The City That Never Sleeps on Debt Collection: An Introduction to New York City Debt Collection Regulations | Hudson Cook, LLP

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The New York City Department of Consumer and Worker Protection (“DCWP”) (formerly the Department of Consumer Affairs) enacted new debt collection rules this spring to provide protections for consumers with limited from English. The new rules are intended to address concerns identified by the DCWP in its “Lost in Translation: Collections Agents’ Language Access Review Resultsreport which was published in the fall of last year.

The rules require certain disclosures on public websites and in consumer communications regarding the availability of language access services, require debt collectors to request consumer language preferences, and require DCWP-approved collection agencies that they keep records of consumers’ language preferences. . The rules do not require creditors, collectors or collection agencies to make services available in a particular language or to honor consumers’ language access preferences.

While the rules aren’t particularly strenuous (especially when compared to the balance of New York City’s debt collection regulations, discussed in more detail below), the DCWP’s rule-making process has attracted national attention. The agency proposed the rules on March 5, 2020 and scheduled a public hearing on the rules for April 10, 2020, amid widespread shutdowns in the New York metro area, and received no comment on the rules until . allowing them to enter into force on June 27. Facing pressure from industry groups, the DCWP agreed to delay enforcement twice, until at least October 1, 2020. On August 6, 2020, the DCWP published a guidance document containing a list of frequently asked questions that clarified the concerns expressed by the industry. And on August 7, 2020, the DCPW published a revised version guidance document.

While that’s probably not DCWP’s intention, the uproar over the agency’s apparent procedural missteps has drawn attention to all of New York City’s debt collection regulations, and not only on the new requirements. Creditors, in particular, have taken a closer look at the contours of New York City’s debt collection regulations and wondered if and to what extent the more onerous and technical requirements apply to a creditor collecting his own debts.

Of particular concern are the requirements and restrictions of 6 RCNY § 5-77. These regulatory conduct requirements and restrictions are contained in the New York City Unfair Trade Practices Rules and apply to “collectors.” This term is defined as referring to any person who regularly collects “debts[s] due or deemed to be due or due” which is broad enough to apply the requirements of the order to creditors collecting their own debts. most of the provisions that many creditors already comply with as good practice), there are two provisions in particular that are very technical and strict.

First, New York City requires certain creditors collecting their own debts, after expediting the outstanding balance or demanding the full balance owing, to provide a debt validation notice. New York City is one of the very few jurisdictions to require creditors to provide a notice of validation of debt. But New York City does not require everything creditors to provide notice. Certain open creditors are exempt from the New York City debt validation notice requirement.

Second, New York City has perhaps the most onerous creditor collection contact frequency restrictions in the nation. The regulation provides that after having put in place “debt collection procedures”, a creditor cannot contact a consumer for more than twice in every seven calendar days. This contact frequency limit includes not only phone calls, but any other type of communication, such as emails, text messages, and letters. Certain communications are excluded from the limit (a response to a consumer’s oral communication, returned and unopened mail, certain messages left with third parties that contain only limited information, and communications required by law). An important caveat to this hard limit is that it only applies after the creditor has instituted “debt collection procedures“, a term that has different meanings depending on the type of credit. For most closed credits, however, “debt collection proceedings” means an attempt to collect after the creditor has “accelerated the outstanding balance of the debt or demanded the Therefore, as a general rule (and depending on the type of credit), the strict limit of two contacts per week does not apply until after the creditor has either accelerated the outstanding balance or demanded the “full balance due ” (an undefined value). term which probably designates the outstanding balance due on the date of the formal notice).

In summary, although the new regulations increase the compliance burden on creditors, the rest of New York City’s debt collection regulations are already among the most onerous in the country and are somewhat unique in that they are generally apply to creditors collecting their own debts. Given the DCWP’s recent debt collection activity, which signals a willingness to pursue collection activity aggressively, creditors should proceed with caution in the city that never sleeps.

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