “exclusively” through oral means. And, following each oral communication, the debt collector must, within five days, redeliver written notice that the statute of limitations has expired if such notice was not provided within the last thirty days.
Beyond these specific requirements, the proposed amendments generally revamp § 5-77 of Title 6 of the NYC Rules prohibiting unconscionable and deceptive trade practices in debt collection. According to NYC DCWP, the proposed amendments are meant to align with the Consumer Financial Protection Bureau’s rules in Regulation F, and include restrictions and limitations on text message communications, contact frequency limitations, and debt verification requirements. Several provisions, however, impose restrictions and/or requirements beyond those found in Regulation F. These include, but are not limited to, additional validation notice requirements which, under the proposed amendments, must include mandatory disclosures concerning NYC consumer rights and a prohibition on placement of debts with collection firms in situations where a debt collector was previously unable to provide written verification.
This is not the first time the NYC DCWP has attempted to amend its debt collection rules. The prior attempt came in December 2022 and met significant pushback from industry commenters concerned about the compliance burdens entailed by the lengthy and complicated rules. According to the NYC DCWP, the newly proposed amendments are meant, in part, to address those concerns, but we expect a similar outpouring from the industry this go around. Stay tuned.