N.Y. announces new protection against abusive debt collection

December 5, 2014

NEW YORK (12/8/14)--Consumers in New York now have new regulations designed to protect them from aggressive and deceptive debt collection practices. Gov. Andrew Cuomo announced debt collection reforms last week, finalized by the state's Department of Financial Services (DFS).

According to the DFS, New Yorkers filed more than 20,000 complaints this year regarding debt collection practices. These include harassing calls, attempts to collect incorrect amounts of money, and contacts with people who were without debt.

The regulations, which will apply to third-party debt collectors and debt buyers, include:

  • Requiring enhanced initial disclosures when a new debt collector first contacts an alleged debtor. The collector must provide general information on the rights of debtors and information about the debt that they are attempting to collect;

  • Protecting against "zombie debts," debts for which the statute of limitations has already expired. If a collector attempts to collect on these debts prior to accepting payment, the collector must provide notice that they believe the statute of limitations may be expired;

  • Requiring a debt collector to substantiate that a debt is actually owed in response to a consumer's oral or written dispute at any point in the collections process. Past regulations only allowed consumers to dispute debt within 30 days of the original attempt;

  • Consumers will now receive written confirmation of any debt settlement agreement and written confirmation once a debt is satisfied, providing documentation in the event another creditor attempts to collect that debt; and

  • Allowing consumers to communicate with collectors via their personal email if they so choose.

The majority of the regulations will take effect March 3, with the exception of the sections that require specific documentation from the debt collector. Those sections will take effect Aug. 30.

Also on the debt collection front, the Consumer Financial Protection Bureau asked a federal district court to enter a consent order against another collection agency. Last week it settled with New Jersey-based Premier Consulting Group LLC for a civil penalty of $69,075.

The complaint alleges that Premier charged consumers upfront fees for debt-settlement services that were never received.

In July, Frederick J. Hanna and Associates, along with its three principal partners, was been accused of operating a debt lawsuit mill using illegal tactics, resulting in a lawsuit against it filed by the CFPB.

The CFPB alleges the Georgia-based firm used illegal tactics to intimidate consumers into paying debts they may not have owed, and that the firm churns out hundreds of thousands of lawsuits that frequently rely on deceptive court filings and faulty or unsubstantiated evidence. The CFPB is seeking compensation for victims, a civil fine, and an injunction against the company and its partners  (News Now July 16) .