City Debt-Collection Laws Apply to Attorneys and Law Firms Performing Non-Legal Work

This blog entry answers the question left open in our last blog, "Do City Debt Regulation Apply to Lawyers. Issue Heats up in New York."

New York's highest court, the Court of Appeals, has ruled that New York City Regulations ("local law 15"), which protects debtors from creditor harassment, indeed applies to attorneys and law firms performing non-legal functions.

Before the Court of Appeals became involved, the law already excluded from the definition of a debt collection agency "any attorney-at-law or law firm [1] collecting a debt in such capacity [2] on behalf of and in the name of a client [3] through activities that may only be performed by an attorney."

In 2012, a federal judge (see blog here) invalidated Local Law 15 as applied to attorneys and law firms, finding that such regulations conflict with—and are preempted by— state law that regulates attorney conduct.

Upon appeal, the U.S. Second Circuit Court of Appeals certified the question to the New York Court of Appeals, as to whether Local Law 15 encroaches upon state law in light of the specific exemption that already protects practicing attorneys. Here's the blog entry discussing that case.

The two laws can harmonize with each other, held Chief Judge Jonathan Lippman, writing for the majority. A "somewhat closer question" he said, was that the law, in distinguishing between the practice of law and debt collection, may encompass some activities a lawyer may do while representing clients, such as contacting a debtor through the mail or telephone to collect a debt.

These laws are another set aiming to curb the unfair, deceptive, and abusive behavior of debt collectors, especially debt buyers. Notwithstanding this city law, our office regularly uses the Fair Debt Collection Practices Act to countersue overreaching debt collectors.

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