Last week, we reported that the New York Department of Financial Services published changes to its proposed regulations for debt collection by third-party debt collectors and debt buyers. The rules seek to clarify the required initial disclosures by debt collectors; disclosures for debts in which the statute of limitations may be expired; substantiation of consumer debts; debt payment procedures; and e-mail communications. Now that the industry has had the chance to take a deeper dive into the details of the proposal, experts and organizations are submitting their feedback on how to further improve the regulations.
These new rules lay out some specific content and language requirements for what is considered a ”clear and conspicuous written notification” to consumers about their rights concerning the debt. For example, according to the DFS rules, initial disclosures must include specific information about the nature of the consumer’s debt, including the name of the original creditor and an itemized account of the debt owed. The rules also require debt collectors to use specific language about a collector’s right to sue a consumer to collect a debt.
“A creditor may sue you to collect on this debt. Even if the creditor sues you and wins, state and federal laws may prevent the following types of income from being taken to pay the debt:
1. Supplemental security income, (SSI);
2. Social security;
3. Public assistance (welfare);
4. Spousal support, maintenance (alimony) or child support;
5. Unemployment benefits;
6. Disability benefits;
7. Workers’ compensation benefits;
8. Public or private pensions;
9. Veterans’ benefits;
10. Federal student loans, federal student grants, and federal work study funds; and
11. Ninety percent of your wages or salary earned in the last sixty days.”
This specific language must be used in the initial disclosure of the debt and when providing the consumer with a written confirmation of their debt payment schedule.
In addition, if the collector has any reason to believe the statute of limitations may have expired on the debt, then the collector must tell the consumer – in the medium that would normally be used to collect the debt (online, phone, snail mail, etc.) – that the SOL may be expired, and that means the collector can’t sue the consumer to collect the debt. The rules include some sample language for this communication.
Still, DBA International said in a press release Monday that debt buyers collecting in New York still need more “clear written boilerplate consumer notice provisions so as to eliminate future frivolous litigation over the issue of adequate consumer notice.” DBA had submitted its initial feedback to DFS about the proposed rules in May, and praised DFS for implementing some of its suggestions, such as:
- Using “charge-off” rather than “default” as the single point-of-time reference for establishing a number of regulatory requirements.
- Eliminating the pre-charge-off itemization requirement on account balances.
- Allowing consumers to make payments at initial contact instead of waiting until the written confirmation of the payment terms arrives by mail.
- Permitting email communications based on reasonable terms.
- Replacing an “immediate” effective date with a 90-day effective date.
Also, when we first reported this story, readers provided some interesting feedback on how the DFS proposal may impact creditors. In fact, it’s tough to find any responses to the proposal from creditors, such as banks in the summary published. However, according to these new rules, a bank collector attempting to collect charged off debt would appear to have to follow these new regulations.
DFS has provided a 30-day comment period on the revised proposed regulations. Comments can be submitted by email or by mail to:
Department of Financial Services
One State Street
New York, NY 10004-1511
What changes would you like to see DFS make to the current proposed regulations? Do they go far enough, or too far for companies collecting debts in the Empire State? Let us know in the comments.