In November 2014 the New York Department of Financial Services (DFS) adopted new regulations governing debt collectors, including third-party collectors and debt buyers. Most of the new rules went into effect in March of this year. The remaining rules – related to debt verification, disclosure, and communication – became effective earlier this month.
When the rules were first announced there was a good deal of confusion about the specifics of implementation. Industry groups, including ACA International, DBA International, and the Consumer Relations Consortium, submitted questions requesting clarification. In February DFS released an FAQ document containing sixteen questions and answers, and also participated in a live symposium about the rules that was hosted by DBA International.
Questions persisted, and in June DFS released twelve additional FAQs.
This is the DFS summary of the amendments:
“This rulemaking amends the Department of Financial Service’s regulations of debt collection in New York by making minor clarifications to the rules. These changes address confusion expressed by some debt collectors. The first change eliminates the word “written” since such direction was already included in the rule and was repetitive and unnecessary. The second change eliminates the option that a debt collector may provide a copy of a judgment against the consumer in order to substantiate a debt. The final rule does not regulate collections of a money judgment, therefore the option to provide a judgment as substantiation of a debt is irrelevant and confusing to some debt collectors. Finally, a required disclosure of consumers’ rights under the Exempt Income Protection Act is amended for clarity and consistency with the rest of the regulation.”
The primary change of substance is that they’ve added the word “may” under 1.5(a)(2) which makes the disclosure consistent with the disclosure under 1.2(a)(2).
These are the new FAQs:
- If a debt is charged-off after a debt collector has been collecting on the debt, does the collector need to provide the disclosure required in 23 NYCRR 1.2(b) in the next communication following charge-off?
A. No. The debt collector only needs to provide the disclosure in 23 NYCRR 1.2(b) if the debt collector’s initial communication with the consumer in connection with the collection of the debt occurs when the debt is charged-off. The applicability of 23 NYCRR 1.2(b) depends on the status of the debt when a debt collector makes its initial communication with the consumer. If the debt collector has been communicating with a consumer and the debt is charged-off after the initial communication, that debt collector does not need to provide the disclosure in 23 NYCRR 1.2(b) to continue collecting on the debt. If the charged-off debt is then assigned or sold to another collector, that collector would need to provide the disclosure required in 23 NYCRR 1.2(b).
- If a debt collector has been collecting on a charged-off debt, does the collector need to provide the disclosure required in 23 NYCRR 1.2(b) in the communication following the effective date 23 NYCRR 1.2(b)?
A. No, 23 NYCRR 1.2(b) applies to a debt collector’s initial communication with the consumer in connection with the collection of the debt. If a collector already has been collecting on the charged-off debt, the communication following the effective date 23 NYCRR 1.2(b) would not be the initial communication.