The New York City Department of Consumer and Worker Protection (DCWP) continued its years-long attempt to update its Rules Related to Debt Collection (Rule). According to the Consumer Relations Consortium (CRC), the proposed update will create unnecessary consumer confusion, unreasonably burden debt collectors with little to no countervailing benefit to consumers, and create other negative unintended consequences.
The DWCP originally proposed updates to the Rules in November 2022 (CRC comment here); however, that proposal was tabled in March 2023. The DWCP released an updated version of the proposed Rules in September 2023 (Proposal).
To highlight the unintended consequences of the Proposal, on November 29, 2023, the CRC submitted a comment prepared by Legal Advisory Board members, Jessica Klander of Bassford Remele, John Bedard of Bedard Law Group, and Jim Schultz of Sessions, Israel, and Shartle.
In its comment, the CRC raised the following concerns about the Proposal:
- The proposed validation notice requirements are inconsistent with federal disclosure requirements and will confuse consumers (pages 2-6). The proposed update to § 5-77(f)(2) contemplates a significant overhaul of the information required to be included in validation notices sent to NYC consumers in a way that interferes with and potentially contradicts federal law. To cure these defects, the CRC made several suggestions to the DCWP, including allowing the validation notice to be sent electronically, removing contradictory and vague language, and updating the Proposal to conform with Reg F.
- The new validation period calculation will create consumer confusion because it does not align with Regulation F (pages 6-7). Section § 5-77(f)(4) of the Proposal potentially creates two different validation periods under federal and New York City law. To avoid this outcome, which may confuse consumers, the CRC provided suggestions for the DCWP to bring its Proposal in line with Reg F.
- Verification requirements under the proposed Rule cannot be reconciled with regulation F and will confuse consumers (pages 7-8). Section 5-77(f)(6) of the Proposal sets forth how a NYC consumer can dispute a debt; however, the language used directly contradicts the Fair Debt Collection Practices Act (FDCPA). Though the FDCPA requires disputes to be in writing within a specified period of time, the DCWP Proposal would allow for oral disputes at any time in which the debt collector owns or has the right to collect the debt. The Proposal also seems to conflate a dispute with a request for verification. As phrased, the Proposal would require a debt collector to provide verification to a consumer, even where the consumer may not want to receive additional documents from the collector. Among other suggestions, the CRC suggested the DCWP remove the contradiction with the FDCPA and clarify the distinction between a dispute and a request for verification.
- The contact frequency rules are unclear and should be clarified to apply “per person, per account” to avoid inconsistency with federal law (pages 8-10). Section 5-77(b)(1)(iv) is unclear regarding whether the proposed 3-in-7 rule applies on a “per consumer” or “per account” basis or both. This section of the Proposal uses the phrases “a debt” and “a consumer” interchangeably. This section also prohibits communications after a collector has already “interacted” with a consumer but fails to define what constitutes an “interaction.” The CRC suggested the DCWP clarify these ambiguities and bring this requirement in line with Reg F.
- The Proposal harms consumers by eliminating their ability to choose a communication preference (pages 10-13). Section 5-77(b)(i)(5) of the Proposal would require a debt collector to obtain direct consent from the consumer in writing to email or send a text message to a NYC consumer. The CRC explained that this requirement contravenes consumer preference, imposes an undue and unreasonable burden on collection agencies, and effectively eliminates the ability to communicate in a way many consumers prefer. The CRC provided multiple illustrations and examples in support of its position and suggested the DCWP remove the direct consent requirement from the Proposal.
- The proposed rules regarding medical debt are unnecessarily onerous, overbroad, and place unreasonable burdens on debt collectors (pages 13-26). As drafted, the Proposal applies to all medical debts - whether medically necessary or elective. In addition to being too being broad and unclear, the medical debt sections of the Proposal require collectors to determine and assess the legal obligations of a provider and the financial aid status of a consumer, provide a notice of certain patient disputes to its clients within one day, and verify information uniquely within the provider’s possession. To cure the issues in these sections, the CRC recommended the DCWP limit the application of the Rule to medically necessary healthcare services, strike or modify vague language, and remove the one-day notice requirement.
- The proposed credit reporting notice imposes tremendous costs on the debt collection industry with little countervailing benefit to consumers (pages 16- 22). Section §5-77(e) requires debt collectors to notify consumers that the debt will be reported to a consumer reporting agency before reporting the debt to any credit reporting agency. Reg F has a similar requirement; however, the DCWP version would require debt collectors to unconditionally re-disclose to consumers certain information about the debt and provide new disclosures not previously required. The CRC noted that the cost of requiring all debt collectors to send a new written notice to all consumers far outweighs the benefit of providing duplicate (and inconsistent) disclosures to consumers and suggested that the DCWP strike or modify this provision.
- The Proposal’s use of clarifying language creates unintended negative consequences (pages 22-26). In addition to other confusing clarifying language, the Proposal uses the phrase “New York City” to modify the term “consumer” in several places, yet does not define the new term “New York City consumer” and does not explain how that term means something different than the defined term, “consumer.” Both terms are used throughout, but not interchangeably, causing confusion. To cure these issues, the CRC suggested that the DCWP edit these terms for clarity.
The CRC’s full comment can be found here.
About the Consumer Relations Consortium
The Consumer Relations Consortium (CRC) is an organization comprised of more than 60 national companies representing the diverse ecosystem of debt collection, including creditors, data/technology providers and compliance-oriented debt collectors that are larger market participants. Established in 2013, CRC is evolving the debt collection paradigm by engaging stakeholders—including consumer advocates, Federal and State regulators, academic and industry thought leaders, creditors, and debt collectors—and challenging them to move beyond talking points and focus on fashioning real-world solutions that actually improve the consumer experience. CRC’s collaborative and candid approach is unique in the market.
About the Legal Advisory Board
The Legal Advisory Board (LAB) is an exclusive membership group of outside counsel with expertise in the accounts receivable industry who have each pledged their time and resources to support the mission of the CRC. The LAB is limited to ten law firms and is comprised of fourteen total attorneys. Throughout the year, the LAB serves as a legal resource to the CRC membership. It assists in fulfilling the mission of promoting forward-thinking approaches to the issues raised by regulatory policy and technology innovation in the accounts receivable industry.