New York DFS Addresses Questions Regarding Itemized Accounting

The New York Department of Financial Services (DFS) recently added an FAQ (its 31st) to a list that seeks to provide clarity for companies responsible to implement its debt collection rules adopted in December 2014. The rules, which took effect in 2015, put in place new specific disclosure and written communication requirements on third party debt collectors and debt buyers, and created a structure for the use of email in debt collection efforts. 

Shortly after the adoption of the rules, DBA International (recently re-named the Receivables Management Association) hosted a symposium to help industry sort through the many questions raised by the rules. The event featured presentations from Joy Feigenbaum, DFS Executive Deputy Superintendent; Antonio Galvao, Deputy Counsel with New York State’s Office of Court Administration (OCA); and Marla Tepper, General Counsel with New York City’s Department of Consumer Affairs (DCA). Feigenbaum discussed the new DFS rules, the primary focus of the symposium, while Tepper and Galvao explored the interplay between the new DFS rules and new requirements recently enacted by their offices.

All three also sat on a Q&A panel that gave participants an opportunity to ask specific questions about how to comply with the new requirements. The panelists were very candid in their replies to questions and offered to provide additional clarification in cases where a specific question could not be answered live. The industry was also encouraged to monitor the DFS site in coming weeks for any additional clarity. (Editor's note: when first released, the FAQ page contained 16 items; it has since grown to 31.)

Combined with universal disclosures required for all accounts, a new DFS provision regarding debt substantiation, and additional information mandated for accounts that are charged-off (including an itemized accounting of charges, fees, and payments) caused industry concern. Many attendees to the symposium noted an issue with “real estate” on certain communications. In short, how can all of the required written disclosures be made on an account that triggers all of the requirements?

Questions related to the disclosures persist; this is the newest item posted on the FAQ list:

In the itemized accounting required by 23 NYCRR 1.2(b)(2), if there is no interest accrued, charges or fees added, or payments made on the debt since charge-off, must a debt collector include those fields indicating “0” or if appropriate “Not Applicable”?

A. Yes, debt collectors must include all the information required in 23 NYCRR 1.2(b)(2) in a clear and conspicuous manner. The required disclosure may indicate that the value of a required field is “0” or explain that charges, fees or interest are not applicable or will not be charged, or a similar statement, if accurate.

insideARM Perspective

As they have been released, many of the new FAQs raised more questions than they have answered. insideARM reached out to David Cherner, attorney at Moss & Barnett, to provide insight into this particular issue. He offered this:

"While the FAQ clarifies what additional information must be included in the initial communication with a consumer in connection with the collection of any charged-off debt, it does not prescribe what disclosure(s) to use. Agencies whose collection activity falls under the NYS DFS rule should immediately examine the new FAQ very carefully, and consult with their clients as well as counsel to identify appropriate implementation steps."