New York City adopted Local Law 15 in 2009. Under this law, law firms that
also act as debt collectors were added to the list of entities regulated
as debt collectors. However, law firms that collect debt on behalf of
clients through litigation are excluded from Local Law 15.
Local Law 15 has been challenged as being invalid under the principle that
it impedes New York State’s authority to regulate lawyers. In 2014,
the Second Circuit ruled the law did not appear to regulate attorneys
collecting debts. And, this past June the New York State Court of Appeals
explained that the law did not violate the state’s authority and,
in fact, was "complementary and compatible with" current laws.
Although Local Law 15 was ruled valid, there was a dissenting opinion
from the Court of Appeals which argued that the difference between a lawyer
acting as a debt collector and a lawyer collecting debt via litigation
is "a distinction without a difference."
Individuals who oppose Local Law 15 also argue that the law violates New
York City’s charter, which designated the Department of Consumer
Affairs as the agency to license debt collectors. The Court of Appeals
did not rule on this issue, and instead asked the Second Circuit to once
again review the case. In doing so, the Court of Appeals stated "the
city should not be prevented from taking permissible steps to curb abusive
debt collection practices." Several weeks ago, the Second Circuit
upheld the law once again. Now, on remand, the case is heading back to
the district court for the final challenge that Local Law 15’s regulation
of attorney conduct is unconstitutionally vague.
Although Local Law 15 faces another hurdle, attorneys for the city continue
to argue that consumers need to be protected by cracking down on all types
of debt collectors that use high-pressure tactics.