New Regulations Against Abusive And Deceptive Debt Collection Practices10/09/2015 | By: Mark B. Brenner, Esq. | Winter 2015 Newsletter
On December 3, 2014 Governor Andrew M. Cuomo announced new regulations promulgated by the Department of Financial Services “to protect consumers against abusive and deceptive debt collection practices.” A consumer debt is one incurred for a personal, family or household purpose.
Although many people mistakenly assume they are commercial obligations, in fact residential rent, maintenance, common charges, and mortgage loans are considered by law to be consumer debt. Because they are considered consumer debts, efforts to collect such debts are subject to the federal and state laws that regulate debt collection practices.
The new regulations apply to “Debt Collectors,” including:
- any person engaged in a business whose primary purpose is the collection of debt arising from a credit transaction for money, property or services incurred primarily for personal, family or household purposes (“consumer debt”), or
- any person who regularly collects money or attempts to collect, directly or indirectly, consumer debt owed or due or asserted to be owed or due another.
Essentially, the new regulations include and expand upon the protections afforded by the Fair Debt Collection Practices Act (“FDCPA”) and require:
- initial disclosures to consumers that are more extensive than the FDCPA requires,
- detailed information to substantiate the debt allegedly owed,
- notification and disclosure as to whether the limitation of time to collect a consumer debt (the Statute of Limitations) may have expired,
- debt payment procedures, and
- procedures to be followed when communicating by electronic mail.
The new regulations take effect on March 3, 2015, except for those sections pertaining to:
- initial disclosures required within 5 days following the initial communication with a consumer (defined as “any natural person”) and
- substantiation of the debt to be supplied upon written request by consumers, including after written notification of this right to consumers who verbally dispute a debt which took effect on August 3, 2014.
Though the new regulations have not yet been subjected to judicial scrutiny, managing agents (who regularly seek to collect rent, maintenance and common charge payments on behalf of residential landlords, cooperative apartment corporations and condominiums), third party residential loan servicers, and others who are not closely affiliated, owned or controlled by the creditors for whom they seek to collect outstanding consumer obligations, will be well advised to consider themselves “Debt Collectors” who must comply with these new regulations. Though these regulations do not directly restrict creditors or people who they directly employ and control from contacting their customers directly, they impose significant added burdens on residential landlords, cooperative apartment corporations and condominiums and lenders to supply much more detailed billing histories to agents who seek to collect payment of arrears on their behalf.
The NYS Department of Financial Services (“Department”) and, in particular, its Financial Frauds and Consumer Protection Unit will enforce the new regulations. The Superintendent of the Department is empowered by statute to conduct investigations upon “reasonable suspicion” that the new regulations may have been violated. Civil Penalties in an amount up to $5,000 for any violation of state or federal collection practices may be imposed per violation.
Significantly, the option to file a complaint with the New York State Department of Financial Services to enforce the new regulations provides consumers with what is potentially a vastly more economical and powerful tool to redress their grievances when they suspect that Debt Collectors have engaged in abusive or deceptive debt collection practices.
Please do not hesitate to contact our office for guidance regarding compliance with these new regulations.
About the author: Mark B. Brenner is a partner at Gallet Dreyer & Berkey LLP. His practice focuses on bankruptcy, corporate law, and real estate. Mr. Brenner can be reached at firstname.lastname@example.org.