Last month, the New York Department of Financial Services announced proposed regulations that are designed to provide heightened protection for New York consumers against rampant abusive debt collection activities. Although these regulations are only proposed and have not yet passed, they would be some of the most stringent regulations of debt collectors in the entire country. They would require affirmative action on behalf of the debt collectors to provide consumers with detailed information that is far above and beyond the current requirements. Debt collectors would be required to house and maintain a great deal of account information for each consumer account, which is not necessarily the norm today. To learn more about the potential requirements, see below.
The new regulations would require debt collectors to make the following disclosures:
- That debt collectors are prohibited from engaging in abuse, deceptive and misleading debt collection efforts, including the use of obscene or profane language;
- That some sources of income may be exempt from collection (including social security, public assistance, disability benefits, etc);
- A clear and conspicuous written notification regarding the nature of the defaulted debt and the original creditor, as well as an itemized accounting of the alleged debt;
- A statement relating to time-barred debts that are past the statute of limitations.
Verification of Debts
These proposed regulations would also change the verification requirements that are now in place. The FDCPA currently requires verification, but the standard for what suffices is relatively low. As it is, the FDCPA has been interpreted to require "nothing more than the debt collector confirming in writing that the amount being demanded is what the creditor is claiming is owed." Under the federal law, the collector is not required to present any meaningful account details or itemizations. However, the new NY regulations would require that collectors communicate an exhaustive list of information with consumers as part of written verification of the debt. Collectors must include the following:
- Copies of the original signed contract or application that created the debt;
- Final account statements or other documents issued by the original creditor;
- Any records reflecting previous settlements;
- A statement regarding the complete chain of title from the original creditor, to the current creditor.
Collectors would also be required to retain evidence of consumer's dispute or demand for verification.
Other proposed regulations pertain to procedures required for when consumers settle or pay alleged debts with a collector. If any settlement includes a payment plan, the collector must furnish the consumer with written confirmation of that payment schedule. The collector would also have to provide the consumer with a breakdown of the debt on a quarterly basis, and within 15 days of receipt of final payment, the collector would be required to send the consumer written confirmation that the debt has been extinguished.
There is no way to know for certain whether these regulations will pass as they are, but we will be keeping a close eye on it.
 Please note that pursuant to the New York Federal Court decision in
Berman v. City of New York, it is unlikely that these new regulations, if and when passed, would apply to collection attorneys. (See
Eric M. Berman, P.C. v. City of New York, 895 F. Supp. 2d 453, 458 (E.D.N.Y. 2012)).