Debt Collection Consumer Protection: It’s not just FDCPA!

My previous article on Debt Collection Consumer Protection described the protections afforded by the Fair Debt Collection Practices Act. There are also numerous other federal, state and local laws which provide additional protections for consumers. Some of these are:

Dodd Frank Wall Street Reform and Protection Act of 2010

The Consumer Financial Protection Bureau was established by the Dodd Frank Wall Street Reform and Protection Act of 2010. Its mission is to establish protections for American consumers regarding financial products and services. It supervises banks, credit unions, and other financial companies, and enforces federal consumer financial laws.

The Bureau restricts unfair and deceptive or abusive acts and practices undertaken by creditors, investigates consumer complaints, provides financial education and monitors financial markets for emerging potential risks to consumers.

New York State Department of Financial Services

In July of this year, the New York State Department of Financial Services promulgated a new Part 1 of Title 23 of the Official Compilation of Codes, Rules, and Regulations for debt collection by 3rd party debt collectors and debt buyers, which requires debt collectors to maintain reasonable procedures to determine if the Statute of Limitations has expired, and must indicate to the consumer that the debt may be expired, and that commencing a lawsuit to collect an expired debt is a violation of the FDCPA.

Debt collectors must also disclose the following to any consumer:

  • The consumer is not required to provide the debt collector with an admission, affirmation or acknowledgement of the debt, a promise to pay the debt, or a waiver from the statute of limitations.

  • If the consumer makes any payment on an expired debt or admits, affirms, acknowledges or promises to pay the expired debt, the statute of limitations may begin anew.

New York City Department of Consumer Affairs

Since 2009, the New York City Department of Consumer Affairs has prohibited debt collectors from contacting consumers to collect a time-barred debt, unless a disclosure is included in each written communication to the consumer, which states the following information:

The legal time limit (statute of limitations) for suing to collect this debt has expired. However, if somebody sues you anyway to try and enforce the debt, court rules require you to inform the court that the statute of limitations has expired. Even though the statute of limitations has expired, you may choose to make payment. However, if partial payment is issued, the creditor's right to sue to collect the entire debt may start again.”

Additionally, since October 1 they now require documentation establishing the ownership of the debt in order to obtain a default judgment in consumer credit matters.

These rules are implemented by the following affidavits required to be submitted in these consumer credit cases:

  • Lawsuits commenced by the original creditor - Affidavit from the original creditor establishing the debt was incurred and the account is in default.

  • Lawsuits commenced by a purchaser of the debt - Affidavit from the original creditor establishing that the debt was incurred and the account was sold by the original creditor to the debt buyer, in addition to the affidavit of the debt buyer that the account was purchased, and the account is in default.

  • Affirmation of attorney that the statute of limitations has not yet expired.

In conclusion, debt collectors must exercise care to ensure they are in strict compliance with all consumer protection laws to avoid regulatory enforcement actions for engaging in any practices that may violate any of the new regulations.