New York Legislature Making Even More Debt Collection Changes with Bills

The New York Senate and General Assembly officially convened last Wednesday and lawmakers wasted no time in introducing bills that write into law many of the new rules published by state regulators late last year and introduce new requirements in their own right.

New York’s Department of Financial Services in early December adopted a number of new requirements for collection agencies, debt buyers, and creditors seeking to recover money from consumers. Those rules represent quite a challenge for ARM companies in compliance, and now many of the rules may have the force of law. The bills also provide some of the legal mechanism for the DFS to regulate the industry.

Statewide Licensing Requirement

On the first day of the 2015-16 legislative session, two companion bills were filed in both the Senate and General Assembly requiring all collection agencies to be licensed and bonded by the state. The identical bills, A408 and S190, were introduced with at least 15 sponsors and co-sponsors. The bills are re-introductions of an Assembly bill that passed the lower house last year, but failed to come up for a vote in the Senate.

The bills would specifically set up a debt collection licensing and bonding procedure for collection agencies and debtors. The bills set the licensing and renewal fee at $500 and the bond amount at $10,000 for agencies with 1-4 collectors, $25,000 for 5-9, $50,000 for 10-20, and $75,000 for agencies employing more than 20 people.

The licensing proposals set civil penalties for non-compliance at between $100 and $10,000 for each violation. In addition, the bills’ language allows for private action against collection agencies that carry a reward of $3,500 per violation.

New York does not currently have a statewide licensing requirement for collection agencies and debt buyers, although ARM firms must be licensed individually in New York City and Buffalo.

General Debt Collection Provisions

On Thursday, the General Assembly saw a bill introduced — A1117 — that attempts to bring New York’s debt collection laws into alignment with the FDCPA. On the following day, a similar bill was introduced in the Senate.

The bills specifically spell out prohibited collection tactics, such as third party disclosure and harassment, and generally mirrors the federal law governing collectors. There are also debt validation requirements spelled out in the language of the Assembly bill. Interestingly, the bill uses the term “validation” rather than the newly-coined term “substantiation” used in the DFS regulations.

All of the bills were read and sent to committees in their respective chambers.