On Wednesday, December 3, 2014, New York Governor, Andrew Cuomo, announced new regulations aimed at “protect[ing] consumers against abusive and deceptive debt collection practices.” The press release issued by Governor Cuomo can be found here.
These regulations come from the New York Department of Financial Services and were first proposed in July 2013 and subsequently put out for a second comment period. They take effect on March 3, 2015 with the exception of sections dealing with disclosure requirements and substantiation of debts which will take effect on August 30, 2015 in order to give debt collectors time to gather documentation required by those sections.
According to Cuomo’s office, the state received more than 20,000 complaints about the debt collection industry in 2014 alone. The regulations seek to combat the issues raised in the consumer complaints and only impact third party debt collectors and debt buyers for now. The regulations are notable for the following reasons (a copy of the full regulations is attached here):
Enhanced initial disclosures by debt collectors: The regulations outline specific disclosures that must be made to consumers within 5 days after the initial communication. These disclosures include an itemized accounting of the debt and go further than current federal requirements.
Disclosure of potential “Zombie Debts”: The regulations require that a debt collector “maintain reasonable procedures” for determining when the statute of limitations on a debt has expired. If the debt collector has reason to know that the statute of limitations has expired, the debt collector must provide the consumer notice that the statute of limitations may have expired. This has been a recurring area of interest for state and federal regulators. For example, New York City has a similar set of notoriously stringent regulations.
Substantiation of consumer debts: The regulations require a debt collector to “substantiate” that a debt is actually owed in response to a consumer’s oral or written dispute of a debt. The regulations allow the consumer to request a “substantiation” of the debt at any time during the collection process.
Confirmation of settlement: Debt collectors must provide written confirmation within 5 days of establishing a debt payment schedule or other agreement to settle a debt. Debt collectors must also provide consumer accountings and confirmation of a payment satisfying a consumer’s debt.
Communication through Email: The regulations provide that a consumer is free to communicate with a debt collector via email. This regulation is aimed at reducing “harassing phone calls” and allowing consumers to maintain better records of communications with debt collectors.
Benjamin Lawsky, Superintendent of Financial Services, stated, “[t]he debt collection industry is filled with far too many unscrupulous actors willing to deceive and abuse consumers just to make a quick buck. These important reforms will provide significant, new protections for financially struggling New Yorkers from harassment and fraud, and help us root out these predatory practices.”
It is important for debt collectors to carefully review the new regulations as they represent an ongoing focus on the debt collection industry in New York, and the Department of Financial Services has the authority to impose civil penalties on collectors that violate these regulations. Additionally, these regulations could prove to be somewhat or a roadmap for future regulation by the Consumer Financial Protection Bureau (“CFPB”). As we discussed last week, the CFPB has delayed proposed rulemaking on several of these issues.
* David Anthony is an experienced trial lawyer at Troutman Sanders LLP with a concentration in litigating financial services and business disputes, including class actions. He has developed an expertise in federal court litigation.
John Lynch is a trial lawyer at Troutman Sanders LLP with a national litigation practice. John is a member of the Financial Services Litigation practice representing financial institutions, loan servicers, and debt buyers/collection companies in class action and individual cases. He also represents companies and executives in intellectual property and commercial cases, involving patent and trademark matters, shareholder/partner disputes, construction, commercial contracts, and real estate.
Alan Wingfield is an experienced business law trial attorney at Troutman Sanders LLP. Alan has represented businesses in many venues; in the last three years alone he has defended in court cases in seven states (Illinois, Maryland, Missouri, North Carolina, Pennsylvania, South Carolina, and Virginia), as well as handling arbitrations arising under the Federal Arbitration Act (FAA). Alan has particularly extensive experience in the United States District Court for the Eastern District of Virginia, the famed "rocket docket," having handled more than 120 cases in that court alone. Alan’s practice includes counseling to help businesses comply with the myriad and growing laws in the consumer law and financial services fields, with a particular emphasis on the many "alphabet soup" federal consumer protection statutes such as the Fair Credit Reporting Act (FCRA), Truth in Lending Act (TILA) and Regulation Z (Reg Z), and Equal Credit Opportunity Act (ECOA) and Regulation B (Reg B), as well as the impact of Dodd-Frank Wall Street Reform and Consumer Protection Act on the consumer protection landscape.
Massie Cooper is an associate in at Troutman Sanders LLP’s Consumer Financial Services practice and specifically within the Financial Services Litigation practice. She focuses her practice in the areas of business disputes and complex litigation. Massie has experience handling a wide range of litigation issues including products liability, corporate contract disputes, patent and trademark infringement, criminal prosecution, corporate dissolution, and corporate derivative actions. She has represented clients at the circuit court level, general district court, the Supreme Court of Virginia, and federal courts.
Ethan Ostroff is a trial lawyer in at Troutman Sanders LLP’s Consumer Financial Services practice and specifically within the Financial Services Litigation practice. He has an active practice representing national, regional and local banks, lenders, consumer reporting agencies, furnishers, debt collectors, law firms and other related consumer finance entities in federal and state consumer litigation, including claims under the Fair Credit Reporting Act (“FCRA”), Fair Debt Collection Practices Act (“FDCPA”), Telephone Consumer Protection Act (“TCPA”), Truth in Lending Act (“TILA”), Equal Credit Opportunity Act (“ECOA”) Real Estate Settlement Procedures Act (“RESPA”), other federal and state statutes, and common law. Ethan also represents companies and individuals in a variety of commercial matters including patent and other intellectual property litigation, real estate, shareholders/partner disputes, construction, and related complex litigation matters.
Tim St. George’s practice at Troutman Sanders LLP includes the representation of clients in federal and state court, both at the trial and appellate level. Tim focuses his practice on the areas of complex litigation and business disputes, financial services litigation, and consumer litigation, and he has represented clients within these areas in a wide variety of litigation matters involving contracts, class actions, mass actions, torts, mergers and acquisitions, RICO, and federal and state consumer protection laws.