This past week, the New York State's Department of Financial Services announced its formal adoption of new debt collection regulations that would place new disclosure and written communication requirements on third party debt collectors and debt buyers. The general theme of these mandatory requirements is for debt collectors to advise debtors of their rights under the law. Debt collectors have to disclose what rights debtors have against certain collection efforts and conduct. In addition to these new requirements, the rules also create a structure for the use of email in debt collection efforts.
State regulators have said that they received more than 20,000 complaints about debt collection practices this year. Many problems come from the debt-buying industry, because debt buyers, sometimes attempt to collect from the wrong person or for the wrong amount. Currently, the new rules only affect third party debt collectors and debt buyers. Attorneys and law firms are specifically exempt from these regulations as long as they are acting in a legal capacity. In addition, creditors, process servers, and government officials are exempt from the new rules as well.
Many of these new rules will take effect in March of next year, while the rules on debt verification, disclosure, and communication requirements will go into effect in August of next year. These new rules and regulations are designed with consumer protection in mind. As Governor Cuomo has stated, the administration and involved government entities are "rolling out tough new regulations that protect borrowers and help crack down on illegitimate debt collection practices. These new tools and disclosures will protect New Yorkers across the state."
One of the most important disclosure requirement mandates that debt collectors must provide disclaimers to debtors if there is a belief that the debt at issue is beyond the statute of limitations. Technically, when a debt is beyond the statute of limitations, collectors cannot file a lawsuit against debtors in an attempt to collect on that debt. Under this new disclosure requirement, a consumer is not required to pay, but if they choose to do so, they are warned that the statute of limitations may start again, because the debtor has acknowledged it. Doing so, would expose the debtor to legal liability.
Another significant disclosure requirement compels debt buyers and collectors to provide written disclosures within 5 days of an initial contact with the debtor. They must inform debtors that what conduct is prohibited under the FDCPA or Fair Debt Collection Practices Act. They must also advise debtors that certain type of funds and assets that debtors have are protected under the law. Such assets include social security payments and other welfare payments. Lastly, the creditor must provide the following information:
- The name of the original creditor; and
- An itemized accounting of the debt, including:
- the total amount of the debt due as of charge-off;
- the total amount of interest accrued since charge-off;
- the total amount of non-interest charges or fees accrued since charge-off;
- the total amount of payments made on the debt since the charge-off
Other requirements and rules that protect consumers require debt collectors to advise consumers of their ability to make a written request for substantiation of the debt in writing and provide consumers with instructions in writing within 14 days. Once that request is received, the debt collector then must provide written validation within 60 days. During those 60 days, debt collectors cannot attempt to collect on the debt. The written substantiation must important information that would verify the debt, including a copy of a judgment against the consumer or a copy of the contract, an account statement provided by the original creditor, a statement describing the complete chain of title of the account, and any records pertaining to previous settlement offers.