Yesterday, the New York Department of Financial Services (NYDFS) announced that it filed its first enforcement action against a debt collector under New York's Debt Collection Regulations. NYDFS brought its statement of charges against Forster & Garbus for allegedly violating the state's substantiation of debt requirements.

New York's debt collection regulations require that, upon a consumer's request, debt collectors provide certain documents to the consumer within 60 days in order to substantiate the debt. The statement of charges alleges that in certain instances, the debt collector failed to provide substantiation, or provided insufficient substantiation to comply with the regulation's specific requirements.

Certain examples include:

  • "CONSUMER-1 requested that Respondent provide her with information to substantiate whether she actually owed the student loan debt in question. In response to this valid request, Respondent immediately filed a lawsuit against CONSUMER-1. With regard to the outstanding substantiation request, Respondent blithely informed CONSUMER-1 in writing that she should “refer to the Summons and Complaint” in the newly-filed lawsuit."
  • "CONSUMER-2 disputed that CONSUMER-2 owed any student loan debt whatsoever, and requested proof of debts owed. Rather than providing CONSUMER-2 with substantiation of debt, Respondent delayed sending any response to CONSUMER-2, sending a response more than 120 days later. In the response, sent well beyond the 60-day time limit established by law, Respondent conceded it would no longer pursue the alleged debts owed."
  • "CONSUMER-4, an individual in financial distress, questioned whether a debt actually belonged to her. CONSUMER-4 also relayed to Respondent that her financial distress was such that she was on the brink of homelessness. In response, Respondent merely provided a single document: a judgment obtained four years prior. The judgment, moreover, reflected a debt of substantially lesser value than the amount sought by Respondent from CONSUMER-4."

A hearing for this action is scheduled for January 21, 2021.

insideARM Perspective

NYDFS is showing its fangs here and makes a very loud statement to debt collectors: substantiate or else. The statement of charges specifically states:

If a debt collector cannot satisfy the obligation to provide substantiation of debt or forgive a debt, the debt collector will not avoid potential violations by returning the debt to the creditor. Debt collectors must have the proper documents before collecting on debt.

According to the regulator's press release, the Superintendent of Financial Services states:

Consumer protection is the center of everything we do at DFS. It is especially important for New Yorkers to have access to appropriate and accurate financial information during this stressful time – so they can protect their rights and make financial decisions in their own best interest.


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