Alert August 06, 2013

New York Department of Financial Services Propose Regulations to Curb Abusive and Deceptive Debt Collection Practices

Once again trumpeting the state’s focus on deceptive debt collection practices, the New York Department of Financial Services announced a proposal to create new regulations imposing specific notice requirements on debt collectors. The proposed rules would require debt collectors, within 5 days of initial communication with debtors, to provide written notice of debtors’ rights under the federal Fair Debt Collection Practices Act, as well as under federal statutes exempting certain benefits (e.g., Social Security benefits) from being subject to a judgment. The proposed rules would also require debt collectors to provide the name of the original creditor and a detailed itemized accounting of the debt. Further, the debt collector would be required to notify the debtor of any debts where the debt collector believes the statute of limitations had run, and inform the debtor that such debt may be legally unenforceable. Of import, the proposed rules would impose debt verification requirements beyond those contained in the FDCPA and require the debt collector to produce the signed agreement that created the debt, a “chain of title” to the debt ownership, relevant account numbers, and any prior settlement agreement concerning the debt.

The regulations are subject to a 45-day notice and comment period. While most of the proposals are effective immediately if adopted, certain requirements related to a debt collector’s duty to provide information verifying the debt would not become effective until 180 days after adoption. California recently took similar action to regulate debt buyers when its state legislature passed the Fair Debt Buyers Practices Act (see July 9, 2013 Alert).